SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Specialized Disclosure Report
MagnaChip Semiconductor Corporation
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of
incorporation or organization)
|(Commission File Number)|| |
c/o MagnaChip Semiconductor S.A.
1, Allée Scheffer, L-2520
Luxembourg, Grand Duchy of Luxembourg
(Address of principal executive offices)
Theodore S. Kim
Chief Compliance Officer, Executive Vice President, General Counsel and Secretary
c/o MagnaChip Semiconductor, Inc.
60 South Market Street, Suite 750
San Jose, CA 95113
Telephone: (408) 625-5999
Fax: (408) 625-5990
(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:
|x||Rule 13p-1 under the Securities Exchange Act (17 CFR 240.13p-1) for the reporting period from January 1 to December 31, 2014.|
Section 1. Conflict Minerals Disclosure
|Item 1.01.||Conflict Minerals Disclosure and Report.|
Conflict Minerals Disclosure
MagnaChip Semiconductor Corporation (including its consolidated subsidiaries, the Company) has conducted a good faith reasonable country of origin inquiry (RCOI) regarding the conflict minerals included in its products for the reporting period from January 1, 2014 to December 31, 2014. The results of the Companys RCOI regarding the conflict minerals included in its products, as well as its additional due diligence regarding the sources of such conflict minerals, are contained in the Companys Conflict Minerals Report, a copy of which is filed as Exhibit 1.01 to this Form SD, and is publicly available at http://www.magnachip.com/AboutUs/Policy.php. The content on, or accessible through, any web site referred to in this Form SD is not incorporated by reference into this Form SD unless expressly noted.
As specified in Section 2 of Form SD, the Company is hereby filing its Conflict Minerals Report required by Items 1.01 and 1.02 as Exhibit 1.01 to this Form SD.
Section 2. Exhibits
The following exhibit is filed as part of this Form SD.
|1.01||Conflict Minerals Report of MagnaChip Semiconductor Corporation for the reporting period from January 1, 2014 to December 31, 2014|
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.
|MAGNACHIP SEMICONDUCTOR CORPORATION|
|Theodore S. Kim||(Date)|
Chief Compliance Officer, Executive Vice
President, General Counsel and Secretary
|1.01||Conflict Minerals Report of MagnaChip Semiconductor Corporation for the reporting period from January 1, 2014 to December 31, 2014|
MagnaChip Semiconductor Corporation
Conflict Minerals Report
For the reporting period from January 1, 2014 to December 31, 2014
This Conflict Minerals Report (this Report) of MagnaChip Semiconductor Corporation (including its consolidated subsidiaries, the Company) has been prepared pursuant to Rule 13p-1 and Form SD promulgated under the Securities Exchange Act of 1934 for the reporting period from January 1, 2014 to December 31, 2014 (the Reporting Period).
Forward-looking statements contained in this Report are made based on known events and circumstances at the time of release, and as such, are subject in the future to unforeseen uncertainties and risks. Statements in this Report which express a belief, expectation or intention, as well as those that are not historical fact, are forward-looking statements, including statements related to the Companys compliance efforts and expected actions identified in this Report. These forward-looking statements are subject to various risks, uncertainties and assumptions, including, among other matters, the Companys customers requirements to use certain suppliers, the Companys suppliers responsiveness and cooperation with the Companys due diligence efforts, the Companys ability to implement improvements in its conflict minerals program and the Companys ability to identify and mitigate related risks in its supply chain. If one or more of these or other risks materialize, actual results may vary materially from those expressed.
Rule 13p-1, through Form SD, requires the disclosure of certain information if a company manufactures or contracts to manufacture products for which certain conflict minerals (as defined below) are necessary to the functionality or production of such products. Form SD defines conflict minerals as: (i)(a) columbite-tantalite (or coltan, the metal ore from which tantalum is extracted), (b) cassiterite (the metal ore from which tin is extracted), (c) gold and (d) wolframite (the metal ore from which tungsten is extracted), or their derivatives, which are currently limited to tantalum, tin and tungsten; or (ii) any other mineral or its derivatives determined by the U.S. Secretary of State to be financing conflict in the Democratic Republic of the Congo or an adjoining country, as such term is defined in Form SD (collectively, the Covered Countries).
