Supply Chain Management
Supply Chain Framework
The production and operating activities of ChipMOS, not only create the direct economic values, more importantly, help the upand downstream industrial chain to create the indirect economic values via the technology cooperation. By following the RBA code of conducts as the policy guidelines for the supplier management, it is committed to promote the local sourcing strategy and supplier coaching, seeking to improve the overall competitiveness and create the win-win situation.
Local Sourcing Strategy
By enhancing the local sourcing strategy, ChipMOS reduces the supply chain risks, as well as the carbon emssion in the overall supply chain and creates the local jobs. The term “local supplier” refers to the manufacturing plants of suppliers locate at the same area as the production bases of ChipMOS. For instance, if a manufacturing plant of a supplier locates in Taiwan, this is a local supplier to ChipMOS’plants in Taiwan. In 2022, the proportion of our local suppliers is 57%, which showed a slight decline in our local sourcing percentage in the past two years. Due to the impact of global recession and shortened product delivery schedules in the second half of 2022, ChipMOS had to significantly cut down its purchase of substrates and reduce its inventory. Incidentally, as most of our substrate suppliers are based in Taiwan, that would account for the decline of our local sourcing.
Looking to the future, we will insist the local sourcing strategy and spirit, to select quality suppliers in Taiwan, and increase the proportion of local sourcing, while expecting to bring more jobs to Taiwan, and further enhance the development of overall local industries.
Supplier Management Committee
ChipMOS complies with the code of conducts of the Responsible Business Alliance (RBA) and applies such as the policy and guidelines to manage the suppliers in terms of environment and human rights, and clearly specifies the five management scopes for suppliers, including labor, health and safety, environment, professional ethics and management system.
ChipMOS has established the “Supplier Management Committee” consisting of five groups, namely engineering, subcontracting, production and material management, procurement, and quality. The Committee works in a cross-function way to implement the supplier management scopes together, including new supplier selection, supplier audit, and supplier appraisals, to be committed to conform to the standards of RBA’s code of conducts, and work with the suppliers to grow together, and operate sustainably.
Supplier Code of Conduct
Supplier Ethical Management Policy
To ensure that suppliers understand ChipMOS's adherence to honest and integrity in all business activities, we require for additional clauses regarding Regulations Governing Professional Moral Conduct when signing procurement contract with suppliers. In case of illegal conduct from ChipMOS's employees or relevant suppliers, the incident can be reported via our whistleblowing mailbox at Audit_Committee@chipmos.com. To collectively bear the responsibility of ethical practices with our suppliers, ChipMOS will investigate and punish the illegal conduct, while keeping the identity of the whistleblower confidential and to adopt proper protection measures.
Supplier's CSR Statement
Since 2014, ChipMOS have been asking its suppliers of raw materials, equipment and specific services (including human resource agencies, janitors, security personnel, resident employees of vendors, catering personnel and so forth) to sign the Declaration of Corporate Social Responsibility, which clearly requires the partners in the supply chain to fulfill the corporate social responsibilities together. Until 2022, a total of 265 suppliers have signed the Declaration of Corporate Social Responsibility; the signature reply rate is 100%.
Selection of New Suppliers
ChipMOS has built a set of new supplier selection process. When the unit in need request for new suppliers, the Supplier Management Committee will evaluate, including for major dimensions: engineering technical capability, quality management system, price, service (including capacity and promise of delivery time), as well as the industrial history from the supplier's existing customers, to evaluate the risks of introducing the supplier in a holistic manner.
ChipMOS expects the suppliers agree with our philosophy of the sustainable operation, and the requirement of ensuring product quality. We adopt the highest reviewing criteria for the evaluation; for the new suppliers of the key materials, their certifications of international quality systems are verified, e.g. ISO 9001, ISO 14001, IATF 16949, and ISO 45001; implementation of the process management, green product, Responsible Business Alliance (RBA) and health and safety management are reviewed, to ensure the suppliers meeting the requirements in terms of environment and labor practices, including product quality, prohibition of hazardous substances, and employee protection. The selection process of new suppliers is as the following figure. These who pass the evaluation will be registered in ChipMOS’ Approval Vendor List (“AVL”) for subsequent daily management. To be more flexible in terms of deploying supply sources and coping with customers' demands, 3 new suppliers were added in 2022. All of them 100% passed the evaluation, conforming to the ChipMOS' requirements for quality, environment and social sustainability practices.
ChipMOS Suppliers Audit Focus and Implementation
Coaching and training suppliers
By correcting the defects found during the appraisal and audit, ChipMOS insists a positive and open attitude to discuss with the suppliers, plus promotions and training from various aspects, to learn from each other while growing together, and ensuring no ecurrence of defects. If suppliers obtain certification of international standards, it is a plus for audit and evaluation. ChipMOS will keep on coaching suppliers to obtain various certification of international standards.
For example, in light of the customers’ needs for applications on automotive products, other than ChipMOS must be certified for the automotive international certification IATF 16949, the suppliers’ production qualities must be under tight controls. Therefore, other than including the automotive requirements in the annual quality audit surveys to suppliers, the process audit form for the German vehicle supply chain quality management system VDA6.3 is required to be completed by the suppliers for automotive products. It is ChipMOS’s responsibility to enable suppliers to understand the requirements for automotive specifications better and obtain the certified quality via ChipMOS’s audit and coaching process for suppliers. The percentage of ChipMOS' suppliers that have obtained IATF 16949 certification has grown from 42% in 2021 to 47% in 2022. Not only that, the percentage of suppliers that have obtained the certification in the past three years has grown by 10%, reflecting a significant increase in the quality and competitiveness of our suppliers.