FocalTech : 2022 ESG Insight Report

FocalTech Systems Co., Ltd.

FocalTech is an IC design company specializing in human-machine interface innovation. The company's products include touch chips, display driver chips, integrated touch and display chips (IDC), and fingerprint recognition chips.

The 2022 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 report references SASB standards and TCFD framework.

ENVIRONMENTAL

Goal: net zero emissions by 2050

FocalTech expects to complete the 14064-1 GHG inventory and verification in 2024.

Climate Change

In 2022, Focal Tech began adopting TCFD framework to address climate-related risks and opportunities and uses the tools provided by TCCIP (Climate Change Integration Service Platform) for assessing climate change physical risk scenarios. The company adopts the 2DS / RCP2.6 scenario as the basis for identifying climate-related risks and opportunities, focusing on physical and transition risks over a ten-year period, aligning with the company's long-term business development cycle.

The Sustainable Development Committee is responsible for identifying climate-related risks and opportunities and formulating corresponding strategies. Action plans are developed to seize opportunities, reduce operational risks, and progress is regularly reported to the Board of Directors for monitoring of the implementation and effectiveness of these strategies.

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Note: Short-term is 1-3 years, medium-term is 3-5 years, and the long-term is 6-10 years

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GHG and Energy Management

FocalTech is a professional IC design company and activities are limited to the office building. In June 2022, we relocated from the leased office to self-owned 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 which saves 35.27% of electricity consumption, installing thermal insulated windows, and more.

1 ping = 3.3058m3

The new office space is 43% larger than the previous leased office. Higher total energy consumption in June to August 2022 was recorded compared to the old office due to overlap usage of old and new office area, summer peak season power consumption as well as air-conditioning adjustments. However, 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.

Other indirect emissions (Scope 3) will be quantified and disclosed in 2024.

GHG and Energy Management Plans

The electricity saving and carbon emission in 2023 will be reduced by 5% compared with 2022. Collect green certificates and green electricity information.

Establish a list of suitable green power procurement manufacturers.

Continue to implement and evaluate energy-saving and carbon-saving targets.

Use renewable energy and increase the utilization rate of renewable energy.

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In the second half of 2022, since the new plant does not have an independent water meter, only January to June will be counted, and the sewage will be treated uniformly by the park.

Waste Management

By improving the material, size and performance of products, we hope to achieve the purpose of maximizing the sustainable use of resources. In addition, actively reduce waste and reduce production costs, reduce waste generation by improving process and operation management, and develop and select non-polluting and low-pollution design process.

In addition, defective products produced by outsourced ICs are recycled through effective management procedures to reduce waste of resources. The waste is mainly general domestic waste generated in the employee office area, which is declared by the qualified manufacturer for general industrial waste; the company does not generate hazardous waste.

Unit: metric ton

Clean Tech

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, 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.

In 2022, FocalTech did not experience any customer complaints related to violations

of product restrictions under RoHS, WEEE, or REACH regulations.

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SOCIAL

Human Rights

FocalTech follows the United Nations "Universal Declaration of Human Rights", "United Nations Global Covenant", "United Nations Guiding Principles for Business and Human Rights" and the International Labor Organization's "Declaration on Basic Principles and Rights at Work" " and other human rights conventions, and recognize internationally recognized basic human rights.

Internal regulations include "Diversity of Employment and Non-Discrimination", "Regulations on the Prevention and Control of Sexual Harassment", "Prohibition of Child Labor", and "Regulations on the Management of Recruitment Operations".

FocalTech also cooperates with customer audits to carry out human rights-related hazard identification and risk assessment, and regularly holds "social responsibility management review meetings".

Contractors have fixed term employment including temporary, short-term, seasonal, dispatch, foreign workers, technical students, interns.

Employee Turnover

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Occupational Safety and Health

FocalTech is an IC design company with no manufacturing operations, our new office area in Zhubei has obtained ISO 45001 certification through verification by TUV NORD in 2022, with annual external audits to ensure the effectiveness of our management system.

FocalTech has established an Occupational Safety and Health Committee consisting of 13 members to regularly review occupational safety issues on a quarterly basis.

We employ full-time, dedicated occupational health nurses to provide regular follow-up and care, reduce the risk of major illnesses among employees, and assess potential occupational hazards. Feedback channels are available for worker consultation and participation, such as suggestion boxes and e-mail complaint on the internal website. 3 hours of occupational safety and health education are provided for new employees and existing employees on an annual basis. Fire evacuation drills are conducted biannually.

The number of occupational injury incidents in 2022 was 0.