The Companys business is conducted through its Standard Products Group, which consists of the Display Solutions and Power Solutions business lines, and the Companys Semiconductor Manufacturing Services.
|||The Companys Display Solution products include source and gate drivers and timing controllers that cover a wide range of flat panel displays used in ultra high definition, high definition, full high definition, light emitting diode (LED), 3D and organic light emitting diodes televisions and displays, notebooks and mobile communications and entertainment devices.|
|||The Companys Power Solutions products include metal oxide semiconductor field effect transistors, insulated gate bipolar mode transistors, power modules, AC-DC converters, DC-DC converters, LED drivers, switching regulators and linear regulators for a range of devices, including liquid crystal display, LED, 3D televisions, smartphones, mobile phones, desktop PCs, notebooks, tablet PCs, other consumer electronics, consumer appliance and industrial applications such as power suppliers, LED lighting and motor control.|
|||The Companys Semiconductor Manufacturing Services provide specialty analog and mixed-signal foundry services mainly for fabless and certain Integrated Device Manufacturer semiconductor companies that serve consumer, computing, communication, industrial, automotive and Internet of Things applications.|
The Companys operations may at times manufacture, or contract to manufacture, products, including the products listed above, for which conflict minerals are necessary to the functionality or production of those products (collectively, the products).
As required by Form SD, the Company has conducted a good faith reasonable country of origin inquiry (RCOI) regarding the conflict minerals included in such products during the Reporting Period, which the Company refers to as the Subject Minerals, to determine whether any such Subject Minerals originated in the Covered Countries and/or whether any of the Subject Minerals were from recycled or scrap sources. Where applicable, the Company has conducted additional due diligence regarding the sources of the Subject Minerals. The results of the Companys RCOI regarding the Subject Minerals, as well as the Companys additional due diligence regarding the sources of such Subject Minerals, are contained in this Report, which is publicly available at http://www.magnachip.com/AboutUs/Policy.php. The content on, or accessible through, any web site referred to in this Report is not incorporated by reference into this Report unless expressly noted.
|1.||RCOI and Due Diligence Process.|
The Company has conducted a good faith RCOI regarding the Subject Minerals. This good faith RCOI was reasonably designed to determine whether any of the Subject Minerals originated in the Covered Countries and whether any of the Subject Minerals may be from recycled or scrap sources, in accordance with Form SD and related guidance provided by the Securities and Exchange Commission (the SEC). The Company also exercised due diligence on the source of the Subject Minerals. The Companys due diligence measures have been designed to follow the framework in the Organization for Economic Co-operation and Development Due Diligence Guidance for Responsible Supply Chain of Minerals from Conflict-Affected and High Risk Areas: Second Edition, including the related supplements on gold, tin, tantalum and tungsten (the OECD Guidelines).
The Companys global supply chain is complex. In the course of its business operations, the Company may purchase materials and components containing conflict minerals. These materials and components may, in turn, be included in the Companys products or products manufactured by the Company. Because the Company does not purchase conflict minerals directly from mines, smelters or refiners, there are many third parties in the supply chain between the Company and the original sources of conflict minerals. As a result, the Company relies on its suppliers and outsourcing manufacturers to provide information regarding the origin of any conflict minerals that are included in its products. In accordance with the OECD Guidelines and related guidance provided by the SEC, the Company worked with its suppliers and outsourcing manufacturers to identify, where possible, the smelters and countries of origin of the Subject Minerals.
During the Reporting Period, the Company worked to identify its Tier 1 suppliers and outsourcing manufacturers that it believed could potentially provide materials or components containing Subject Minerals (collectively, the Covered Suppliers) as part of its RCOI. The Company focused on its suppliers providing materials or components for products that the Company identified as containing Subject Minerals and all of its outsourcing manufacturers. During the Reporting Period, the Company asked the Covered Suppliers to complete and return the Conflict Minerals Reporting Template (CMRT) that was developed by the Conflict-Free Sourcing Initiative (the CFSI). The CFSI was founded by the Electronics Industry Citizenship Coalition (EICC) and the Global e-Sustainability Initiative (GeSI) and has grown into a multi-industry initiative addressing conflict mineral issues in the supply chain. The CMRT is a widely-used standard form to collect information through the supply chain, including the names of smelters and refiners of conflict minerals. The CFSIs Conflict-Free Smelter Program (the CFSP) sponsors independent third-party audits of smelters and refiners of conflict minerals which determine the country of origin of minerals processed through those smelters and refiners.
