Supplier Management

Supplier Management Policy

(1) Overview of our Supply Chain

The Company's suppliers are divided into five main categories: raw material suppliers, equipment suppliers, waste clearance and disposal service providers, contractors (such as security companies, corporate catering providers) and freight forwarders. Among them, raw material suppliers are the most important. For those suppliers that provide the main raw material for our production, we have established a sound administration system to ensure their quality and their CSR/ESG performance to achieve corporate social responsibility, to avoid financial risk, to not use conflict minerals and to be a going concern in order to achieve corporate sustainability. At the same time, we have established good partnership with our suppliers so as to grasp the risks related to our suppliers’ CSR/ESG, to strengthen audit management, to coach and assist their improvement, and to collaboratively drive the overall supply chain towards a sustainable future.

(2) Supply Chain Management

a. Local procurement

The Company encourages local procurement of raw materials to reduce unnecessary air and sea transportation costs, and to reduce the carbon footprint generated during transportation. In addition to fulfilling the environmental protection responsibility of energy saving and carbon reduction, it also directly reduces procurement costs. Therefore, each manufacturing site has a dedicated procurement unit responsible for the selection and management of local suppliers. Whether in Taiwan or in China, the proportion of local procurement is high and all beyond 80%. The 2022 statistics are as follows:

Items	2021		2022
	Taiwan	China	Taiwan	China
Proportion of local suppliers	80%	93%	80%	93%
Number of main suppliers	65	43	60	43
Number of new suppliers	2	5	0	1

b. Selection and approval of new suppliers and new materials

For the development of new raw materials, new suppliers or old suppliers’ products that are different from those produced in the past, their evaluation will follow "Operational Procedures for Evaluation and Approval of Raw Materials Suppliers and their Products". A prospective supplier is required to at least acquire a certificate of ISO 9001 and is encouraged to obtain a certificate of ISO 14001 and of ISO 45001. In addition to requirements of having passed our on-site audit, got procurement capability, possessed enough production capacity and established control system to manage the hazardous substances, , etc., our prospective suppliers should meet the requirements of having established proper measures to protect the environment, human rights, labor safety and labor health and to implement corporate sustainable development. And then they must meet the further requirements of having installed a control system to enhance labor safety and health, not used child labor, not violated labor rights, fostered ethical management, and signed the relevant commitment letter, etc. before they can become one of our suppliers.

Items		Completion Rate
Agreements and Commitments	Purchase Contract	100%
	Quality Agreement	100%
	Aerospace Quality Management System Declaration	100%
	RBA Compliance Commitments	100%
	Declaration of Minerals Conflict-Free	100%
Surveys	CMRT	100%

Due to the structure and types of products, the Company has a large number of suppliers. In order to implement effective supplier management, risk assessment is conducted every year based on the overall performance of suppliers. Suppliers whose risk level meets the standard must provide improvement measures and participate in improvement meeting. The completion rate of supplier risk assessment in 2022 is as follows:

Year	Region	Number of suppliers	Completion Rate
2022	Taiwan	35	100%
2022	China	105	100%

c. Audit on Suppliers’ Sustainability

Based on the audited items of material risk and annual risk assessment stipulated in the Company’s "Operational Procedures for Evaluation and Approval of Raw Materials Suppliers and their Products" and "Operational Procedures for Suppliers Management", we adopt the "Raw Material Suppliers Survey and Evaluation Table" to conduct the yearly assessments on raw material suppliers to reduce risk through preventive measures.

Suppliers Audit Pass Rate in 2022

Region	Number of Audited Suppliers	Pass Rate
Taiwan	60	100%
China	43	100%

The audit checklist includes quality system management, environmental & occupational health and safety management, hazardous substance management and RBA compliance.

The statistics of audit deficiencies is as follows:

2022	Taiwan		China
2022	No. of Items	Ratio	No. of Items	Ratio
Quality System Management	16	100%	8	89%
Environmental & Occupational Health and Safety Management	0	0	0	0
Hazardous Substance Management	0	0	1	11%
RBA Compliance	0	0	0	0
Total	16	100%	9	100%

d. Contractors Management

In order to protect the employees of the contractors and the employees of the Company and to maintain the safety of our plants, the Company complies with laws and regulations on occupational safety and health and has established the operational procedures on contractor safety management, which regulate the responsibilities of the Company's responsible units and of the contractors, and deal with the relevant matters of environmental safety and health.

After guiding the contractors into the location, our supervisors will also control the workforce and equipment used, and supervise the implementation of protective measures before dangerous operations are carried out in the workplace.

Our supervisors and the contractors will receive safety and health education training conducted by our safety and health department, with a 100% pass rate in 2022.

Training for	Number of Person	Pass Rate
our supervisors	135	100%
the contractors	108	100%

e. Conflict Minerals Management

The Company complies with the RBA code of conduct, collaborates with our customers, promises not to use metals from armed groups, illegal mining and poor working conditions, and requires our suppliers to fulfill social responsibilities and to trace the origins of gold (Au), tin (Sn), tantalum (Ta), tungsten (W), etc., which are contained in their products, to ensure that these metals do not come from "conflict mines". When evaluating new materials, if they contain metal materials, our suppliers are required to disclose the source of minerals involving metals and sign the "Declaration of Minerals Conflict-Free" and to use the Conflict Minerals Reporting Template (CMRT) to regularly update their sources of minerals.