SR=0, FR=0

Employee Communication

FocalTech provides diverse communication channels, such as labor-management meetings, welfare committee meetings, new employee care, and lifestyle exchange platforms to foster opportunities and space for bilateral communication.

2022: four labor-management meetings and four cross-functional communication meetings were held, with a total attendance of 312 participants.

Goals for 2023:

• Hold labor-management meetings regularly.
• The Chairman informs employees of the Company's recent development and financial reports through birthday celebrations, and to eliminate the concerns of Company's operation and welfare development.
• Set up a Chairman's mailbox and assign dedicated personnel to gather colleagues' questions every week, as well as a dedicated personnel to conduct preliminary communication within one week upon receiving the questions.

Salary Structure

At FocalTech, employee salary adjustments are primarily based on factors such as individual years of service, educational background, and professional capabilities, without any differentiation based on personal physical or psychological differences. There is no gender pay gap between male and female employees, as well as indirect employees, when comparing basic salaries and overall compensation ratios. Additionally, for non-supervisory personnel, both male and female employees receive standard salaries that exceed the statutory minimum wage.

Full-timenon-executive employee salary in 2022

The Company's earnings per share increased from NT$3.97 in 2020 to NT$30.23 in 2021, and the average salary of full- time employees who are not in supervisory positions increased by 33%. In 2022, due to the sudden drop in the general environment and market, the company's profit was loss, and the average and median salary decreased by 29% and 22% compared with 2021.

Note: The statistics in Taiwan do not include the local employees in the United States, Germany and Korea; the statistics are consistent with the statistics of the Taiwan region disclosed on the Market Observation Post System (MOPS).

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Employee Benefits

FocalTech offers salary and benefits and plans a wide range of welfare programs to provide comprehensive care to employees.

Apart from statutory welfare benefits, the Company (including Employee Welfare Committee) provides additional leave, year-end bonuses, festive gifts, wedding/celebration/hospitalization subsidies, company trips, club activities, departmental gathering subsidies, group insurance and employee stock ownership.

Parental Leave

Talent Cultivation

The 2022 annual education and training plan was generated through compilation of employee surveys and unit supervisors' requests. The training unit carried out course planning and arrangements, inviting employees to participate and enhance their job-related knowledge and skills.

Post-training satisfaction surveys showed that both the "practicality" and "job assistance" aspects of the courses received satisfaction rates of over 90%.

We have designed specific training blueprints for each unit, providing complete training programs in areas such as professional expertise and management capabilities. Through various functional training, new employees can quickly adapt to their roles, assimilate into the company culture, and foster a sense of unity within the company. Additionally, it is essential for experienced employees to pass down their practical experience to the next generation of new employees.

FocalTech has established the "Education and Training Management Procedure," arranging annual educational training based on the required employee competencies and skills for the company's development. The training program includes four major categories as follows:

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Talent Cultivation and Development Framework

Professional collegues

The Company's core values and corporate culture as cornerstones

Training hours of personnel at all levels in 2022

Academic Industry Collaborations

In 2022, FocalTech invested a total of 8.73 million NTD in academic-industry collaborations.

Master's and Ph.D. students from four major departments: Semiconductor Components, Design, Materials, and Processes attended the symposium and lecture.

In addition to collaborating with the Semiconductor Research Institute to nurture talents, we also initiated eight technical research and development projects with four universities in Taiwan, benefiting and involving 65 students. This initiative further enriches the future talent pool in the semiconductor industry.

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Performance Evaluation

The HR department at FocalTech follows the "Performance Management Policy" to set and evaluate performance objectives through performance interviews and assessments. Regular reviews of employee performance are conducted annually to measure individual achievements and assist in personal career development, ultimately enhancing both organizational and individual performance.

Performance evaluation adheres to the principles of transparency and fairness and ensures that no differentiation is made based on factors unrelated to work performance, such as gender, age, or religion. Employee performance evaluations are conducted semi-annually.

In 2022, 99% of employees participated in the performance and career development evaluation according to the performance assessment system. The 5 employees who did not participate in the performance assessment include the Chairman, employees who have been in their positions for less than three months, and a massage therapist.

Supply Chain Management

2023: 50% of the key suppliers have completed ISO 14064 education and training internally.

89% (2021) and 93% (2022) suppliers obtained ISO 14001 certification and 100% (2021 &2022) of key suppliers obtained certification.

FocalTech follows the RBA Responsible Minerals Initiative (RMI) requirements and requests suppliers to submit a "Conflict- Free Minerals Commitment Letter" to ensure that the raw materials used in FocalTech' products are sourced from smelters certified by the RMI.

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