Using a risk-based approach, the Company evaluated responses from the Covered Suppliers for plausibility, consistency, and gaps both in terms of which materials or components were stated to contain or not contain Subject Minerals, as well as the origin of those Subject Minerals.
The Company obtained representations from substantially all of its Covered Suppliers, including completed CMRTs indicating the facilities at which the Subject Minerals were processed. Based on the information obtained pursuant to the RCOI process described above, however, the Company does not have sufficient information with respect to the Reporting Period to determine with specificity the country of origin of the Subject Minerals contained in the products. The Companys RCOI procedures are an evolving process. See Additional Due Diligence and Risk Mitigation below for additional detail.
The Companys due diligence process is designed to follow the OECD Guidelines. Due diligence measures undertaken by the Company during the Reporting Period included the following:
Establish Strong Company Management Systems
Internal Team to Support Supply Chain Due Diligence.
The Company established an internal team from its supply management and legal departments to manage conflict minerals engagement with its suppliers and outsourcing manufacturers. This team has been charged with overseeing and driving conflict minerals compliance. This team has been tasked to work with the Companys other employees to provide training and guidance, receive and track responses and facilitate communication between departments with respect to compliance with the SECs reporting requirements regarding conflict minerals.
Internal Policy Developed to Establish Expectations of Suppliers.
The Company has adopted and published a position statement establishing the expectations of its suppliers and outsourcing manufacturers to responsibly source products on a conflict-free basis. The position statement can be found on the Companys website at http://www.magnachip.com/AboutUs/Policy.php. The Companys position statement will be periodically reviewed and updated as needed. The Companys internal conflict minerals team is also currently evaluating its supply agreements and purchasing procedures to determine whether additional contractual or other means of implementing the Companys policy should be adopted as described below under Additional Due Diligence and Risk Mitigation.
Identify and Assess Risks in the Supply Chain
The Company continues to assess its supply chain risks and work with its suppliers and outsourcing manufacturers in developing greater supply chain transparency.
Design and Implement a Strategy to Respond to Identified Risks
The Company is committed to maintaining high standards of corporate responsibility through its compliance with Form SD. As required by Form SD, the Company is reporting the findings of its RCOI and additional due diligence measures through the preparation of this Report. The Companys internal team that manages conflict minerals engagement with the Companys suppliers and outsourcing manufacturers also works to address any significant due diligence findings as they arise. For example, as described below, when the Company became aware that certain of its outsourcing manufacturers used smelters that are not members of the CSFP (in this Report, we refer to CSFP-compliant smelters as Members), its internal team requested that those outsourcing manufacturers eliminate the non-Member smelters from the Companys supply chain or have the non-Member smelters complete the steps required to become Members, in either case by May 15, 2015. Those Covered Suppliers have since reported back to the Company that they have eliminated the non-Member smelters from the Companys supply chain and that they will monitor the non-Member smelters progress towards completion of a CFSP audit and certification as Members.
Carry Out Independent Third-Party Audit of Smelters / Refiners Due Diligence Practices
Where possible, the Company has relied on third party assurances and certifications. For example, the Company accepts as reliable any smelter that is a member of the CFSP.
