Disclosure Based on TCFD Recommendations
In April 2021, we expressed our support for the TCFD*1 recommendations.
This section discloses our governance, strategy, risk management, and metrics and targets in line with the TCFD recommendations.
- *1The Task Force on Climate-related Financial Disclosures established by the Financial Stability Board (FSB)
1. Governance and Risk Management
In SUMCO, the Environmental Management Committee, chaired by an environmental officer who is a member of the Board of Directors, reviews the risks and opportunities arising from climate change, sets environmental objectives (reduction of CO2 emissions, reduction of water consumption, etc.) to be addressed, and manages the status of such efforts.
As regards climate change and other risks, the Business Security Committee (BSC), which is attended by the Chairman and CEO and other senior management, determines company-wide policies and deliberates and decides on risk prevention measures.
2. Strategy
We recognize that the risks and opportunities associated with climate change are among the key business issues that will affect our future finance.
We therefore forecast and quantified the risks and opportunities that are likely to have a financial impact and carried out a scenario analysis in line with the TCFD recommendations.
(1) Major risks and opportunities related to climate change
- Scope: SUMCO Group
- Timing of embodiment: short term (1 year or less), medium term (1 to 3 years), medium to long term (3 to 10 years), long term (over 10 years)
- Possibility: small, medium, large
- Degree of impact: small (1 billion yen or less), medium (1 to 10 billion yen), large (over 10 billion yen)
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| Classification | Expected result | Timing of embodiment | Possibility | Degree of impact | |
|---|---|---|---|---|---|
| Risk | Transition risk | Loss of sales opportunities and increase in procurement costs due to intensifying competition in the semiconductor sector | Medium to long term | Large | Large |
| Increase in operating costs due to the introduction of a carbon tax (carbon pricing) | Medium term to medium to long term | Large | Medium | ||
| Increase in waste disposal costs due to the formation of a recycling-oriented society | Medium to long term | Large | Medium | ||
| Increase in business costs due to the increased burden of renewable energy levy | Short term to medium to long term | Large | Medium | ||
| Increase in capital costs due to the expansion of ESG investments | Medium term | Large | Small | ||
| Physical risk | Suspension of business activities due to wind and flood disasters | Short term | Medium | Small to large | |
| Supply chain disruptions due to wind and flood disasters | Short term | Medium | Small to large | ||
| Opportunity | Expansion of demand for energy-saving-related equipment due to the advancement of energy conservation and renewable energy | Long term | Large | Large | |
| Expansion of demand for automotive products due to the spread of Evs | Medium to long term | Large | Large | ||
| Increase in demand for server-related equipment due to the spread of telework | Medium to long term | Large | Large | ||
| Increase in demand for automation equipment due to the spread of automation and digitization | Medium to long term | Large | Large | ||
(2) Scenario analysis
Although all the items identified as risks and opportunities are evaluated as having a significant impact on SUMCO, three items (blue items in the above list) have been selected for the scenario analysis in the current fiscal year.
1) Increase in operating costs due to the introduction of a carbon tax (carbon pricing) [Risk]
Since we emit large amounts of greenhouse gases and there will be a significant impact on our business if a carbon tax is introduced, we conducted a scenario analysis for the 2°C and 4°C scenarios.
(i) Assumptions of scenario analysis
- (1) Total emissions for scopes 1 and 2
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Emissions in 2030 are estimated, with emission factors calculated for each country‘s electric utilities based on the World Energy Outlook (WEO) 2019 of the International Energy Agency (IEA).
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2°C
Sustainable Development Scenario (SDS)4°C
Stated Policies Scenario (STEPS)Emissions in 2030 Approx. 430,000 t-CO2/yr Approx. 675,000 t-CO2/yr
- (2) Carbon prices
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Carbon prices of each country are set on the basis of the World Energy Outlook (WEO) 2019 of the International Energy Agency (IEA).
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2°C
Sustainable Development Scenario (SDS)4°C
Stated Policies Scenario (STEPS)Japan, USA, Taiwan $100/t-CO2 *2 $33/t-CO2 *4 Indonesia $75/t-CO2 *3 $12/t-CO2 *5 - *2The value for advanced economies is adopted.
- *3The value for selected advancing economies is adopted.
- *4The value for EU is adopted.
- *5The lowest value among the values given for different countries in the WEO 2019 is adopted.
(ii) Scenario analysis results
The cost burden will increase by about 2.4 billion yen/yr under the 4°C scenario and about 4.7 billion yen/yr under the 2°C scenario.
(iii) Proposed cost reduction initiatives
Since the scenario analysis has indicated that the total cost decreases when the unit cost of procuring renewable energy is lower than the unit carbon price, we discuss the introduction of renewable energy in addition to our current efforts toward energy conservation.
