Pursuant to the framework of Task Force on Climate-related Financial Disclosures (TCFD), PSMC's climate risk management framework is based on the four major areas of governance, strategy, risk management, indicators and targets. This framework aides us in the identification of potential risks and related opportunities topics derived from climate change, to assess the actual impact and the degree of influence of climate issues on the Company's business.

The Board of Directors of PSMC serves as the highest climate governance unit, responsible for overseeing the achievement of climate change strategies and goals, and ensuring the consistency of the organization's operational development direction and goals. In order to improve the evaluation and implementation effectiveness of climate change strategies and plans, the Audit Committee is responsible for managing, integrating and organizing ESG issues and climate-related risks and opportunities, confirming the overall strategic direction and goals of the organization, and setting up the "Sustainability Development Committee" and the "Risk Management Committee" under its jurisdiction. The "Sustainability Development Committee" is responsible for formulating various climate change strategies. The four strategic implementation teams under the committee will assist each business unit in implementing the climate change strategy response plan and review the compliance and appropriateness of the response strategies and goals. The "Risk Management Committee" is responsible for identifying and analyzing the organization's climate-related risks, effectively controlling the potential risks faced by the organization on climate change, and ensuring that risk management can be implemented in the daily operations of each business unit through the four strategic implementation teams. The "Sustainability Development Committee" and the "Risk Management Committee" regularly report the strategic implementation of climate risks and opportunities of each department to the Audit Committee to facilitate it to track the development progress of each strategy and adjust the implementation plan in a timely manner.

In order to reduce the impact of climate change risks, PSMC uses a risk assessment form to conduct risk assessments by key operating units of each department. Based on the risk identification results, the three aspects of potential impact degree, vulnerability and probability of occurrence are considered, and key encountered risks at the occurrence stages are sorted. At the same time, in order to reduce the impact of risks, corresponding risk control strategies are also developed, and risk assessments are clearly standardized and should be coordinated with the adjustment of the company's business and personnel, and must be reviewed at least every two years. In addition, through "establishing emergency response measures", when a risk disaster occurs, the heads of the responsible departments will carry out notification work in accordance with the factory disaster emergency response measures, and the crisis management team will coordinate the crisis handling and subsequent recovery work to maintain the company's continuous operations.

PSMC has identified 12 climate risks and 9 climate opportunities by considering the domestic and international climate change development trends and its own current operating conditions, and the relevant departments of authority have jointly evaluated the level of impact of climate related risks and opportunities. The evaluation covers the entire value chain of PSMC. Based on the level of impact, vulnerability, control, and probability of occurrence that each risk and opportunity, and the characteristics of the scale for short-middle-long term period has on PSMC, we identified the key issues that we should prioritize and address for climate change after an internal investigation, and formulated the strategies and targets in order to implement climate change management.

Climate Risk  

Climate Opportunity  

Internal Carbon Pricing (ICP)

To strengthen climate risk management, implement sustainable development strategies, and respond to international trends and national regulatory requirements, PSMC has launched an Internal Carbon Pricing (ICP) mechanism introduction plan starting from 2024. By incorporating carbon costs into internal financial and investment assessment processes, ICP shall help the company improve energy usage efficiency, preemptively address the risk of rising carbon costs, and make more accurate and forward-looking low-carbon investment decisions. At the same time, this mechanism can also help optimize medium- and long-term financial planning, making resource allocation more aligned with low-carbon transformation needs and strengthening overall operational resilience.

PSMC has completed the inventory and verification of greenhouse gas (GHG) categories 1, 2, and 3, and based on categories 1 and 2, it plans to apply the ICP system. Starting from 2024, the company plans to prioritize the use of implicit prices as an ICP mechanism, which will incorporate the impact of carbon emission costs on overall economic benefits into investment project assessments, equipment replacement, and energy improvement schemes, among other decision-making processes. The goal is to enhance capital allocation efficiency and strengthen the depth and accuracy of cost-benefit analysis.