Report Annually on Supply Chain Due Diligence
This Report is publicly available at http://www.magnachip.com/AboutUs/Policy.php and meets the OECD recommendation to report annually on supply chain due diligence.
|2.||Due Diligence Results.|
Based solely on the information obtained pursuant to the RCOI and due diligence process described above, including review of completed CMRTs from the Covered Suppliers:
|||22 of the 25 Covered Suppliers reported that they solely used Members for the Companys products.|
|||Three Covered Suppliers reported that they:|
|||used smelters that are designated as Active by the CSFP. Smelters and refiners designated as Active by the CSFP have committed to undergo, but have not completed, a CFSP audit. According to information provided on the CFSIs website, (i) smelters and refiners are identified as Active in the CFSP once they submit signed Agreement for the Exchange of Confidential Information and Auditee Agreement contracts, which is the first step of the audit process; (ii) smelters and refiners on the Active list are at various stages of the audit cycle, and the time it takes a smelter or refiner to complete an audit cycle varies, with the average time ranging from four to six months; (iii) if an Active smelter or refiner is deemed by the CFSP to be delaying an audit, corrective action completion, or re-audit for more than 90 days, that smelter or refiner will be removed from the Active list; and (iv) a smelter or refiner that is unresponsive for 45 days will be removed from the Active list; and/or|
|||used or may have used smelters that were not Members (and those smelters were not listed as Active with the CFSP).|
When the Company became aware that certain of its Covered Suppliers used smelters that were not Members (including smelters that were listed as Active with the CFSP, but had not completed the CFSP audit process), the Companys internal team requested that those Covered Suppliers eliminate the non-Member smelters from the Companys supply chain or have the non-Member smelters (including those designated as Active by the CFSP) complete the steps required to become Members, in either case by May 15, 2015. Those Covered Suppliers have since reported back to the Company that they have eliminated the non-Member (and non-Active) smelters from the Companys supply chain and that they will monitor the Active smelters progress towards completion of a CFSP audit and certification as Members.
Based on the information obtained pursuant to the RCOI and due diligence process described above, the Company does not have sufficient information, with respect to the Reporting Period, to determine the known facility/smelter or country of origin of the Subject Minerals because certain of the Covered Suppliers were unable to identify with specificity the smelters that were part of the supply chain for the Subject Minerals contained in the products. For example, at least one Covered Supplier reported its sourcing results on a company-wide basis (and provided the Company with a list of all smelters that it uses for all of its customers, rather than solely smelters that were used for the Subject Minerals in the products), rather than on a Company product-specific basis and, accordingly, the Company was unable to determine the facility/smelter and/or country of origin for the Subject Minerals contained in the products. Three Covered Suppliers reported that the minerals used for the Companys products were derived from the mixing of different mineral inputs, some of which were processed by Members and some by non-Member smelters.
Any Covered Suppliers failure to identify a specific facility/smelter and/or country of origin with respect to the Companys products at any point in its supply chain will drive an equivalent response for the Company and, therefore, the Company is unable to report a complete list of facilities/smelters and/or countries of origin for the Subject Minerals at this time. The Company has, however, included in this Report a list of facilities that may have been used to process the Subject Minerals in the Companys products as reported by the Covered Suppliers in their completed CMRTs, as noted in Facilities Used to Process Subject Minerals and Country of Origin below.
The Company expects to continue to implement and refine its conflict minerals program to improve its supply chain transparency by obtaining more accurate and more complete information from its suppliers and outsourcing manufacturers. See Additional Due Diligence and Risk Mitigation below for additional detail.
|3.||Additional Due Diligence and Risk Mitigation.|
The Company expects to take the following steps, among others, to improve its RCOI process and due diligence measures:
Additional Terms and Conditions / Supplier Code of Conduct
Within the Companys supplier relationships, the Company seeks to manage its sourcing processes ethically, and to hold the Company, its suppliers, and its outsourcing manufacturers to high standards of behavior. This means that the Company is committed to working with its suppliers and outsourcing manufacturers to encourage responsible practices throughout the supply network. The Company is working to strengthen its commitment to the responsible sourcing of conflict minerals, including though using the Companys purchasing power and relationships to influence its suppliers and outsourcing manufacturers, and evaluating the use of specific terms and conditions in certain supply agreements and purchase orders. For example, the Company has added to its purchase order form a request that the supplier declare that all products supplied to the Company do not contain Subject Minerals that originate from the Covered Countries and that the supplier does not use smelters that have not been validated to be conflict free. The Company has also required certifications from its suppliers and outsourcing manufacturers that they will adhere to the Companys conflict minerals policy and assist in its reporting requirements. The Company expects to continue to refine, develop and implement specific terms, conditions and expectations with its suppliers and outsourcing manufacturers that require, among other matters, that no materials or components supplied or manufactured on behalf of the Company contain any conflict minerals that directly or indirectly finance any armed group that has been identified as a perpetrator of human rights abuses.
