Governance

2022 Business Performance

In 2022, the Alltek’s revenue and profit-maintained growth. Consolidated operating revenue was NT$60.428 billion, a year-on-year increase of 28.20%; net profit after tax was NT$1.076 billion, a year-on-year increase of 36.84%; working capital was NT$4.918 billion, an increase of 55.65% from the previous year. The Company invested NT$128,191,000 in research and development in 2022.

Direct Economic Value Generated and Distributed by the Organization from 2021 to 2022 (Unit: NT$ thousands, except for earnings per share, which is presented in NT$)
Item/year 2021 2022
Direct economic value generated Consolidated revenue 47,134,253 60,428,396
 

 

 

 

 

 

Economic value of distribution

Operating costs 44,688,561 57,972,155
Operating expenses 1,354,076 1,227,521
 

 

 

GRI specific items

Employee remuneration and benefits 1,004,837 808,755
Payments to contributors  

(e.g. Board of Directors, shareholders)

641,703 823,185
Payments to the government  

(sales tax, income tax, property tax)

214,805 337,437
Community investment  

(e.g. charity donation)

0 0

Retained economic value
(Note: Retained economic value = Direct economic value generated – Economic value distributed)

Net operating income (excluding non-business income) 1,091,616 1,228,720
Net profit after tax 786,152 1,075,734
Earnings per share 4.05 5.01
Proportion of Product Sales in 2021-2022

Unit:NT$100million

Year 2021 2022
Product item Amount Percentage Amount Percentage
Wired broadband components

164.07

34.81%

185.47

30.69%

Wireless communication components 156.19 33.14% 281.21 46.54%
Others 151.08 32.05% 137.6 22.77%
Total 471.34 100.00% 604.28 100.00%

Integrity Management

We understand that the use of corruption and unethical means for business operations will cause losses to the Company’s goodwill and many stakeholders, including society. Only the establishment of business policies based on integrity can create the competitiveness of the sustainable development of the enterprise. We reinforce our “Ethical Corporate Management Best Practice Principles,” “Code of Ethical Conduct,” “Procedures for Handling Material Inside Information and Procedures for Management of Prevention of Insider Trading.” As well as this, we have also formulated its “Reporting System for Unlawful Conduct” to strictly prevent the occurrence of unethical practices. At least once a year, the President’s Office reports on ethical governance performance to the Board of Directors.

Ethical Values and Behavioral Standards

To emphasize the integrity of business management and to improve the management of “Ethical Corporate Management Best Practice Principles,” the President’s Office is responsible for the establishment and supervision of the implementation of the policies on ethical business management and the plans for unethical conducts. Implement transparent information, respect intellectual property rights, protect the privacy of each business partner, uphold a responsible attitude in procurement, establish a variety of communication channels and whistle-blowing mechanisms, and establish a special “Reporting System for Unlawful Conduct” to prevent fraud, maintain company reputation, and conduct unethical and unethical practices. In addition, in order to ensure that the behaviors of the Company’s directors, supervisors, managers, and other employees comply with ethical standards, and to enable the Company’s stakeholders to better understand the Company’s ethical standards, the “Code of Ethical Conduct” has been established to require all directors, supervisors, Managers and other employees are required to abide by laws and ethical standards when carrying out related business activities.

Alltek’s Moral Value

Prevention of conflict of interest

Employees shall not use his/her position to improperly benefit their immediate blood relatives
Avoidance of opportunities for personal gain Avoid the use of company property and information for personal gain or the convenience of one’s position
Confidentiality duty Absolute confidentiality of the information of the Company or its purchase (sale) customers
Fair trade The employees shall not obtain improper benefits through manipulation, concealment, misuse of information gained from carrying out duties, or make misstatements on material matters or conduct other unfair trade practices.
Protection and proper use of company assets Use company assets legally and effectively to prevent theft, negligence or waste.
Reporting System for Unlawful Conduct
The following unlawful conducts are strictly prohibited
Embezzlement of public funds Fraudulent claim of public expenses Illegal use of company assets Illegal embezzlement of company assets
Receiving kickbacks Having dealings with stakeholders by taking advantage of their positions Accepting of improper benefits Dishonest and unethical conduct
Leaking trade secrets Leaking vendor and customer information Illegal act Damage to the Company’s reputation
Insider Trading Prevention Mechanism

To prevent insider trading, avoid improper leakage of information, and ensure the consistency and correctness of the information released to the outside world, we have established the “Procedures for Handling Material Inside Information and Procedures for Management of Prevention of Insider Trading.” The Company’s directors, supervisors, managers, and employees are subject to these Procedures, stipulating that persons who has knowledge of material information shall not disclose it to others, nor shall he/she inquire or collect material information about the Company not yet released that is not related to his/her personal duties, in order to implement insider trading prevention and management operations.

