Corporate Governance-Risk Management

• The migration of the passive component industry has led to reduced product demand.
• Mainland Chinese manufacturers of electronic carrier tape materials have developed their own raw materials, offering lower-priced but lower-quality products compared to Japanese ones, changing the competitive structure of the SMD carrier tape materials market.
• The electronics industry faces cyclical downturns and overcapacity. If cost reduction measures are not effectively implemented, revenue, gross margin, and profitability will be impacted.

• Continuously enhance the depth and breadth of product lines, such as wafer processes and other laser applications.

• The company's key raw material, 'paper tape raw material,' is supplied by Japanese and Chinese manufacturers. Exchange rate and market supply fluctuations may cause price changes and supply shortages.
• Natural disasters, trade barriers, political or economic instability (including military conflicts), and inflation in the origin of raw materials may severely affect supply or cause price increases.

• Seek suppliers from other countries, test alternative materials, and optimize inventory management.
• Monitor raw material prices and promptly notify customers.
• Sign long-term procurement contracts to stabilize prices.
• Establish good and long-term relationships with suppliers.
• Maintain multiple sources of suppliers to avoid concentration on a few vendors.

• Consumer electronics such as smartphones have changed the direction of the global electronics industry, making competition increasingly fierce.
• If the company's R&D technology cannot break through bottlenecks, and processes cannot be innovated or new machines developed, performance cannot continue to grow.
• Over-concentration or obsolescence of the carrier tape product line affects the company's competitiveness and hinders continuous growth.

• Continuously enhance the depth and breadth of product lines, such as wafer processes and other laser applications.
• Continuously introduce engineering improvement plans to improve production processes, enhance product quality, and increase product added value.

• Affected by fluctuations in the exchange rates of USD and JPY against TWD, resulting in impairment of company value and volatility in future cash flows.

• Open foreign currency accounts and appropriately adjust foreign exchange positions.
• Collect information on exchange rate changes daily, fully grasp exchange rate trends, and pre-purchase (pre-sell) forward foreign exchange or other derivative financial products.

• Counterparties are unable to pay notes and accounts receivable according to payment terms.

• The business department regularly reviews the operating status of customers.
• Combine finance to provide information systems to monitor overdue accounts receivable for each transaction, enabling early warning and subsequent tracking.

• In recent years, the number of hacker attacks has increased, raising the risk of loss or damage to important internal documents.
• The pandemic has changed work patterns, allowing remote work for those in need, increasing the company's information security vulnerabilities.

• Continue to strengthen employees' awareness of information security precautions.
• Introduce more information security services and products.
• Detailed information will be presented in the information security chapter of the sustainability report.

• Customers require the supply chain to reduce emissions together, at least 3% reduction per year.
• In the future, each industry will have a total emissions cap, and those exceeding the cap will need to purchase excess quotas.

• Implement ISO 14064-1 greenhouse gas inventory to identify company emission hotspots.
• Launch energy-saving and carbon reduction programs.
• Join government low-carbon related programs.

• According to the Taiwan FSC's sustainability roadmap for listed companies, complete greenhouse gas inventory and assurance (parent company entity) by 2028.
• Also complete greenhouse gas inventory and assurance (consolidated company) by 2029.

• Implemented ISO 14064-1:2018 greenhouse gas inventory standard in 2022.
• First completed data collection for Kaohsiung plant, gradually expanding the inventory boundary.
• Plan to complete greenhouse gas inventory for Taiwan business sites in 2024.

• Taiwan will start collecting carbon fees from major emitters (25,000 tons/year) in 2025.
• The EU, US, and other countries are gradually imposing carbon taxes on specific products.

• Continue greenhouse gas emission inventory.
• Implement energy-saving and carbon reduction projects.
• Purchase renewable energy.

• Invest in solar photovoltaic technology, etc.

• Co-invest in solar photovoltaic technology with other companies to diversify risk.

• Seek low-carbon equipment and raw materials, and develop related low-carbon products.
• If low-carbon products are not provided, sales volume will decrease.

• Continue to seek low-carbon raw materials.
• Decarbonize processes through government programs.
• Improve product energy efficiency to reduce resource consumption.

• Raw materials (including electricity, water, etc.) prices gradually increase due to environmental impacts.
• Product raw materials must comply with regulations or environmental trends, using higher-priced materials, resulting in price changes.
• Waste disposal regulations and requirements are becoming stricter.

• Find multiple suppliers that meet environmental trends.
• Co-develop new low-carbon, eco-friendly materials with customers and suppliers.
• Continuously evaluate the quality of raw materials.
• Actively seek willing partners.

• Disclose company information in multiple ways to increase transparency, attract customer orders, and meet regulatory requirements.

• Disclose relevant information through annual reports, official website, and sustainability reports.

• Customers prefer low-carbon or carbon footprint products, so the company must adjust its business strategy to meet market trends.
• Company products adopt low-carbon technology to provide low-carbon or carbon footprint products and increase sales.

• Continue to monitor customer and supply chain carbon reduction and carbon footprint requirements.
• Evaluate whether to introduce product carbon footprint for company products.
• Regularly review and evaluate whether company materials and processes can adopt low-carbon technology.

• With stricter international regulations and rising environmental awareness, consumers are increasingly seeking carbon footprint certification and carbon-neutral products.

• To keep company products competitive, continue to monitor regulations and value chain trends and evaluate whether to introduce product carbon footprint.
• Evaluate whether materials and processes can adopt low-carbon technology to meet international trends and regulatory requirements.