- Image of costs associated with carbon tax
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2) Expansion of demand for energy-saving-related equipment due to the advancement of energy conservation and renewable energy [Opportunity]
As we move toward a decarbonized society, demand is expected to increase for power semiconductors that provide stable and efficient power supply and streamlined, high-precision control.
We have conducted scenario analysis for representative products that are expected to become more widespread in the future due to climate-change-related factors and for which both the 2°C and 4°C climate change scenarios exist and have evaluated changes in the demand for power semiconductors in each industrial sector.
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| Consumer equipment sector | Electric railcar sector | Energy sector | Automotive & electronics sector | Information & communication equipment sector | Industry sector | ||
|---|---|---|---|---|---|---|---|
| Market size of power semiconductors in percentage *6 | 30% | A few percent | A few percent | 20% | 20% | 20% | |
| Products and devices with semiconductors having promising growth potential | Inverters for home appliances, AC adapters, etc. | Electric railcars (inverter modules) | Solar and wind power generation equipment, power transmission infrastructure, etc. | EVs, quick charging stations, wireless power supply systems, etc. | Server power supplies, UPS, etc. | High-voltage and high-current applications, such as motor control, inverter control, and welding machinery | |
| Products and equipment subject to scenario analysis | Air conditioners | Electric railcars | Solar and wind power generation equipment | Electronic control unit (ECU) | This sector was not included in the analysis because there are no appropriate climate change scenarios for the sector, and the cycle of products and services is shorter than in other sectors, making medium- to long-term projections difficult. | Energy efficiency of the entire manufacturing plant | |
| Changes in power semiconductor demand toward achieving the goal of less than 2°C in 2030 | Production of high-efficiency air conditioners with inverters is estimated to be about 1.3 times higher than that under the 4°C scenario (business as usual). The production percentage of air conditioners with inverters is also expected to rise. | The demand for rail travel, whose CO2 emissions per travel distance is low, will grow. The production of railcars is estimated to be about 1.2 times higher, compared to the 4°C scenario (business as usual). |
Although it is difficult to forecast the volume of power semiconductors to be installed in power generation equipment and related products, we estimate that the amount of solar and wind power to be introduced globally will be about 1.5 times greater than in the 4°C scenario (business as usual). | A separate scenario analysis is conducted for general automotive semiconductor devices (see "Expansion of demand for automotive products due to the spread of EVs") |
Although there are no climate change scenarios for individual equipment and products in this sector, we estimate that energy intensity in the manufacturing industry will decrease by about 7% in comparison with the 4°C scenario (business as usual) due to energy conservation and improved efficiency. | ||
| Our business opportunities in the transition toward achieving the goal of less than 2°C | Increased production of air conditioners due to global warming and greater extremes of weather is expected to have a positive impact on demand for our products. | Although the market size is small, we expect a positive impact on demand for our products as demand for electric railcars increases due to a modal shift. | Although the market size is small, we expect that the global shift to renewable energy will increase the production of power conditioners and other products, which will have a positive impact on demand for our products. | Considering that there are no direct climate change factors affecting the demand for products and services in this sector, we assess that the difference in demand for power semiconductors in this sector between the 2°C and 4°C scenarios is small. | We expect that demand for power semiconductors will increase due to such factors as progress in energy conservation and higher efficiency in factories, which will lead to increased demand for our products. | ||
| Our business opportunities with the spread of next-generation power semiconductors | The market for next-generation power semiconductors (SiC, GaN, etc.), which are currently undergoing development, commercialization, and cost reduction, is expected to expand significantly by 2030. We will therefore continue to monitor the spread of next-generation power semiconductors, pursue development, and increase our capacity. | ||||||
- *6Based on a research company's forecast data
3) Expansion of demand for automotive products due to the spread of EVs [Opportunity]
In forecasting the demand for automotive wafers, we estimated the ratios of future EV/HEV production as shown in the figure below.
Regarding the right-side graph (New scenario) as the 2°C scenario and the left-side graph as the 4°C scenario (business as usual), we analyzed the trend of silicon wafer demand until 2030 by multiplying the projected area of silicon wafers for automotive semiconductors by the production ratio of each vehicle type.
The results indicate that the demand for silicon wafers in 2030 will be more than doubled compared to 2020 in both the 2°C and 4°C scenarios. When both scenarios are compared, the demand as of 2030 under the 2°C scenario is estimated to be about 1.1 times higher than that under the 4°C scenario.
In the automotive and electronics sector, we expect, as a baseline, increasing demand for automotive semiconductors due to such trends as automated driving and computerization of display devices. In addition, we expect that the spread of EVs and PHEVs for decarbonization will have the effect of further boosting demand, with a positive impact on demand for our products.
We will therefore continue to develop high reliability and durability and increase our capacity.
- *The scenario analysis was conducted with the help of an external research company in collecting and analyzing external information.
3. Metrics and Targets
Setting the reduction of CO2 emissions as one of our environmental objectives, we are working to reduce CO2 emissions.
We are also publishing the results of our activities to achieve the objective.