Sustainable Supply Chain｜Supplier Management

Incorporate ESG into supplier evaluation and audit items, leveraging influence to work hand in hand with suppliers in valuing and promoting a vision for a sustainable supply chain.

SDGS

The proportion of main suppliers that completed the RBA VAP in 2023 is

100

Annual response rate for supplier conflict minerals survey.

39.8

The proportion of local procurement in total company procurement reached a record high of

Supply-Chain Composition Framework

Supplier Management

Conflict Minerals

Sustainable Supply Chain Management

Nuvoton has established a Supplier Management Team under the Sustainable Development Committee that is responsible for formulating policies related to sustainable supplier management. It leverages its influence and collaborates with suppliers to prioritize and promote corporate sustainability, achieving the vision of a sustainable supply chain. Nuvoton's strategy for promoting a sustainable supply chain includes developing risk management methods for critical materials, setting short, medium, and long-term goals to increase the percentage of major suppliers completing RBA VAP and publishing sustainability reports.

As a key player in the semiconductor supply chain, with a focus on chip design upstream and wafer manufacturing midstream, Nuvoton closely collaborates with suppliers in the industry chain to form partnerships based on specialized division of labor and mutual cooperation. As a global semiconductor industry leader, collaborating with suppliers to build a sustainable supply chain is a key indicator of Nuvoton's sustainable development management. Nuvoton pays attention to labor rights in the supply chain, requiring suppliers to operate in compliance with relevant laws of their operating countries and comply with relevant international industry codes of conduct, including the Responsible Business Alliance (RBA) Code of Conduct and any amendments thereto. All suppliers are required to sign the "Compliance with the Code of Conduct Commitment" and "Confidentiality Agreement." Over the past three years, 100% of Nuvoton's suppliers have signed the Supplier Code of Conduct. In 2023, Nuvoton's suppliers did not experience any human rights disputes related to child labor, forced labor, violation of the freedom of association or collective bargaining rights of employees.

In the risk management of critical materials (wafers, chemicals, gases, targets), Nuvoton employs three main control strategies. In 2023, there were no instances of critical material shortages:

Diversifying product sources

Nuvoton procures raw materials from different suppliers and regions to ensure a secure supply of materials.

The principle of multiple suppliers and multiple locations

In adherence to the principle of sourcing from multiple suppliers across various locations, key raw materials are secured through long-term supply contracts with manufacturers. Apart from maintaining proprietary inventories, the risk of supply is further mitigated through consignment arrangements.

Prepare safety stock.

For projects in which establishing a second supplier is not feasible, Nuvoton requires suppliers to maintain secure inventories at production sites and with agents to reduce supply risks through just-in-time production.

Supplier Selection and Evaluation

Nuvoton's selection mechanism for new suppliers is designed with reference to RBA standards. It considers multiple factors, such as the use of hazardous substances, quality, price, and environmental considerations. Suppliers meeting Nuvoton's requirements must sign agreements including the "Code of Conduct Commitment," "Confidentiality Agreement," and "Declaration of Non-Usage of Conflict Minerals." Nuvoton also requires suppliers to faithfully execute all transactions without harming Nuvoton's interests or reputation to become qualified suppliers. Additionally, Nuvoton encourages suppliers to obtain international certifications such as ISO 14001 for environmental management systems. If suppliers cannot obtain these certifications promptly, Nuvoton requires them to provide a schedule for obtaining the certification.

Selection Mechanisms for Suppliers

Environmental Management System Certification

Nuvoton encourages its supply chain manufacturers to obtain international certifications such as ISO 14001 for environmental management systems. If they cannot obtain them promptly, they are required to establish a schedule for obtaining the certification.

Code of Conduct

Nuvoton actively adopts the standards of the Responsible Business Alliance (RBA) Code of Conduct. It requires all supplier factories to jointly sign the "Code of Conduct Commitment" and "Confidentiality Agreement." Suppliers must faithfully execute all transactions without harming Nuvoton's interests or reputation.

Conflict Minerals Management

Relevant suppliers are required to sign the "Declaration of Non-Usage of Conflict Minerals," including wafer foundry subcontractors, packaging plants, and raw material suppliers.

Risk Assessments

In 2023, we conducted RBA risk assessments for our top 92% suppliers by revenue, covering ESG risk evaluation content (including environmental, social, and governance aspects).

Starting from 2024, key suppliers are required to undergo regular assessments, including completing a self-assessment questionnaire (SAQ) on the Business Continuity Plan (BCP) and compliance with product-related regulations and customer specifications. Nuvoton commits to continually assessing supplier risks, measuring the extent of negative environmental and social impacts, and devising improvement plans to enhance the resilience of the overall supply chain.