The Group has regulated the management of key processes of supply chain such as the placing of purchase order, the entering of contracts, product acceptance and the settlement by formulating proven purchase management system and establishing supplier acceptance, performance appraisal and exit mechanisms.

The Group implements comprehensive certification of its newly introduced suppliers, which includes certification of sustainable development system. The Group regards sustainable development as one of the basic conditions and requirements in introducing suppliers, so as to assess suppliers’ capability and level to comply with laws and regulations and sustainable development agreements. Suppliers are required to carry out business based on the fact that they have complied with applicable laws and regulations and met the requirements under sustainable development. The Group has entered into Agreement of Corporate Social Responsibility (《企業社會責任協定》) with material suppliers to constraint their code of conduct on integrity and law abiding, human rights, labour standards, health and safety, environment and prohibited commercial transactions, which is a necessity to carry out supplier certification, audit and performance assessment. During the year, more than 520 suppliers have signed the agreement.

The results of supplier performance assessment are utilized to supplier management to promote their sustained improvement. Suppliers are subject to annual comprehensive assessment based on various factors such as their business volume, daily assessment, quality performance, RoHS risk, environment and safety. Over 50 suppliers have been selected for on-site audit in 2020. Suppliers with excellent performance are entitled to increase purchase percentage on the same conditions and provided with priority of business cooperation. Suppliers with poor grade in performance assessment are provided with respective training and coaching, so as to drive suppliers to regard corporate social responsibility as a requirement of product and production, and integrate it into business decision making and daily operation, thus establishing effective management system.

The Group attaches great importance to the issue of conflict minerals and publicly states that it will not purchase and support the utilization of conflict minerals. For the acceptance of suppliers, all suppliers are required not to purchase conflict minerals and their sub-suppliers are also so required. The Group identifies the material lists and supplier lists relating to conflict minerals in accordance with OECD Guidelines for Due Diligence of Conflict Minerals (《OECD衝突礦物盡職調查指南》) and adopts conflict mineral questionnaire (CMRT Form) under Global Conflict Free Sourcing Initiative (全球無衝突採購倡議) (CFSI) to carry out due diligence and analysis on 90% of its suppliers every year.

The Group also attaches importance to environmental risks. For the acceptance of suppliers, the Group collects the RoHS testing qualified report from suppliers and formulates a period for the renewal of such report, in order to carry out regular monitoring on suppliers’ results of RoHS testing, thereby promoting the use of environmentally-friendly materials by suppliers. Over 1,300 renewed RoHS testing qualified report are collected annually.