Continuous Improvement of Supply Chain Due Diligence
The Company expects to continue to improve its supply chain due diligence efforts. Such measures may include, but are not limited to:
|||assessing the presence of conflict minerals in its supply chain;|
|||clearly communicating expectations with regard to transparency of supplier sourcing of conflict minerals;|
|||increasing the detail and transparency of responses received in the RCOI and due diligence process, including by requesting that suppliers provide CMRTs twice a year;|
|||continuing to compare RCOI and due diligence results to information collected via independent conflict free smelter validation programs such as the CSFP; and|
|||contacting suppliers and outsourcing manufacturers regarding smelters identified as a result of the RCOI and due diligence process and request their participation in obtaining a conflict free designation from an industry program such as the CSFP.|
|4.||Facilities Used to Process Subject Minerals and Country of Origin.|
Based on the information obtained pursuant to the RCOI and due diligence process described above, the Company does not have sufficient information, with respect to the Reporting Period, to determine the known facility/smelter or country of origin of the Subject Minerals, or whether the Subject Minerals in its products are from recycled or scrap sources, for the reasons described above under Due Diligence Results. Based on the information provided by the Covered Suppliers in their completed CMRTs however, the Company believes that facilities that may have been used to process the Subject Minerals in the Companys products include the following smelters and refiners.
Country location of
|Gold||Aida Chemical Industries Co., Ltd.||Japan|
|Gold||Allgemeine Gold-und Silberscheideanstalt A.G.||Germany|
|Gold||AngloGold Ashanti Córrego do Sítio Mineração||Brazil|
|Gold||Asahi Pretec Corporation||Japan|
|Gold||Asaka Riken Co., Ltd.||Japan|
|Gold||CCR Refinery Glencore Canada Corporation||Canada|
|Gold||Eco-System Recycling Co., Ltd.||Japan|
|Gold||Heraeus Ltd. Hong Kong||China|
|Gold||Heraeus Precious Metals GmbH & Co. KG||Germany|
|Gold||Ishifuku Metal Industry Co., Ltd.||Japan|
|Gold||Johnson Matthey Inc.||United States|
|Gold||Johnson Matthey Limited||Canada|
|Gold||JX Nippon Mining & Metals Co., Ltd.||Japan|
|Gold||Kennecott Utah Copper LLC||United States|
|Gold||Kojima Chemicals Co., Ltd.||Japan|
|Gold||LS-NIKKO Copper Inc.||Republic of Korea|
|Gold||Matsuda Sangyo Co., Ltd.||Japan|
|Gold||Metalor Technologies (Hong Kong) Ltd.||China|
|Gold||Metalor Technologies SA||Switzerland|
|Gold||Metalor USA Refining Corporation||United States|
|Gold||Mitsubishi Materials Corporation||Japan|
|Gold||Mitsui Mining and Smelting Co., Ltd.||Japan|
|Gold||Nihon Material Co., Ltd.||Japan|
|Gold||Ohio Precious Metals, LLC||United States|
|Gold||Ohura Precious Metal Industry Co., Ltd||Japan|
|Gold||Rand Refinery (Pty) Ltd.||South Africa|
|Gold||Republic Metals Corporation||United States|
|Gold||Royal Canadian Mint||Canada|
|Gold||SEMPSA Joyería Platería SA||Spain|
