UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form SD

 

Specialized Disclosure Report

 

Diodes Incorporated

(Exact name of registrant as specified in its charter)

 

 

Richard D. White

(972) 987-3900

(Name and telephone number, including area code, of person to contact in connection with this report.)

 

Check the appropriate box to indicate the rule pursuant to which this form is being filed, and provide the period to which the information in this form applies:

 

 

 

 

 

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Section 1 – Conflict Minerals Disclosure

Item 1.01 Conflict Minerals Disclosure and Report

The disclosure required by this item are contained in the Company’s Conflict Minerals Report for the year ended December 31, 2016 filed as Exhibit 1.01 hereto and is publicly available at http://diodes.com/pdfs/conflictmineralsreport2016.pdf.

Item 1.02 Exhibit

A copy of Diodes Incorporated’s Conflict Minerals Report for the year ended December 31, 2016 is filed as Exhibit 1.01 hereto and is publicly available at http://diodes.com/pdfs/conflictmineralsreport2016.pdf

Section 2 – Exhibits

Item 2.01 Exhibits

Exhibit 1.01 – Conflict Minerals Report as required by Items 1.01 and 1.02 of this Form.

 

 

 

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the duly authorized undersigned.

 

 

 

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Exhibit 1.01

 

Diodes Incorporated
Conflict Minerals Report
for the Year Ended December 31, 2016

 

I. INTRODUCTION

 

This Conflict Minerals Report (“CMR” or “Report”) for DIODES INCORPORATED  (herein referred to as “Diodes,” the “Company,” “we,” “us,” or “our”) is presented to comply with Rule 13p-1 under the Securities Exchange Act of 1934 (the “Rule”) for the reporting period from January 1 to December 31, 2016 (the “2016 reporting period”). The Rule was adopted by the Securities and Exchange Commission (“SEC”) to implement reporting and disclosure requirements related to Conflict Minerals as directed by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”).

 

The Rule imposes certain reporting obligations on SEC registrants whose manufactured products contain Conflict Minerals which are necessary to the functionality or production of their products. These requirements apply to registrants whatever the geographic origin of the conflict minerals and whether or not they fund armed conflict.

The Report covers activities of all Diodes majority-owned subsidiaries and variable interest entities that are subject to the Rule. The Rule imposes certain due diligence and reporting obligations on SEC registrants whose manufactured products (including products contracted to be made for that registrant) contain “conflict minerals” necessary to the functionality or production of those products. Conflict Minerals are defined as columbite-tantalite, also known as coltan (the metal ore from which tantalum is extracted), cassiterite (the metal ore from which tin is extracted), wolframite (the metal ore from which tungsten is extracted), gold, or their derivatives (collectively referred to as “3TGs”); or any other mineral or its derivatives as determined by the Secretary of State to be financing conflicts in the Democratic Republic of the Congo (“DRC”) or adjoining countries.

 

This Report has been prepared by the management of Diodes.

 

Diodes is committed to the responsible sourcing of raw materials globally in support of human rights, labor, health and safety, environment and ethics (for more information, please see http://www.diodes.com/sourcing_our_products.html ). This commitment includes our efforts to responsibly address conflict minerals in our products’ supply chain. This report describes our efforts during the 2015 reporting period, which demonstrate further meaningful progress.

 

The net number of 3TG smelters identified in our supply chain during 2016 increased from 92 to 108 due to changes in our suppliers and their sub-tier suppliers, additional information provided by suppliers, and changes in the status of smelters under the Conflict Free Smelter Program (CFSP).

 

This Report has not been audited because the circumstances that would require an audit under the Rule are not present.  The Report can be found on Diodes’ website at http://diodes.com/pdfs/conflictmineralsreport2016.pdf

 

Diodes is a leading global manufacturer and supplier of high-quality application specific standard products within the broad discrete, logic, analog and mixed-signal semiconductor markets, serving the consumer electronics, computing, communications, industrial and automotive markets. Our products include diodes, rectifiers, transistors, MOSFETs, protection devices, function-specific arrays, single gate logic, amplifiers and comparators, Hall-effect and temperature sensors, power management devices, including LED drivers, AC-DC converters and controllers, DC-DC switching and linear voltage regulators, and voltage references along with special function devices, such as USB power switches, load switches, voltage supervisors, and motor controllers.  Our products are sold globally but primarily throughout Asia, North America and Europe.