 

Anti-Corruption Policy and Communication Procedures

The President’s Office is responsible for formulating and supervising the implementation of the ethical corporate management policy and the unethical conduct plan. The implementation status is reported to the Board of Directors at least once a year. Through the establishment of good corporate governance and risk control mechanisms, we aim to create a business environment for sustainability. The Company’s Board of Directors and the management have declared in various public occasions that they will uphold the principle of ethical corporate management to run the operations of the Company. The Company has not formally assessed the risk of corruption of each operating location, but has publicly disclosed its “Ethical Corporate Management Best Practice Principles,” “Code of Ethical Conduct,” and anti-corruption-related guidelines on its official website. The Company also provides employees with education and training on integrity and ethical management and requires each employee to sign an “Integrity Pledge” and advocate ethical conduct on the intranet, ensuring ensure that everyone understands the relevant covenants and rules.

Risk Management Policy

Risk Management

In order to ensure the stable operation and sustainable development of the Company, improve the business philosophy of integrity, and reduce the risks that may be faced in operations, the Board of Directors of the Company approved the Risk Management Policies and Procedures in 2022, and risks are regularly assessed. The risk management policy defines various risks according to the Company’s overall operating guidelines, and establishes a risk management mechanism for early identification, accurate measurement, effective supervision, and strict control of risks to prevents possible losses within the tolerable risk range. The best risk management practices are continuously being adjusted and improved in accordance with changes in the internal and external environment in order to protect the interests of employees, shareholders, partners and customers, while also increasing the value of the Company, and achieving the principle of optimizing the allocation of company resources.

 

Risk Management Organization

The Company’s Board of Directors is the highest decision-making body for the Company’s risk management, with the objective of complying with laws and regulations and promoting and implementing the Company’s overall risk management. The Board of Directors has a clear understanding of the risks faced by the operations in order to ensure the effectiveness of risk management and assumes the ultimate responsibility for risk management. The “Corporate Sustainability Committee” has been established under the Board of Directors, with various functional teams formed under it to analyze and monitor related risks within the unit. The risk management team is responsible for the implementation and promotion of various risk management policies. Two or more meetings are held each year and the results of risk management are reported to the Corporate Sustainability Committee on a regular basis.

Internal Control

The Company’s internal audit is an independent unit, with one full-time auditor established under the Board of Directors. The internal auditor assists the Board of Directors and management in supervising various internal systems and procedures, to ensure the effectiveness of internal audit procedures, the reliability of financial reporting and compliance with relevant laws and regulations, and can provide suggestions for improvement in a timely manner. This way, the Company’s internal systems can be effectively implemented, and the execution of the supervision mechanism and control of various risk management practices can be carried out effectively.

 

Risk Management Procedures

The risk management process is divided into four stages. Each risk management unit examines its own business and operational characteristics, identifies possible risk factors that the Company’s operations may face, develops a complete risk classification framework, and defines appropriate measurement methods as the basis for risk management.

After Reviewing the Characteristics of Its Business and Operation, the Risk Categories and Management Measures Are as Follows:

Risk category Risk management performance
Operational Risk 1. Formulated the “Procedures for Sustainability Committee Establishment” and set up a Sustainability Committee, which includes the risk team.

2. The annual audit plan based on the risk assessment was formulated and executed accordingly.

3. Formulated the “Risk Management Policies and Procedures,” which were submitted to the Board of Directors in 2022.

Financial Risk 1. In terms of operations, we have strengthened the management of inventory and accounts receivable and other material assets, and maintained profit growth.

2. Raised funds such as syndicated loans and convertible corporate bonds to supplement the working capital.

Information Security Risk Established the “Cybersecurity Management Policy” and reported the implementation status to the Board of Directors in 2022.
Environmental Risk Supported the release of the Task Force on Climate-Related Financial Disclosures (TCFD) by the Financial Stability Board (FSB) in June 2017 to mitigate the risks and pursue opportunities associated with climate change. In addition, the annual progress and results of the work was disclosed in accordance with its proposed framework.
Overview of 2023 Risk Management
  1. The company’s risk management team has reported the risk management operations to the board of directors on November 7, 2023.