|Gold||Shandong Zhaojin Gold & Silver Refinery Co., Ltd.||China|
|Gold||Solar Applied Materials Technology Corp.||Taiwan|
|Gold||Sumitomo Metal Mining Co., Ltd.||Japan|
|Gold||Tanaka Kikinzoku Kogyo K.K.||Japan|
|Gold||The Refinery of Shandong Gold Mining Co. Ltd||China|
|Gold||Tokuriki Honten Co., Ltd.||Japan|
|Gold||Umicore SA Business Unit Precious Metals Refining||Belgium|
|Gold||United Precious Metal Refining, Inc.||United States|
|Gold||Western Australian Mint trading as The Perth Mint||Australia|
|Gold||Yamamoto Precious Metal Co., Ltd.||Japan|
|Gold||Yokohama Metal Co., Ltd.||Japan|
|Tantalum||F&X Electro-Materials Ltd.||China|
|Tantalum||Global Advanced Metals Boyertown||United States|
|Tantalum||H.C. Starck Co., Ltd.||Thailand|
|Tantalum||H.C. Starck GmbH Goslar||Germany|
|Tantalum||H.C. Starck GmbH Laufenburg||Germany|
|Tantalum||H.C. Starck Hermsdorf GmbH||Germany|
|Tantalum||H.C. Starck Inc.||United States|
|Tantalum||H.C. Starck Ltd.||Japan|
|Tantalum||H.C. Starck Smelting GmbH & Co.KG||Germany|
|Tantalum||Mitsui Mining & Smelting||Japan|
|Tantalum||Ningxia Orient Tantalum Industry Co., Ltd.||China|
|Tantalum||Solikamsk Magnesium Works OAO||Russian Federation|
|Tantalum||Ulba Metallurgical Plant JSC||Kazakhstan|
|Tin||China Tin Group Co., Ltd.||China|
|Tin||Cooperativa Metalurgica de Rondônia Ltda.||Brazil|
|Tin||CV United Smelting||Indonesia|
|Tin||Gejiu Non-Ferrous Metal Processing Co., Ltd.||China|
|Tin||Magnus Minerais Metais e Ligas Ltda.||Brazil|
|Tin||Malaysia Smelting Corporation (MSC)||Malaysia|
|Tin||Mineração Taboca S.A.||Brazil|
|Tin||Mitsubishi Materials Corporation||Japan|
|Tin||O.M. Manufacturing Philippines, Inc.||Philippines|
|Tin||Operaciones Metalurgical S.A.||Bolivia|
|Tin||PT Artha Cipta Langgeng||Indonesia|
|Tin||PT Bangka Tin Industry||Indonesia|
|Tin||PT Bukit Timah||Indonesia|
|Tin||PT DS Jaya Abadi||Indonesia|
|Tin||PT Eunindo Usaha Mandiri||Indonesia|
|Tin||PT Mitra Stania Prima||Indonesia|
|Tin||PT Prima Timah Utama||Indonesia|
|Tin||PT Refined Bangka Tin||Indonesia|
|Tin||PT Sariwiguna Binasentosa||Indonesia|
|Tin||PT Stanindo Inti Perkasa||Indonesia|
|Tin||PT Timah (Persero) Tbk Kundur||Indonesia|
|Tin||PT Timah (Persero) Tbk Mentok||Indonesia|
|Tin||PT Tinindo Inter Nusa||Indonesia|
|Tin||Rui Da Hung||Taiwan|
|Tin||Soft Metais Ltda.||Brazil|
|Tin||White Solder Metalurgia e Mineração Ltda.||Brazil|
|Tin||Yunnan Chengfeng Non-ferrous Metals Co., Ltd.||China|
|Tin||Yunnan Tin Group (Holding) Company Limited||China|
|Tungsten||Chongyi Zhangyuan Tungsten Co., Ltd.||China|
|Tungsten||Ganzhou Huaxing Tungsten Products Co., Ltd.||China|
|Tungsten||Ganzhou Seadragon W & Mo Co., Ltd.||China|
|Tungsten||Global Tungsten & Powders Corp.||United States|
|Tungsten||H.C. Starck GmbH||Germany|
|Tungsten||Hunan Chunchang Nonferrous Metals Co., Ltd.||China|
|Tungsten||Japan New Metals Co., Ltd.||Japan|
|Tungsten||Kennametal Huntsville||United States|
|Tungsten||Tejing (Vietnam) Tungsten Co., Ltd.||Vietnam|
|Tungsten||Wolfram Bergbau und Hütten AG||Austria|
|Tungsten||Xiamen Tungsten (H.C.) Co., Ltd.||China|
|Tungsten||Xiamen Tungsten Co., Ltd.||China|