FSL completed and pending actions

Transcription

1 April 2012 Freescale, the Freescale logo, AltiVec, C-5, CodeTEST, CodeWarrior, ColdFire, C-Ware, t he Energy Efficient Solutions logo, mobilegt, PowerQUICC, QorIQ, StarCore and Symphony are trademarks of Freescale Semiconductor, Inc., Reg. U.S. Pat. & Tm. Off. BeeKit, BeeStack, ColdFire+, CoreNet, Flexis, Kinetis, M XC, Platform in a Package, Processor Expert, QorIQ Qonverge, Qorivva, QUICC Engine, SM AR OS, TurboLink, VortiQa and Xtrinsic are trademarks of Freescale Semiconductor, Inc. All other product or service names are the property of their respective owners Freescale Semiconductor, Inc.

2 Review content and status of US legislation regarding the origin certification of Tin, Tantalum, Tungsten and Gold How regulations may affect FSL reporting to the SEC, our Customers and Suppliers FSL completed and pending actions Next steps 2

3 Conflict Mineral Act Section 1502 of Dodd-Frank Act Undefined and Overdue Strong FSL Customer Demand Supplier data generally not available FSL cannot declare conflict free FSL cannot declare compliance 3

4 US legislation enacted by Congress on July 2010 Disclose annually to SEC Democratic Republic of Congo Tin Tantalum Tungsten Gold It is the sense of Congress that the exploitation and trade of conflict minerals originating in the Democratic Republic of the Congo is helping to finance conflict characterized by extreme levels of violence in the eastern Democratic Republic of the Congo, particularly sexual- and gender-based violence, and contributing to an emergency humanitarian situation therein. Section 1502(a) of the Act 4

5 Cassiterite Tin Sn Alloy, tin plating, solders for pipes and electronic circuits Columbite-tantalite Tantalum Ta Electronic components, mobile telephones, computers, videogame consoles, digital cameras, alloy for carbide tools, jet engine components, wafer targets, capacitors Wolframite Tungsten W Metal wires, electrodes, contacts in lighting, electronics, electrical, heating and welding applications, wafer targets Gold Au Jewelry, electronics, communications, aerospace, plating, wire bond CONFMNLS@freescale.com 5

6 Freescale Primary Metal Usage 3T&G Minerals % FSL Supply Area Where Used Top Suppliers Available Smelter Documentation (all or part)? Gold 10% Fab Targets Honeywell & Tosoh Yes / No 65% FMM Bonding Wire Hereaus & Sumitomo Yes / No 10% EFM Various Amkor & Carsem Yes ASE No Tantalum 100% Fab Targets Honeywell & Tosoh Yes / No Tin TBD FMM Solder Balls Senju Metals No Post Mold Plating Rohm & Haas, Redring Solder No Tungsten TBD Fab CVD WF6 Air Products No FMM Header Assembly NTK, Kyocera & Sumitomo Metal No CONFMNLS@freescale.com 6

7 Federal Regulations Customer Expectations Regional Legislations World Environmental and Social Organizations New Corporate Social Responsibilities Regional legislation also growing which further complicates compliance efforts 7

8 1. Country of origin verification 2. Independent audit of results 3. Report to the SEC 4. Report to all customers 8

9 Internal Supplier Established cross-functional team Posted Policy Statement Added Conflict Mineral statements: Supplier Code of Conduct Supplier Self Assessment/Audit Supplier Work Instructions 12MWS00047B Supplier Certification 12MWS00047B-01 Determined materials contain 3T&G Front and Backend Manufacturing Determined Top Suppliers Sent EiCC/GeSi form Benchmarking (next slide) 9

10 Company Consulting Group Form Supplier Results Cisco EICC/GeSi Extractives Working Group EICC/GeSi NA IBM EICC/GeSI Extractives Working Group EICC/GeSi day response depending on supplier Intel EICC/GeSI Extractives Working Group EICC/GeSi Every response under sun. More about business practices than the template. Invited to join group and WG's Due Diligence TI EICC/GeSI Extractives Working Group EICC/GeSi have asked for a response by 10/5/11 NI Total Parts Plus EICC/GeSi Gather basic and gather more after SEC rules Fairchild Semiconductor NA FS Survey Murata NA EICC/GeSi Kodak NA NA NA Dell EICC/GeSI Extractives Working Group EICC/GeSi NA 3M NA Standard Response NA Air Products NA Standard Response NA Contacted ELM consulting firm. November 15, 2011 Personal Survey - nearly all suppliers could not track to the source or would not disclose. EICC template but are reluctant until SEC finalize the rule 2/3 divisions have EICC certifications at the smelter level CONFMNLS@freescale.com 10