Intellectual Property Management Plan and Enforcement 

At Alltek, we attach great importance to information security and comply with laws and regulations. Professional ethics is our commitment to the employees and stakeholders. Ensuring that confidential information and customer privacy are respected is also a Company’s competitive advantage. We adhere to the principle of business integrity. Restrictions and regulations on various types of intellectual property rights and copyrights have always been ones of our priorities. In order to implement the intellectual property policy, the specific implementation measures within the Company and the stakeholders are as follows:

1. All employees must sign the “Employment and Intellectual Property Confidentiality Declaration Form” when joining the Company. According to the law, they must undertake the obligation of confidentiality regarding the Company’s intellectual property rights, copyrights, and business secrets during the tenure until after they resign.
2. The Company continues to publicize information security concepts and educate employees on information security concepts such as respect for intellectual property rights and the correct use of legally authorized software through quarterly company meetings and the Enterprise Information Portal (EIP). By doing this, we are able to ensure that employees can properly use legally authorized software and avoid infringement of rights due to misuse of unauthorized software, further protecting the Company’s Information security.
3. When using cloud-based digital services such as Microsoft 365 and Teams, the Company implements two-factor authentication for all login accounts to enhance information security protection and prevent information security risks from password theft.
4. Achieving the compliance of intellectual property, trade secrets, and information security management with customers by signing non-disclosure agreements.
5. All intellectual property works produced are properly stored in the Company’s information system and maintained and used continuously. For example: online training courses for new employees, audio and video courses of professional practice seminars, information system user manuals, and corporate sustainability reports.Gradually promote the inclusion of relevant documents and archives into the DMS document management system.
6. As of October 31, 2023, the outcomes of the Company’s trademarks and patents are as follows:

Registered trademarks: 5.

Patent: One utility patent has been approved.

7. The Company reports the implementation of intellectual property management to the Board of Directors once a year. The latest report was submitted on November 7, 2023, to ensure that the operation and effectiveness of intellectual property management meet the Company’s expectations and plans, and to establish a continuous improvement mechanism.

Cybersecurity Policy

Under the organization of the Sustainability Committee, an Information Security and Process Management Team (hereinafter referred to as the Information Security Team) has been established. The top supervisor of the Information Department is also the Chief Information Security Officer, responsible for coordinating information and network security management, including policies, plans, implementation, and analysis of information security incidents. A dedicated Information Security Department has also been established which reports regularly at senior executive meetings, evaluates information security policies annually and reports to the Board of Directors.

The information security team adheres to the security concept of maintaining an information safe operating environment, and adopts necessary management, operation, and technical security protection means, measures or mechanisms to ensure the confidentiality, integrity and availability of important information, and to provide comprehensive protection and safeguards for the Company’s information systems and their processes, stored media and databases, and transmitted data. Establish a secure and reliable computerized operating environment to ensure the cybersecurity objectives of the Company’s computer data, systems, equipment and network security. In the event of an emergency such as a malicious attack, sabotage or misuse, the Company can quickly make the necessary responses to restore normal operations in the shortest time possible in order to reduce the extent of damage that may affect and jeopardize the Company’s business operations.

Information Security Protection and Risk Management

We are committed to improving various information security protection measures, continue to strengthen the information security awareness among employees, and regularly perform information hazard recovery and vulnerability scans to minimize the possibility of information security risks. In addition, to strengthen information security risk management, the Company has joined the TWCERT/CC information security joint defense organization. We exchange information security information with one another in the alliance, discuss and share information security problems encountered in operation or important information security issues recently discovered. By doing this, we are able to achieve the purpose of joint defense of information security and to improve the overall information security protection capability of Taiwan. In 2023, there was no leakage of sensitive information, and there was no significant interruption of information services, resulting in financial losses in business activities with customers or suppliers.

Cybersecurity Defense Structure

Significant Cybersecurity Incidents

In the past years and up to the date of the public prospectus, no significant cybersecurity events affecting the company’s operations have occurred.

Digital Optimization – [Paper Reduction Campaign]

In August 2021, Alltek launched the “Paper Reduction Campaign,” which was initiated by the Chief Operating Officer, and coordinated and executed by the “Business Information Management Committee.” The Group’s subsidiary, Pantek Corp., was also included in the project team, changing the process of paper signing to digital signing. Announcements were also made on the intranet to promote the policy of printing on both sides of the paper, extending the spirit of the Paper Reduction Campaign in all daily operations of the Company. In doing so, we are able to strengthen the awareness of all employees to save paper and reduce waste generation and strengthen the cultivation of green awareness through daily self-management and environmental protection habits.