 

We design, manufacture and market these semiconductors for diverse end-use applications. Semiconductors, which provide electronic signal amplification and switching functions, are the basic building-blocks that are incorporated into almost every electronic device.

 

 

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Our product portfolio addresses the design needs of advanced electronic equipment, including high-volume consumer devices such as digital media players, smart phones, tablets, notebook computers, flat-panel displays, mobile handsets, digital cameras and set-top boxes. Our product line includes over 20,000 products and we shipped approximately 41 billion units in 2016.

 

We manufacture “in-house” and contract with third parties to manufacture our products, which we refer to collectively in this CMR as “products”. A review of the Bills of Materials used in our products showed that the 3TGs are necessary for the functionality of our products.

 

All Diodes’ products contain one or more 3TGs and are thus within the scope of the Rule. On the basis of our “reasonable country of origin inquiry” required by the Rule and described in Section II, some of the 3TGs contained in our products have originated in the Democratic Republic of Congo (“DRC”) or an adjoining country (each a “Covered Country” for purposes of the Rule. For that reason, we are submitting this CMR, which describes the conflict minerals due diligence we have performed pursuant to the Rule, as an exhibit to our Form SD.

 

This CMR, which includes sections titled Reasonable Country of Origin Inquiry, Due Diligence Design and Performance, Smelter Information, Improvements from 2015 Conflict Minerals Report and Future Actions, is designed to meet the reporting requirements of the Rule. It is publicly available on our website.

 

II. REASONABLE COUNTRY OF ORIGIN INQUIRY (RCOI)

 

Our RCOI corresponds to the first and second steps of the five-step OECD Guidance, as that Guidance (including its Supplements) applies to each of the 3TGs and to Diodes as a “downstream company.” The OECD Guidance provides a framework for detailed due diligence to support responsible global supply-chain management of minerals, including the 3TGs, and is the only internationally recognized framework for Conflict Minerals due diligence.

 

Diodes is a direct and contract manufacturer with an extensive supply chain comprised of several layers of suppliers positioned between ourselves and 3TG smelters/refiners and mines. Our contracts require our supplier partners to identify each and every substance including, but not limited to, 3TGs contained in the materials/products supplied to us. We refer collectively in this CMR to our manufacturing partners and their respective contracted suppliers as “in-scope suppliers.” Due to our extended supply chain, we rely on our in-scope suppliers to provide us with information concerning the sources and chains of custody of 3TGs necessary to the functionality or production of our products. Because of our operation size, the complexity of our products, and the depth, breadth, and constant evolution of our supply chain, it is difficult to identify actors upstream from our direct suppliers. We provide detail on our supply chain due diligence process in Section III.

 

A. Establish Strong Company Management Systems

 

1. Company Policies

 

Diodes’ “Statement on Conflict Minerals” (See http://diodes.com/pdfs/DiodesIncorporatedStatementOnConflictMinerals.pdf) describes our approach and commitment to work towards a goal of sourcing only conflict-free 3TGs in our products. Diodes is committed to the sourcing of raw materials in a way that supports human rights, labour, health and safety, environment and ethics. Consistent with this commitment, we address the issues associated with the harvesting, extraction and transportation of raw materials as a global responsibility applicable to all substances used in our products - unbounded by specific materials or locations. Diodes’ policies also include, but are not limited to, Diodes’ Supplier Code of Conduct, which defines our expectations concerning ethical business, employment, and expected behaviours for all Diodes’ employees. Diodes’ policies and procedures require contracted suppliers to immediately notify Diodes if they obtain information or knowledge that minerals used in the products that they supply to Diodes may contain 3TGs from a Covered Country that may be directly or indirectly financing or benefitting armed groups in those countries. Such information would trigger an escalation process that may result in termination of Diodes’ business relationship with the supplier. For more information, see Section III below.

