FocalTech : 2022 Sustainability Report

2022

FocalTech

Sustainability Report

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Resilience

With its spirit of perseverance, beliefs in integrity, and a philosophy of innovation, FocalTech will fulfill its responsibilities to society and stakeholders, and together promote change for the better.

Contents	Preface 	About the Report	1	Appendix Appendix 1: Comparison Table of GRI Sustainability Reporting Guidelines	54
	Message from the Chairman	2	Appendix 2: Comparison Table of Sustainable Accounting Standards Board (SASB) Guidelines	58
		Sustainable Business Strategy	3	Appendix 3: TCFD Disclosure Items Comparison	59
				Appendix 4: Sustainable Disclosure Indicators for Semiconductor Industry by Taiwan Stock Exchange	60
				Appendix 5: Climate-related Information for Listed Companies	61

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	Corporate			Innovative Value	Sustainable Prosperity	Protecting the Green		Friendly Corporate		Giving Back to Society
	Sustainability and			Breakthrough		with Partners		Environment			Workplace
	Robust Governance
1.1	Company Overview	12	2.1	Technological Leadership 25	3.1	Firm Foundation	29	4.1 Climate Change Risks and		5.1	Talent Foundation	39	6.1 Social care and Giving Back 52
1.2	Business Performance	16	2.2	Intellectual Property Security	3.2	Sustainable Supply Chain	31	Mitigation Strategies	35	5.2	Compensation and Benefits	41
1.3	Board of Directors			28				4.2 Greenhouse Gas Emissions and	5.3	Parental Leave	42
	Operations	18						Energy Management	37	5.4	Retirement Plan	43
1.4	Integrity in Business									5.5	Workplace Safety	43
	Foundation	21								5.6	Health Promotion	45
1.5	Risk Management	22								5.7	Employee Communication	47
1.6	Information Security									5.8	Talent Development	48
	Protection	24								5.9	Performance Evaluation	51

About the Report

This report, titled the 2022 ESG Sustainability Report of FocalTech Systems Co., Ltd. (referred to as "FocalTech" or the "Company"), upholds the principles of transparency and integrity in business. It faithfully presents FocalTech' performance and initiatives in the economic, environmental, and social dimensions throughout 2022. The report provides comprehensive disclosure on the six major areas of "Corporate Governance, Innovative Value Breakthrough, Sustainable Prosperity with Partners, Green Environment, Friendly Corporate Workplace, and Giving Back to Society." Through this report, we aim to share our commitment and achievements in sustainable development with all stakeholders.

Scope and Boundaries

The data disclosed in this report covers the period from January 1, 2022, to December 31, 2022. The report primarily focuses on FocalTech and its wholly-owned overseas subsidiaries. The disclosed data includes information from Taiwan and other overseas regions, including the United States, South Korea, and other locations. The financial data is sourced from audited financial statements and is consistent with the financial reports.

The content of the report encompasses specific practices and performance data in the economic, governance, social, and environmental dimensions. To ensure the completeness of project and activity performance, some performance data may include information from the most recent three years. Any special circumstances regarding the data will be explained in the respective chapter.

Basis of Reporting

This report has been prepared in accordance with the General Reporting Guidelines 2021 edition published by the Global Reporting Initiative (GRI). The direction of information disclosure in this report also complies with the Operating Procedures for Listed Companies to Prepare and Declare Sustainability Reports, referring to the Sustainability Accounting Standards Board (SASB) standards and the framework of the Task Force on Climate-related Financial Disclosures (TCFD). Additionally, it incorporates principles such as the United Nations Sustainable Development Goals (SDGs). The content of the 2022 report does not include any restatements of information from the previous year's report.

Publication Cycle

FocalTech issues its Corporate Social Responsibility (CSR) report once a year and makes it available for download on the company's website (http://www.focaltech-electronics.com) for public access.

This is the third sustainability report published by FocalTech, and the company plans to release a report annually in the future.

Previous Report Publication Date: June 2022

Current Report Publication Date: June 2023

Next Report Estimated Publication Date: June 2024

Contacting FocalTech

To enhance the quality and content of FocalTechs' sustainability report and facilitate communication with stakeholders, any suggestions or feedback are welcomed. You can reach out to the company through the following contact details:

Company Address：11F-1, No. 23, Huanke 1st Rd., Zhubei City, Hsinchu County 302047, Taiwan

Company Website：http://www.focaltech-electronics.com/

Contact Person：Sylvia Wu, Executive Secretary of the Board

Contact Email：[e-mail]

Review and Verification

The sustainability report has been prepared in accordance with the significant, inclusive, responsive, and impactful principles of the GRI General Reporting Guidelines 2021 edition and the AA1000 Accountability Principles 2018 edition. The 2021 report has already undergone external review and verification. It has been decided that external verification will not be conducted for this year's report.

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Message from the Chairman

FocalTech aspires to achieve sustainable operations in the semiconductor industry and exert a positive impact, contributing to a sustainable future.

Maintaining Resilience in Risk Response

The IC design industry faced various negative factors such as the pandemic, conflicts, and inflation in 2022, leading to a rapid downturn in the consumer market. Companies throughout the upstream and downstream supply chains made concerted efforts to reduce excessive inventory, and FocalTech was no exception. However, FocalTech has consistently maintained resilience and adaptability, promptly implementing response measures. At this moment, we believe that the worst times have passed, and FocalTech will gradually approach a healthy inventory level and restore its operational capabilities.