• The electronics industry is seen as high energy-consuming. Without active green innovation to reduce environmental impact, it cannot integrate into low-carbon economic development and will bear a negative image of high energy consumption and high carbon emissions.

• Continue to disclose company energy-saving and carbon reduction projects and greenhouse gas emissions on public platforms.
• Invest in green energy equipment and related technologies.
• Evaluate and plan the proportion of renewable energy use in the company.
• Increase the proportion of waste recycling and reuse.
• Implement energy-saving and carbon reduction plans with the entire value chain.

• Climate change is becoming more apparent, with increased frequency of extreme weather events. In the future, short-term heavy rainfall may overwhelm local flood control systems, increasing flood risk.

• Currently developing disaster response and prevention plans to reduce losses.
• Continue to monitor surrounding flood control systems; if necessary, build waterproof facilities according to rainfall patterns, increase flood control and drainage facilities, or consider relocation if unresolved.

• The global average temperature continues to rise, with persistent high temperatures becoming more apparent, possibly leading to reduced or interrupted production capacity, or affecting labor management or planning.

• To avoid impacting company operations, building equipment must be adjusted, such as replacing old, energy-consuming air conditioning equipment with energy-saving models.
• To reduce gas leakage and save air conditioning, seek eco-friendly insulation coatings or partitions to improve overall building energy efficiency.

• The company's main operating sites are located in coastal areas. If polar ice continues to melt and sea levels rise annually, the Kaohsiung plant and surrounding areas may be flooded, leading to reduced or interrupted production capacity.

• Develop disaster response and prevention plans to reduce losses.
• To mitigate the impact, raise equipment foundations or relocate, which will increase operating costs.

• Replace company vehicles from fuel to electric vehicles to reduce fossil fuel combustion.

• Replace company vehicles, assign electric vehicles to supervisors.

• Replace low-efficiency equipment to reduce losses and increase capacity.

• Replace old process equipment with more energy-efficient equipment to reduce material loss.
• Establish an energy management system to understand energy usage and provide a reference for equipment replacement.

• Consider green building design when constructing, renovating, or repairing plants to reduce energy use.

• When maintaining plants or replacing equipment, purchase energy-saving certified equipment to reduce energy loss.

• Use more recyclable and reusable raw materials in product manufacturing to reduce resource consumption and promote circular reuse.

• Company product scrap is collected by specialized companies for recycling and reuse.

• Build solar photovoltaic facilities and use renewable energy to replace original energy sources, reducing greenhouse gas emissions and meeting stakeholder expectations.

• Company invests in solar photovoltaic to increase domestic renewable energy supply.
• Consider building solar photovoltaic facilities to replace original energy use with renewable energy.

• In response to the overall green transition trend, begin to invest in low-carbon technology development and provide low-carbon products.

• Seek low-carbon raw materials and improve product manufacturing processes to increase energy efficiency and reduce resource waste.
• Replace company process equipment with more energy-efficient equipment to reduce material loss.

• Enter new and emerging markets (e.g., solar photovoltaic investment, cooperation with government and development banks) to diversify business activities.

• Invest in solar photovoltaic to increase domestic renewable energy supply and promote low-carbon economic transformation.

• Build solar photovoltaic, implement energy-saving and carbon reduction plans, and convert buildings to green buildings.

• Invest in solar photovoltaic and jointly build solar photovoltaic with other enterprises in the plant area to meet future renewable energy demand.

Base period: 1995–2014

Variable: Average temperature (unit: temperature change °C)

Model statistic: ensemble mean

Time scale: annual average

Region: Kaohsiung City

Base period: 1995–2014

Variable: Precipitation (unit: precipitation change rate %)

Model statistic: ensemble mean

Time scale: annual average

Region: Kaohsiung City

Note

• Hazard level mainly indicates the degree of natural hazard caused by extreme rainfall under climate scenarios, which may result in potential destructive events. In future projected scenarios, the probability of daily rainfall exceeding 650 mm in Kaohsiung City is considered. Flood hazard level 5 indicates a relatively high probability of extreme rainfall, while level 1 indicates a relatively low probability.
• Flood disaster risk refers to the probability of being affected by flooding in areas with high vulnerability and population under the impact of extreme rainfall due to climate change. Flood disaster risk level 5 means the area has the 'relatively' highest risk, while level 1 means relatively low risk, not zero risk or no disaster events.

Note

• Based on ISO14064-1:2018 inventory, the boundary includes Kaohsiung headquarters, Kaohsiung Lin Guang Plant 5, and Hsinchu branch. Data has not yet been verified by a third-party organization.
• Unit: metric tons CO2e.
• According to the ISO14064-1:2018 materiality screening principle, three emission inventories were completed in 2023, and inventory items continue to expand.
• The 2023 electricity emission factor adopts the latest announcement from the Taiwan Bureau of Energy: 0.494 kg CO2e/kWh.
• Numbers are calculated to four decimal places (rounded), which may cause slight discrepancies.
• 2022 data for Category 2 (Scope 2), Category 3 to Category 6 (Scope 3), and totals have been revised due to clarification of inventory boundaries.

• Bonding processing equipment with real-time monitoring and adjustment functions.
• Laser rapid drilling device.

• Laser rapid drilling device (invention).
• Rapid optical path switching architecture for cutting low dielectric constant (Low-K) wafer materials.

• Rapid cutting optical path architecture for cutting low dielectric constant wafer materials (invention).

• Laser clock modulation spectral cutting processing module.
• UV laser processing method and structure for copper coils.
• Laser etching method for thinning copper coils.