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%.

To analyze energy consumption and improve efficiency, PSMC has fully implemented the ISO 50001 Energy Management System and engages third-party verification bodies to conduct regular audits and re-certifications to ensure the effectiveness of the management system. 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 88.13% 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. 2024 saw the implementation of about 93 energy saving measures, reducing energy consumption by 33,803.82 gigajoules (including electricity, diesel and natural gas) and 8,987.23 metric tons of CO2e compared to the 2023. The energy saving rate of the entire plant is 1.65%, achieving the set target. The energy savings programs are summarized in the table below:

PSMC is actively expanding smart energy management. For example, at the P2 fab, an energy-saving system was officially introduced on November 21, 2024. This system utilizes outdoor wet-bulb temperature as a baseline for data clustering and compares the coefficient of performance (COP) efficiency of the chilled water system before and after improvements under the same outdoor wet-bulb temperature conditions. The original data is sourced from the facility monitoring historical database, with average values recorded every 10 minutes. The extracted data is then analyzed to evaluate system performance. By integrating intelligent management with renewable energy, PSMC is committed to providing customers with low-carbon manufacturing services.

PSMC has also developed and introduced AI technology in an industry-university cooperation model with Professor Zhang Guohao of Tsinghua University starting in 2022, creating an advanced intelligent control system for air compressor operations. This system not only monitors and predicts the health status of air compressors, enabling more precise maintenance to prevent abnormal energy consumption caused by inefficiencies, but also flexibly manages multiple air compressor units, constructing an optimized model to reduce overall energy consumption.

PSMC 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 responsible for planning renewable energy procurement and implementing solar power generation systems to enhance energy self-sufficiency and reduce greenhouse gas emissions. In 2024, the P5 fab completed the installation of a 0.5MW inhouse solar photovoltaic system, bringing PSMC's total installed capacity to 1MW (with an estimated annual green power generation of 1.25 GWh). Additionally, PSMC purchased 13,798 renewable energy certificates, equivalent to 13.798 GWh of green electricity.

To assess the environmental impact of 12-inch wafer foundry products across the raw material acquisition and manufacturing stages, PSMC has identified key environmental impact hotspots at each stage. This helps in formulating strategies for performance improvement and enhancing communication with customers. In 2023, PSMC conducted a comprehensive product life cycle assessment (LCA) for its P1/2 fab, following the requirements of ISO 14040 and ISO 14044, using LCA SimaPro 9.5.0.0 software. The LCA assessment covers two stages: the raw material stage, and the manufacturing stage. The system boundary is defined as Cradle to Gate (from raw material to the customer's gate). The results of the product life cycle environmental impact assessment are illustrated in the figure below.

The assessment results provide R&D developers with an understanding of the sensitivity to the potential impacts of various design decisions, including material selection, packaging use, and the relevance of manufacturing to the use of renewable energy for that manufacturing. During the manufacturing stage, it probably should be made to reduce the use of materials, minimize the number of equipment used, and maximize the utilization of production equipment. In addition, potential environmental impacts during the manufacturing phase, PSMC will continue to through increase the use of renewable energy, reduce process waste, and improve production yield process improvement to reduce material use in the raw material stage, and also reduce the environmental impact of raw material transportation.

PSMC produces advanced, energy-saving and environmentally friendly products for customers and continues to promote new process technologies to reduce chip power consumption and save resources. In order to implement the "Net Zero by 2050" goal, PSMC has conducted a carbon footprint assessment for 12-inch products at the P1/2 fab in accordance with ISO 14067 standards, using SimaPro 9.5.0.0 analysis software. The assessment and calculations cover greenhouse gas emissions across different stages, including raw material manufacturing, raw material transportation, and energy/resource consumption during product manufacturing. Additionally, PSMC has conducted a water footprint assessment in compliance with ISO 14046 standards, measuring water consumption from raw material production to the manufacturing process. Both carbon footprint and water footprint assessments were conducted within a Cradle to Gate system boundary, covering raw material and manufacturing stages. The results have been verified by TÜV Rheinland, enhancing the quality and credibility of the assessment data, PSMC will continue to formulate improvement actions based on the carbon footprint and water footprint results in the future.