PSMC conducts greenhouse gas inventory every year in accordance with the ISO 14064-1 procedure, all operational locations had been verified by a third-party impartial inspection unit to fully understand the overall greenhouse gas emission sources and emissions, and set various reduction targets and plan. Each department has also formulated related greenhouse gas reduction measures and plans. Statistics show that PSMC's energy-saving and carbon-reduction programs achieved a reduction performance of 1.34% in 2024, meeting the annual reduction target of 1%. In 2024, total greenhouse gas emissions from Scope 1 and Scope 2 combined increased by more than 20% compared to the previous year. The main reasons were the commencement of operations at the newly built P5 fab (thus included in the inventory), increased production capacity at fab sites, and the use of the newly-announced Greenhouse Gas Emission Factors as stipulated by the Ministry of Environment's Climate Change Administration. From the results of the 2024 annual greenhouse gas inventory, it can be seen that the overall emission hot spots of PSMC focus on the fluorine-containing greenhouse gases used in the scope 1 process and the use of purchased electricity in scope 2. The aforementioned two scopes accounted for 95% of the total emissions. Therefore, PSMC has listed the reduction of fluorine-containing greenhouse gases and the reduction of purchased energy as key projects in its greenhouse gas reduction plan.

Note 1: The greenhouse gas emission coefficient mainly refers to the Ministry of Environment announced the greenhouse gas emission coefficient on February 5, 2014. The electricity carbon emission coefficient is calculated using 0.494kg CO2e/kWh as Scope 2 (this calculation method is based on the Market Coefficient Method for statistics).

Note 2: The source of the Global Warming Potential (GWP) used in this table is the "IPCC Fifth Assessment Report (2013)" edition.

Note 3: Greenhouse gas types include nitrous oxide (N2O), methane (CH4), carbon dioxide (CO2), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), sulfur hexafluoride (SF6), and nitrogen trifluoride (NF3).

Note 4: Method used for aggregating greenhouse gas volumes: Operational controlling rights method.

Note 5: Standards, methodologies, assumptions and/or calculation tools used: The energy consumption is derived from the measured values of the chargeable receipts, and the checklist does not have any estimated values.

Note 6: The emission coverage of Scope 1 and Scope 2 is 100%.

PSMC also follows the procedures of ISO 14064-1:2018 to conduct Scope 3 inventory and obtain third-party external verification. The total emissions of greenhouse gas Scope 3 in 2024 was 214,549 metric tons of CO2e, increased compared to the previous year, not achieving the annual reduction target of 1%. The main reason is that the P5 plant was completed and started operation and was included in the inventory and the plant's production capacity increased. The inventory results show that in Scope 3, fuel and energy-related activities and purchased goods and services are the main emission hotspots. PSMC will continue to negotiate with value chain partners to expand the influence of its climate strategy and create opportunities for cooperation.

In order to reduce the fluorine-containing greenhouse gases used in the manufacturing process, in addition to continuous source management and evaluation of material replacement, we are also committed to improving the processing efficiency of end-of-pipe pest control devices or replacing old equipment, hoping to achieve the reduction of perfluorinated compound emissions in the manufacturing process with a rate of 90% by 2030 for the long-term goal. In 2024, all units will actively promote the replacement of old process exhaust gas treatment equipment with new ones, increase the treatment range of process exhaust gas, and install high-efficiency process exhaust gas treatment equipment in new machines and other actual reduction plans. The carbon reduction from fluorinated gases (FCs) is 414,083 metric tons of CO2e,,in 2023, and the reduction performance has increased by about 88.7%.

PSMC has an "Environmental Safety and Health Policy" in terms of energy management and has passed the ISO 14001 environmental management system verification. In addition, in order to comply with the introduction time and the new edition announcement, it has fully introduced the ISO 50001 energy management system in 2021 to analyze energy consumption efficiency and pursuit the effective use of energy, and implement regular verification operations by third-party impartial inspection agencies to ensure the effectiveness of the management system, so that the performance and culture of energy management can gradually become deeper and stronger. In addition, PSMC has set an annual energy saving target of 1% or more, and provides incentives through the proposed improvement system and CIP competition to encourage employees to take the initiative to propose recommendations around energy savings, climate response measures, productivity improvements, and work efficiency. At the same time, PSMC is committed to continuously carry out and improve the following tasks and promote management plans based on this to achieve the mission of environmental sustainability:

• Provide energy improvement resources and enforce energy laws
• Enhance equipment energy management and reduce energy consumption in order to achieve energy saving targets
• Continue to carry out energy reduction measures to optimize energy use efficiency
• Increase the procurement of equipment with energy-saving labels and introduce energy-saving design products and processes
• Establish appropriate energy strategies and engage all employees to promote sustainable business operations
• Provide employees with education and training related to energy systems and energy efficiency to enhance their awareness of energy conservation and equip them with the ability to discover and continuously improve energy efficiency.

PSMC's energy usage is mainly composed of purchased electricity, accounting for approximately 88.38% of the overall energy consumption. The usage statistics of various energy resources are as follows:

Note 1: Energy heating value: The heating value of purchased electricity: 3,600 gigajoules/million degrees; converted using the coefficients in the "Greenhouse Gas Emission Coefficient Management Table Version 6.0.4" of the Climate Change Administration of the Ministry of Environment. The coefficients used for natural gas and diesel are 9,000 kcal/cubic meter and 8,400 kcal/liter respectively.

Note 2: Calculated as 4.186 kilojoules per kilocalorie

Note 3: The scope of coverage is PSMC and its consolidated reporting subsidiaries, and the subsidiaries only use purchased power for energy.

Note 4: Renewable electricity is solar photovoltaic.

Note: Data statistics covers PSMC and its consolidated reporting subsidiaries.

In accordance with the Ministry of Economic Affairs' "Energy Conservation Targets and Implementation Plan for Energy Users", PSMC has set a target of 1% annual energy savings. 2023 saw the implementation of about 90 energy saving measures, including reviewing and improving the reduction of electricity consumption per unit of production, planning the retirement of old equipment, and developing renewable energy, reducing energy consumption by 59,388.99 gigajoules (including electricity, diesel and natural gas) and 8,193 metric tons of CO2e compared to the previous year. The energy saving rate of the entire plant is 1.90%, achieving the set target. The energy savings programs are summarized in the table below:

In order to effectively manage energy usage efficiency, PSMC has also actively expanded intelligent energy management in recent years. Taking 8A fab as an example, it has introduced the ISO 50001 energy management system in 2021 and installed Digital Panel Meter for major energy-consuming equipment in the factory in the following year through the power monitoring system combined with system big data to promote relevant energy-saving measures. The electricity consumption of the chiller water system accounts for 32% of the total electricity consumption of the facility system. Therefore, in order to improve the intelligent management of the chiller water system, and with the power consumption of the facility accounting for 55% of the total power consumption of the whole plant, the newly developed chiller system optimization technology is used to assess and improve energy-saving for the existing factory machines of chiller compressor, chiller water pump, cooling water pumps, warm water pumps and related existing software and hardware. Through intelligent management and use of renewable energy, low-carbon manufacturing services are provided to customers, and sustainable production continues to move towards the goal of net-zero emissions.

In addition to the intelligent chiller water system, PSMC has also developed and introduced AI technology in an industry-university cooperation model with Professor Zhang Guohao of Tsinghua University starting in 2022, and apply it to energy-consuming factory air compressor systems, in addition to health-predictive air compressors to avoid excessive energy consumption, it can also flexibly and intelligently schedule the operation of multiple air compressor units to achieve overall energy saving effects. After importing the AI model, the health of the air compressor can be monitored in real time, and the machine maintenance can be performed more accurately to avoid abnormal energy consumption. In the energy saving part, we aim at optimal energy consumption and construct an optimal model of air compressor unit configuration, which can make optimal energy consumption adjustments in real time and create a new intelligent control system for air compressor units. The energy saving performance will be improved significantly

In addition to energy-saving measures such as product energy efficiency and setting new specifications for machines, PSMC also has basic energy-saving solutions, such as automatically turning off lighting when no one is around, adjusting lighting to accommodate the factory's work schedule, and replacing frequently used fluorescent tubes with LEDs. We look forward to working with our employees to save energy and maintain a sustainable environment through basic energy-saving solutions.