 

 

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2. Internal Management Team

 

Development and implementation of Diodes’ Conflict Minerals due diligence plan requires engagement of various Diodes departments, including, but not limited to, Sub-contract Management, Engineering, Finance, Legal, Purchasing and Quality. The team of subject matter experts is responsible for implementing our Conflict Minerals compliance strategy and is led by our Quality Systems Manager who acts as the Conflict Minerals Program Manager. Senior management is updated on the results of our due diligence efforts on a regular basis. The team also trains other Diodes personnel on their roles and responsibilities for implementing and supporting Diodes’ responsible sourcing program.

 

Because we do not have a direct relationship with Conflict Mineral smelters or refiners (“SORs”) and do not perform or direct Conflict Mineral audits of these entities within our supply chain, we follow the following industry-wide initiatives:

 

 

 

As a result of this we have periodically updated our publicly available Conflict Minerals reporting template (“CMRT”) declaration, as well as updating information retrieved from our suppliers’ CMRTs. The CMRT declaration, which is a standardized reporting template developed by the CFSI, facilitates the transfer of information through the supply chain regarding mineral country of origin and SORs being utilized.

 

We also monitor data as updated on the CFSI web site at http://www.conflictfreesourcing.org/conflict-free-smelter-refiner-lists/? regularly. We request updates of our suppliers’ CMRT declarations to be in compliance with the latest revision of the CMRT reporting template.

 

We have outlined expectations regarding use of Conflict Minerals in our Corporate Supplier Quality specifications. We request all identified Conflict Mineral suppliers to disseminate our requirements along their supply chain.

 

We rely upon our suppliers to provide us with information about the sources of Conflict Minerals contained in the materials/products supplied to us. Our suppliers are similarly reliant upon information provided by their sub-tier suppliers.

 

3. System of Supply Chain Controls and Transparency

 

We require our suppliers of materials and components for our products to fully disclose the substances that are present in the materials/products supplied to us, which may include information obtained from sub-tier suppliers. These material disclosure requirements explicitly cover 3TGs. Our contracted suppliers are responsible for communicating these 3TG sourcing requirements and specifications to their suppliers. These disclosures are assessed for correct completion, credibility and potential sourcing risk. In cases where risk is identified, Diodes implements an escalation policy, which may result in termination of the business relationship with the supplier.

 

4. Supplier Engagement

In light of our corporate size, and the depth, breadth and constant evolution of our supply chain, we rely on our suppliers of materials and components to provide us with information concerning the source and chain of custody of 3TGs contained in the products they supply to us. Many of our suppliers are also subject to the Rule and they rely on information provided by their upstream suppliers.

 

We drive responsible sourcing through our extended supply chain by exercising due diligence regarding our suppliers’ sourcing of 3TGs in their upstream supply chains. We also support broader industry efforts to promote responsible mining and sourcing, as outlined above. Finally, we review all

 

 

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documentation supplied by our contracted suppliers to verify conformance to Diodes’ requirements. More information concerning this review is set out below.

 

 

 

The CFSI’s “Reasonable Practices to Identify Sources of Conflict Minerals: Practical Guidance for Downstream Companies” document states that “the red flag triggers are exclusively upstream of the [smelters or refiners].” Because of this we mitigate risks associated with the sourcing of 3TGs by working with our suppliers to identify 3TG SORs and encouraging those facilities to become compliant with the relevant CFSP assessment protocol or if this does not occur, encouraging the supplier to use an alternate facility that is CFSP compliant. We require our suppliers to actively work with their upstream suppliers to mitigate risks associated with their 3TG sourcing.

 

5. Grievance Mechanism

 

Diodes’ Code of Business Conduct includes our commitment to provide an anonymous grievance reporting mechanism for our employees who may be affected by our operations. The policy encourages Diodes employees to report suspected violations. We investigate and, where appropriate, take remedial action to address reported incidents.

B. Identify and Assess Risk in the Supply Chain

 

We have taken the following steps to identify and assess supplier conflict mineral sourcing risk in the 2016 reporting period:

 

 

 

 

III. DUE DILIGENCE DESIGN AND PERFORMANCE

 

On the basis of our RCOI, we have determined that some of the 3TGs contained in our products may have originated in one or more Covered Countries. Accordingly, we performed due diligence on the source and chain of custody of those 3TGs to seek to confirm that the SORs were certified by the CFSI.