*Note 1: As the Group’s subsidiary, Pantek Corp., shares the procurement, sales, inventory process and logistics and warehousing resources of Alltek Technology and Pantek Corp. was included in the early stage of the Paper Reduction Campaign.

*Note 2: The “Group” referred to in the [Paper Reduction Campaign] chapter refers to the two companies, i.e. Alltek Technology and Pantek Corp.

Phased Introduction of Projects

Up to 2022, the “Paper Reduction Campaign” has been gradually carried out in four stages. The implementation status of each stage is as follows.

*Note: Virtual outgoing/virtual incoming operations is the entry of goods without physical access into the warehouse of Alltek. (Example: Arrange delivery to the client through triangular trade.)

Performance Benefits

1. Review existing processes and set up process digital control points to reduce the risk of human error. The Company has changed its physical signing to digital signing to improve the timeliness of document delivery and increase the efficiency of signatures. In 2022, the Group carried out 97,447 electronic signatures via the Business Process Management (BPM) system.

2. When accessing data, users only have to search for them in the database, instead of manually rummaging through boxes and cabinets to search for them.

3. After launching the Paper Reduction Campaign paper expenses of the procurement, sales, inventory process were reduced by 56.66% compared to the original process, reducing the quantity of paper by 36,806 sheets, or a reduction of 56.8%.

Paper Reduction Campaign 2022 Original method After the Paper Reduction Campaign was launched Compared to the original method

Increase/decrease

Increase/decrease compared to the original method (%)
Paper expenses
(Unit: NTD)
21,790 9,443 -12,347 -56.66%
Quantity of paper
(Unit: sheet)
64,794 27,988 -36,806 -56.80%

Note 1: As the Paper Reduction Campaign is jointly promoted by the Group and its subsidiary, Pantek Corp., the data also includes Pantek Corp. The boundaries of the scope are Alltek Technology’s Xizhi Warehouse and Taoyuan Bonded Warehouse.

4.Starting from the improvement of the procurement, sales, inventory process, and through the internal promotion of the concept of paper saving, the overall paper consumption of the Taiwan Headquarters, offices, and logistics and warehousing in 2022 decreased by 96,053 sheets from 2021, or a reduction ratio of 25.95%.

5.In 2022, the Group’s Taiwan headquarters, offices, logistics and warehouses in Taiwan was reduced by approximately 11.53 trees from the previous year.

From 2020 to 2022, The Paper Consumption Statistics of the Alltek Technology’s Taiwan Headquarters, Offices, and Logistics and Warehouses Are as Follows:
Year of inventory 2020 2021 2022
Paper consumption by MFPs (unit: sheet) 422,813 370,149 274,096
Increase/decrease in paper consumption from the previous year (unit: sheets) Base year -52,664 -96,053
Increase/decrease in paper consumption from the previous year (unit: %) Base year -12.46% -25.95%
Approximately equivalent amount of trees felled (unit: tree) 50.74 44.42 32.89
Increase/decrease in the number of trees cut down from the previous year N/A -6.32 -11.53

Note: The calculation of the equivalent number of trees felled for paper consumption (unit: tree) is quoted from Conservatree, a non-profit organization in the United States. It is estimated that one tree can produce about 8,333.3 sheets of photocopying paper.

 

Paper Reduction Performance in the Past Three Years

Supplier Sustainability Management Policy

Supply Chain Management

The Company distributes semi-conductor products for network communication in various countries, including wired broadband components, wireless communication components, optical communication components, speech processing components, and communication protection components. The main suppliers are “product suppliers” and “service providers” merchants. The global supply chain chaos and shortages caused by the pandemic will continue until 2022. We know that supply chain partners are indispensable to the sustainable growth of enterprises. In addition to maintaining close contact with our suppliers, we are also committed to preventing and avoiding environmental and social impacts caused operation of the Company itself and the supply chain.

Supplier Assessment

We use an assessment mechanism to ensure the competence of service providers and help service providers understand and comply with the Company’s “Supplier Management Operating Procedures.” The “Supplier Assessment Sheet” is used for annual assessment. Considering the diversity of supplier management and evaluation, Alltek referred to the Code of Conduct of the Responsible Business Alliance (RBA), that regulates five aspects: labor, health and safety, environment, business ethics, and management system, and formulated its “Supplier Code of Conduct” in 2022. Therefore, before collaborating with a service provider, the Company not only evaluates the supplier’s capabilities, but also requires the supplier to sign the “Supplier CSR Commitment” or to propose the supplier’s related social responsibility policies. By doing this, we jointly promote sustainable environmental development, protect basic human rights and fulfill related obligations with our suppliers.

In 2022, a total of 17 service suppliers met the qualifications for supplier assessment. In terms of “Supplier Code of Conduct,” 11 of the 17 service suppliers assessed were able to meet the “Supplier CSR Commitment” requirements, and the compliance rate was 64.71%. Among them, 5 out of 7 logistics service providers were able to meet the requirements, with a compliance rate of 71.42%.

We will actively work with suppliers to establish a supply chain that protects the environment, human rights, safety, and sustainable development and implement supplier due diligence management to grow with suppliers and work together for sustainability.

Conflict Minerals Management and Due Diligence

The Company complies with the “Due Diligence Guidance for Responsible Supply Chain of Minerals from Conflict or High-Risk Areas” established by the Organization for Economic Cooperation and Development (OECD) of Minerals from Conflict-Affected and High-Risk Areas) as the basis for the establishment of its due diligence framework. This investigation process identifies and assesses supplier risk and uses the Conflict Minerals Reporting Template (CMRT) published by the Responsible Minerals Initiative (RMI) as the basis for due diligence, specifically requiring suppliers to disclose the source of minerals. If the source of minerals come from conflict zones, they must be produced from a conflict free mine verified by a third party.

In response to customers’ requirements not to supply conflict minerals such as tin, tantalum, tungsten, and gold that are sourced from areas with human rights disputes, we also require suppliers to provide a conflict minerals report template and a responsible sourcing policy. If a conflict mineral is used unintentionally in the Company’s products, suppliers are required to disclose in detail during the investigation. This way, we can ensure that the products supplied do not come from metals produced in conflict areas, achieving the goal of responsible sourcing management.

In 2022, 70.45% of the product suppliers represented by the Company were assessed and verified as meeting the conflict mineral free requirements. We conducted due diligence on the 5 key product suppliers identified in order to assess and trace the source of raw materials from the smelter. The results of the investigation showed that 100% of the smelter sources disclosed by the five key product suppliers were qualified suppliers of conflict minerals. In the future, we will regularly implement conflict minerals management and thoroughly implement the spirit of humanitarian care throughout Alltek’s value chain.

Management of Hazardous Substances in Products

At Alltek, we have incorporated the requirements of international environmental protection laws and regulations into specific evaluation standards. Moreover, we implement these standards into the management mechanism of hazardous substances in products. Registration, Evaluation, Authorization, and Restriction of Chemicals (REACH) are confirmed by a third-party test report when the product is sold as an agent. Based on the written information provided by the product suppliers, the management and identification of hazardous substances in the environment are reviewed and analyzed by the Document Management Department of Alltek to confirm whether each traded item meets the environmental protection regulations and data are systematically compiled into a database. By analyzing the composition of various chemical substances in materials, we can assess which of our suppliers’ products contain chemicals that may pose an impact on the global environment and human health.

Implementation of Hazardous Substance Management in Products

In 2022, 88.64% of the product suppliers represented by the Company were assessed and verified to be in compliance with the EU RoHS and REACH regulations. Among the five key product suppliers identified by Alltek, 100% have fully complied with the EU’s RoHS and REACH regulations. In addition, according to individual customer’s requirements for the management of hazardous substances in various products, product suppliers are required to provide related non-use and prohibited substances guarantee, material composition analysis reports, and hazardous substance testing reports from third-party testing institutions according to the product material number in order to comply with the environmental regulations for the products.

 

Customer Relationship Management

Today’s industry is changing rapidly. Sales of all walks of life are filled with various marketing models. With the advancement of technology, different service models are derived accordingly. Among them, customer relationship management (CRM) is a very important issue for companies. Alltek provides sales and services for the promotion of semiconductor electronic parts and components. At Alltek Technology, each member adheres to the five spirits of the Company: correctness, speed, professionalism, loyalty and enthusiasm, and maintains a customer-oriented service quality and business philosophy to establish long-term and stable relationships with customers and bring stable income to the Company.