We shall maintain a fairly good relation with our suppliers because they are our partners. We shall:	Fairly and objectively screen and select suppliers. Honestly and frankly negotiate the content of contract. Cooperate with suppliers in order to fulfill our commitment to customers. Avoid action of lousy decision judgment.
Selection of suppliers
In order to ensure collaborating supply chain vendors are equipped with the capacity to fulfill their corporate social responsibilities, TXC has adopted the following criteria as the guiding principle for the selection of suppliers: Quality system Design control Document control and quality records Supplier management Product identification and tracing Inspection testing Inspection testing Resource management/control Resource management/control Resource management/control Social and environmental responsibilities	Suppliers that have been identified for superior performance through the evaluation would be given priority as potential candidates for collaboration. In addition, the Company has also clearly spelled out the following criteria for supplier selection in the Code of Conduct to ensure strict adherence to the fundamental principles and implementation details: Leadership in product technology. Excellence in service and support. Quality. Performance in delivery and lead time. Performance in overall cost control. When the need for public bidding arises, supplier selection shall be conducted in a fair manner in accordance with the aforementioned principles.

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Order continuity

Depending on the operational direction of the Company, a portion of the earlier models will be outsourced to downstream suppliers for production while TXC maintains the production of high-precision products of high added-value. In light of market fluctuations, in order to maintain normal production for the suppliers, the Company also maintains a specific ratio of outsourced production in order to achieve co-existence and common prosperity for the parties involved. To achieve continuity of orders, the Company will take factors such as in-house production costs and quantity produced by suppliers into consideration so as to maintain profit margins and their willingness to collaborate with TXC over long-term.

 

 

In the dealings with downstream suppliers or contractors, the Company shall refer to the Code of Conduct as the basis for collaboration. Both parties are required to sign and return the EICC agreement before a supplier may become an official partner of TXC. If the vendor in question is unable to sign or refuse to sign said agreement for any reason, the Company shall offer a reasonable duration for consideration. If the vendor in question still fails to sign the agreement, the Company will seek collaboration with other potential candidates. In 2011, a total of 74 proposals for collaboration were sent and all 74 vendors have signed the agreement with a response rate of 100%.

 

 

 

 

To ensure that the requirements and spirit for the fulfillment of corporate social responsibilities extend to our suppliers, TXC suppliers are required to sign and return documentations including the “Commitment to Comply with Industrial Regulations”, “SA8000 Commitment”, “EOSH Survey” and “Declaration of Metal Conflict-Free” on a yearly basis. Relevant information is also fully disclosed in the ESH Management Handbook as a guideline for suppliers. All TXC suppliers are required to undergo routine assessment to ensure their compliance with the Company’s requirements in order to maintain long-term partnership. In addition, the Company also makes a point to reiterate its relevant measures and requirements for corporate social responsibilities at the annual supplier meetings with the purpose of appealing to the suppliers for compliance. In 2011, the Company promoted issues including AEO certification, environmental management requirements, conflict metal and ESH practices at the meeting and urged participating suppliers to complete the “Self-Assessment Checklist for Business Partners” and “Supply Chain Security Declaration for Business Partners” at the meeting. The documentations were distributed to 27 suppliers and 25 of them completed and sent back the forms. The majority of our suppliers offered their greatest support during relevant implementations, thereby enabling TXC to be accredited to the Supply Chain Safety Management System (ISO28000) certification and onsite verification for AEO conducted by the Keelung Customs of the Customs Administration.

 

 

 

 

In 2011, the Company carried out a survey for five items including quality system, next-tier supplier management, process control, social responsibility and environmental management and audited a total of 23 raw material suppliers. The value of the total procurement constituted 60% of the Company’s purchasing budget. Given that all major world-class quartz suppliers come from Japan and that Japan has had technical advantages for several decades, approximately 95% of the industry comes from Japanese suppliers, with the remaining 5% from Taiwan. And as such, the development of local suppliers within a limited time frame would prove to be difficult. However, TXC’s procurement policy prioritizes local purchasing of goods and materials and if competent Taiwanese suppliers with to foray into the upstream development of quartz industry in the future, TXC will be inclined to provide opportunities for collaboration and assistance.