In 2022, PSMC established a Green Energy Team, in charge of green energy procurement planning and solar power generation facility construction to diversify energy use, reduce greenhouse gas emissions, and fully prepare for future legal requirements. In 2023, the construction of 0.5MW solar photovoltaic system and the purchase of 10.5MW green power certificates for the P1/2 plant and the 8A plant have been completed, generating a total of 13,373 renewable energy certificates.

With a sustainable management mindset, PSMC supports customers in developing energy-saving related green products. In order to understand the environmental impact of foundry wafer products at each stage of raw material acquisition and manufacturing, identify the environmental impact hot spots at each stage, formulate strategies to achieve performance improvement and communicate with customers, a complete product life cycle assessment has been introduced.

Product life cycle assessment is based on ISO 14040 and ISO14044, and analysis is performed using LCA SimaPro 9.5.0.0 software. The inventory is divided into two stages, the raw material stage and the manufacturing stage. The system boundary is from the cradle to the customer gate (Cradle to Gate), to check the collected data, input it into the life cycle assessment software program and complete the record, and also allocate the process data to each In the life cycle stage, the product life cycle environmental impact assessment results are shown in the figure below.

The results of this assessment provide R&D staff with sensitivity to the potential impact of various design decisions, including material selection, package use, and the relevance of production manufacturing to the use of renewable energy for that manufacturing. Efforts should be made to reduce material used, minimize the number of equipment used, increase the utilization of production equipment, etc. during the manufacturing stage. In addition, in view of the importance of the potential impact of the manufacturing stage on the whole, PSMC will continue to increase the use of renewable energy and reduce process waste in this stage, as well as reduce material use in the raw material stage by improving production yields through process improvement, and also reduce the environmental impact of raw material transportation.

As a professional foundry service provider, PSMC produces advanced, energy-efficient, and environmentally friendly products for our customers and continues to advance new process technologies to reduce power consumption and conserve resources, as well as contributing to the "Net Zero by 2050" goal and the sustainable development of the planet. We comply with domestic energy laws and regulations and follow the international trend of energy conservation and carbon reduction. Through the formulation of energy policies, low-carbon operations, and the use of green energy, we continue to improve the efficiency of the use of energy and water resources, and to maintain the effectiveness of our management systems. At the same time, we implement green procurement and the sustainable consumption model in our daily operations. In terms of reducing energy consumption and addressing the impacts of climate change, PSMC carries out Product Carbon Footprint and Product Water Footprint inventory program to identify potential points for further reductions in greenhouse gas emissions and water consumption, and then drives programs to improve and reduce environmental impacts.

The Carbon Footprint inventory of the 12" product was conducted in accordance with ISO 14067, using SimaPro 9.5.0.0 analysis software to inventory and calculate the greenhouse gas emissions from raw material production, raw material transportation, and energy consumption in the manufacturing process of the product at each stage. The product also had a Water Footprint inventory according to ISO 14046 with SimaPro 9.5.0.0 analysis software, which inventories and calculates the amount of water used in the production of raw materials and in the manufacturing processes. The boundary of both Carbon Footprint and Water Footprint inventories were set from Cradle to Gate, which includes both raw materials and manufacturing stages, as shown on the following map of the product manufacturing process. In order to increase the credibility and reliability of the Carbon Footprint and Water Footprint inventory information and reports on our products, we have been verified by an external verification firm and have been awarded the certificates.

With the Product Carbon Footprint inventory data, we can clearly identify the GHGs emissions of products at each stage of their life cycle, and then look for opportunities to improve the efficiency of the supply chain, energy saving and carbon reduction, as well as serving as a reference for planning activities to reduce GHGs emissions in the future. Measures for Product Water Footprint inventory include identifying hotspots for water use, treating water footprint reduction as an environmental protection and operational goal, continuously enhancing water conservation and waste water recycling, and working with suppliers to conduct value chain analysis based on water footprint to improve overall supply chain water resource efficiency.