While the company's operational capacity is being tested by the changes in the external environment, the impacts of extreme weather caused by climate change are pervasive. Currently, there is no significant reduction in the deterioration rate due to human improvement efforts. We deeply understand that regardless of market conditions, whether good or bad, we must remain proactive in our actions to promote energy conservation and carbon reduction.

Sustainable Environment and Innovative Growth

Since 2015, FocalTech has been investing in the research and development of IDC (TDDI integrated touch display driver) technology. In 2022, it made remarkable achievements in the automotive market, creating a cumulative shipment volume of over 10 million units and capturing a market share of 36%. This product significantly reduces the manufacturing processes and consumables required by panel customers, leading to a direct 50% reduction in IC procurement by end customers, effectively reducing resource consumption on our planet.

To provide employees with a more comfortable environment and better public facilities, FocalTech relocated to a newly purchased office in June 2022. The new office space is 43% larger than the previous leased office. Taking advantage of this opportunity with our own property, we proactively planned for future energy-saving and carbon reduction benefits. We made a total investment of NTD 7.4 million, including the procurement of a central control system (PLC), full adoption of LED lighting, insulated windows, and more. By analyzing the actual electricity usage from September to December 2022 and comparing it to the same period of the previous year, we achieved a significant 16% reduction in electricity consumption despite an increase in floor area.

Talent Development

Since 2021, FocalTech has been strengthening its industry-academia collaboration programs. In the fiscal year 2022, we allocated a total investment of NT 8.73 million to actively cultivate semiconductor talent through partnerships with institutions such as the Semiconductor Institute at Tsinghua University, Yangming University, and National Taiwan University of Science and Technology.

FocalTech has implemented a "Training-oriented Individual Development Plan" specifically for the R&D department. This plan involves developing a "Job Skills Matrix" to identify required talent capabilities and then creating a "Training Roadmap" based on these needs. The training programs are designed according to factors such as years of experience, job positions, and levels, covering general knowledge, specialized skills, management, and other areas.

Additionally, the establishment of an online course system in 2021 has further enhanced our talent development efforts. In the fiscal year 2022, both internal and external training participants increased significantly by 2.3 times compared to the figures in 2021 and 2020. For more details, please refer to Chapter Five of this report.

Future Outlook

Since its establishment in the United States in 2005, FocalTech has embarked on its 18th year. We have always maintained an unwavering courage to face every challenge and actively address ESG issues. In addition to consistently maintaining a corporate governance evaluation score between 6% and 20%, we were honored to receive the Gold Award in the Electronics and Information Manufacturing category at the 15th Annual Sustainable Report Awards organized by the Taiwan Sustainable Energy Research Foundation in 2022. This award recognizes our commitment to sustainable development.

We express our gratitude to all our partners and colleagues. It is through our collective efforts, perseverance, and unwavering commitment that we continuously strive for improvement and excellence in all aspects. This enables us to fulfill our commitments to society and the environment, driving positive and transformative changes for a better future.

FocalTech Chairman

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Sustainable Business Strategy

Stakeholders and Major Theme Identification Process

Step 1. Understand the organizational context

• Refer to sustainability-related industry standards, and examine the organization's operations, business relationships, and the process of identifying stakeholders to understand the overall profile of the organization and related impacts.

Step 2.	Step 3.	Step4.
Identify actual and potential	Assessing the Significance	Prioritize coverage of most
impacts	of Shock	significant impacts
• Based on the overall profile	• Through telephone	• Rank the identified issues of
of the organization, relevant	interviews with stakeholders	concern, and check their
impact information, and	from the "Sustainable	significance with consultants
issues of concern to	Development Team"	according to sustainability-
stakeholders, 35 issues of	department representatives,	related industry standards,
concern related to	the scores of "Stakeholder	and finally select 10 major
sustainability were selected.	Concern" and "Operational	themes.
	Impact" were obtained for
	materiality analysis.

Stakeholder Identification and Communication Channels

FocalTech Sustainability Development Team evaluated the five major factors including responsibility, influence, concern, multiple perspectives, and dependability in accordance with the five principles of the AA1000 Stakeholder Engagement Standards. After a discussion based on the feedback and analysis of the information, the Sustainability Development Team identified the key stakeholders for the 2022 ESG Report. The key stakeholders of the Report include (1) employees, (2) customers, (3) shareholders and investors, (4) suppliers, (5) competent authorities, and (6) academic research institution.

Through different communication channels, FocalTech listens to and understands the needs and expectations of its stakeholders, and responds to them in a timely and appropriate manner. Good two-way communication not only drives the development of FocalTech sustainability policy, but also makes the best effort in leading FocalTech to move forward towards a better living environment.

	Stakeholder		Significance to FocalTech			Issues of concern		Communication channel / Communication frequency
									Hold various activities occasionally
									Submit the proposal for employee promotion
									on a regular or occasional basis every year
			Employees are the cornerstones of FocalTech, as		Labor-management issues			Organize internal and external education &
			well as the Company's most important asset. In		Protection of human rights			training programs occasionally
			addition to protecting the rights and interests of		Employee appointment and compensation			Hold a birthday celebration event every two
	Employees	each employee and providing them with a better		management			months
			compensation and benefits than the industry,		Education & Training and career			Employee Performance Appraisal (semi-
			FocalTech also respects and cares for each and		development			annually)
			every employee.		Occupational safety and health promotion			New Employee Discussion Forum (New
									employee orientation)
									Employee Welfare Committee Meeting
									(monthly on average)

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