11 OECD Pilot Program (Organization for Economic Co-operation and Development) Sanctioned by UN to implement CM program EICC-GeSI (Electronics Industry Citizenship Coalition and Global e-sustainability Initiative) IPC (Interconnecting and Packaging Electronic Circuits) ECIA (Electronics Component Industry Association) 11

12 External Internal SEC will hold an Open Meeting on August 22, 2012 If supplier is non-compliant: FSL and customer also non-compliant Intel & AMD referenced conflict mineral risk in SEC filing EICC-GeSi is becoming industry standard in absence of SEC official regulations Establish Corporate policy Clear protocol for uncertified suppliers Impact on supply base Internal Ownership Supplier Assurance & Communication Procurement Regulatory Review & Customer response Legal SEC Filing Finance Audit TBD 12

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15 CEO Global Procurement Legal Finance Business Manager Environmental Manager Director Corp. Accounting Supplier Contracts Environmental Program Analyst 15

16 Freescale, the Freescale logo, AltiVec, C-5, CodeTEST, CodeWarrior, ColdFire, C-Ware, t he Energy Efficient Solutions logo, mobilegt, PowerQUICC, QorIQ, StarCore and Symphony are trademarks of Freescale Semiconductor, Inc., Reg. U.S. Pat. & Tm. Off. BeeKit, BeeStack, ColdFire+, CoreNet, Flexis, Kinetis, M XC, Platform in a Package, Processor Expert, QorIQ Qonverge, Qorivva, QUICC Engine, SM AR OS, TurboLink, VortiQa and Xtrinsic are trademarks of Freescale Semiconductor, Inc. All other product or service names are the property of their respective owners Freescale Semiconductor, Inc.

17 Overview - Contains comprehensive guidance for responsible supply chain for conflict minerals - Most quoted document for modeling compliance - Very broad application In practice - Excellent baseline guidance for companies working closer to the source of the minerals or in conflict areas - Broader than Dodd-Frank Section However, five (5) principal steps can be extracted and used by electronics producers 17

18 Step 1: Establish Strong Company Management Systems Step 2: Identify and Assess Rick in the Supply Chain Step 3: Design and Implement a Strategy to Respond to Identified Risks Step 4: Third-Party Audit of Smelters/Refiners Due Diligence Practices Step 5: Report Annually on Supply Chain Due Diligence 18

19 20 30 companies and 3 industry associations Aerospace and defense Automotive Medical devices ICT (including semiconductors) Consumer products Extractives Chemicals Lighting The majority of participants fall within the ICT sector, while many companies fall into multiple categories due to diversified business structures 19

20 Companies that have adopted a conflict minerals policy. Aims to source from the DRC, but conflict free mines 18% Not to source from conflict areas in the DRC 17% Other 18% Not to source from any conflict areas 47% Companies approach to minerals sourcing 20 Level of incorporation of policy

21 External Communications None 5% Internal Communications Board members 13% Government 17% Other 18% NGOs 12% Suppliers 25% Business partners 12% Consumers/Gener al Public 11% Other 6% No internal communications 6% Staff 33% Management 42% 21

22 Method for identifying red flag locations Method for identifying red flag suppliers No 52% Yes 48% No Answer Given 3% Yes 29% No 68% Data collection Smelter identification No 46% No 41% Yes 54% Yes 59% 22

23 Challenges Visibility beyond Tier 2 is very challenging. Use an industry process (EICC-GeSi) to gain visibility into the supply chain Difficult to obtain internal buy-in Smaller companies have limited knowledge and experience of the supply chain Actions 54% are collecting supply chain data Supplier s suppliers, smelter name, contact information, mine of origin, product suppliers, all points of import and export along the supply chain, export license, signed supplier declaration, and supplier polity Tools EICC-GeSi MRPRO dashboard, IMDS and SAP software AIAG is working on a common data collection system for origin/smelter identification 23

24 Challenges Identifying smelters Labor Intensive Limited reliability Identify all vendors that supply 3T s Fear of reverse engineer the product Confidentiality issues Trade secret and Non-disclosure assurances General lack of resources to implement due diligence 24

25 Challenges Smelters participation in the CFS Smelters outside of US and Europe that are not subject to legislation Suppliers reluctant to provide proprietary information due to competitive concerns Customers only accepting audits from certain auditing firms Increase administrative and cost burdens Procurement Complexity Buyers change suppliers frequently increasing the complexity of obtaining information. Auditor training Building the capacity of trained auditors will take time and resources Limited visibility 25

26 CA Anti-trafficking Applies to retailers/manufacturers doing business in California Post a link on website addressing the risk of human trafficking and slavery Must disclose to what extent, if any : Dedicated Policy Training Monitor Continuous Improvement Allows class action lawsuits for false or misleading disclosure 26