 

 

 

 

 

 

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A. Due Diligence Design

 

Our due diligence measures have been designed to conform to an internationally recognized due diligence framework.

 

B. Due Diligence Performance

 

1. Design and Implement a Strategy to Respond to Risks

 

Diodes encourages its suppliers to take affirmative actions to minimize the possible sourcing of 3TGs from conflict-affected areas by doing the following:

 

 

 

 

•   Seeking to ensure that minerals in their supply chain are are not being sourced from the DRC or adjoining countries unless they are purchased from SORs that are listed as “conflict-free” on the CFSI website.

 

We encourage our suppliers to impose these same requirements on their sub-tier suppliers and to provide appropriate training and support to help their sub-tier suppliers meet Diodes’ requirements. To facilitate this process, we direct our suppliers to utilize the common industry template provided by the CFSI and found at www.conflictfreesourcing.org.

 

 

2. Report on Supply Chain Due Diligence

 

Diodes’ Statement on Conflict Minerals is available on our external website at http://www.diodes.com/pdfs/DiodesIncorporatedStatementOnConflictMinerals.pdf. We file our CMR, required by Section 1502 of the Dodd-Frank Act, annually with the SEC. These disclosures are also publicly available on our website at http://www.diodes.com/pdfs/conflictmineralsreport2016.pdf

 

IV. SMELTER INFORMATION

 

A. 3TG Processing Facilities

 

As described in Section II, we require our suppliers of materials and components for our products to provide full material declarations for all substances, including 3TGs, contained in the products they supply to us. For smelter and refiner identification, the vast majority of our suppliers provided data at a company or divisional level. We are therefore unable to be certain that the 3TG reported by the suppliers were contained in the materials or components supplied to us or that the SORs reported by our suppliers are all in our supply chain.

 

Our supplier survey data revealed 108 potential 3TG smelters or refiners in the Diodes’ supply chain, all of which are listed on the CFSI website.

 

Listed below are the smelters and refiners we have determined to be potentially in our supply chain for 2016 that have processed Conflict Minerals, the conflict status of which is undeterminable. As explained above, the presence of a smelter or refiner on the list does not indicate that our products necessarily contain Conflict Minerals processed by that smelter or refiner.

 

 

 

 

 

 

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Table 1: Conflict Mineral Status of Smelters and Refiners

 

 

 

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B. 3TG Countries of Origin

 

To draw reliable conclusions as to 3TG countries of origin, we have, in line with the OECD Guidance, relied on our suppliers’ use of the CMRT as a tool for querying and transmitting information along the 3TG supply chain. We also have relied, again in line with the OECD Guidance, on the CFSP website as another valuable country-of-origin determination tool.

 

 

 

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Countries of origin for the CFSP-compliant SORs that were identified on our list include: Australia, Austria, Belgium, Bolivia, Brazil, Canada, China, Germany, Indonesia, Italy, Japan, Kazakhstan, Korea, Malaysia, Peru, Philippines, Poland, Singapore, Spain, Sweden, South Africa, Switzerland, Taiwan, Thailand, Turkey, and United States.

 

For identified conflict-free smelters for which minerals sourcing information is available from CFSI:

 

 

 

C. 3TG Mines or Locations of Origin

 

Based upon our experience, we have concluded that requiring our contracted suppliers to complete the CMRT represents the most reasonable best effort we can make at this time to identify the mines, smelters and countries of origin of 3TGs contained in our products with the greatest possible specificity. To date, CFSI has validated through facility audits that its conflict-free smelters are not sourcing 3TGs in a manner that contributes to armed conflict, even for those sourcing from mines or smelters located in the Covered Countries.

 

V. IMPROVEMENTS FROM 2015 CMR

 

Diodes’ key 2016 accomplishments and improvements are summarized below. We made considerable progress, although direct comparisons to the 2015 reporting period data are made difficult by supply chain complexities and year-to-year variances in the data pool.

 

 

 

VI. FUTURE MEASURES

 

We have taken, or intend to take, the following steps to improve the due diligence conducted to further mitigate any risk that the 3TGs in our products could benefit armed groups in the DRC or adjoining countries: