Sustainability: Supply chain accountability:
Management of suppliers

Management of TI's supply chain is led by our vice president of worldwide procurement and logistics, who reports directly to the chief financial officer. Together, they oversee supply chain policies, performance and risk management. Our director of supply chain responsibility oversees supplier environmental and social responsibility, implements related programs and policies, and manages supplier diversity. This role brings greater focus to the growing importance of the supply chain when managing risks and operating conscientiously.

Compliance

Laws and regulations vary across the different locations where TI operates. Site leadership teams are responsible for monitoring local legislation and ensuring compliance.

From a global perspective, our ongoing priority is to make sure that suppliers comply with all applicable local laws and regulations, including the California Transparency in Supply Chains Act and regulations issued under the U.S. Dodd-Frank Wall Street Reform and Consumer Protection Act. Other specific laws and regulations include:

  • The European Union's (EU) Restriction on Use of Hazardous Substances in Electrical and Electronic Equipment (RoHS2).
  • The EU's Regulation on Registration, Evaluation, Authorization and Restriction of Chemicals.
  • Applicable regulations and standards pertaining to lead, halogen, antimony and red phosphorous.

Quality and performance

We diligently screen and monitor raw materials suppliers and manufacturing foundries by:

  • Ensuring that all critical suppliers who provide direct materials to TI are International Organization for Standardization (ISO) 9001 or Technical Specification (TS) 16949 certified before engaging with them.
  • Examining environmental, safety and health policies, and evaluating related performance as part of TS 16949.
  • Gathering analytical data for six RoHS-banned substances to provide proof of compliance to customers who request additional evidence beyond certification.

Additionally, we scrutinize the financial health of key suppliers to ensure that they can maintain product deliveries. After this assessment, we put contingency plans in place to prevent possible interruptions.

Labor, ethics and human rights

After joining the Electronic Industry Citizenship Coalition (EICC) in 2012, TI began to implement the full requirements of EICC membership. This includes having our first-tier suppliers complete a self-assessment questionnaire on their practices and requiring a third-party audit of 25 percent of our high-risk supplier facilities.

Differing international regulations present challenges in determining accountability for audits and performance improvements related to supplier working conditions. We are working with our industry partners through organizations like the EICC to address and overcome this challenge.

Performance management

We conduct our own supplier assessments and have protocols in place to address risks and noncompliance. Twice a year, we evaluate our suppliers’ performance using our cost, responsibility, technology, responsiveness and assurance of supply and quality (CETRAQ) scorecard. We also assess suppliers' compliance, quality and performance, labor, ethics and human rights, performance management as well as risk management performance.

CETRAQ provides a supplier performance dashboard that helps us quickly identify potential risks and underperformers, helps new suppliers understand our expectations, and shows existing suppliers how they rank and where they need to improve. For our Education Technology suppliers, we use a similar process to verify that their products meet our deliverable specifications.

In addition, we work with the EICC to assess and audit select suppliers’ performance. Critical suppliers also regularly participate in a risk assessment to ensure that their qualifications, financial performance and business continuity plans continue to meet our standards. Vendors who do not comply with our standards, laws or regulations must put corrective action plans in place within a specified time period or risk termination of the relationship.

We recognize outstanding suppliers each year through the TI Supplier Excellence Award. Winners are selected based on several criteria, using the principles of our CETRAQ supplier scorecard: cost, environmental and social responsibility, technology, responsiveness, assurance of supply and quality.

Risk management

The semiconductor industry as a whole faces risks related to the availability of resources, such as water and metals, while global industry supply chains are more susceptible to supply disruptions and price volatility for key materials. We work closely with our suppliers to address and mitigate potential risks. Continuity of supply is integral for uninterrupted operations and on-time product delivery to customers.

We continually assess risks to our supply chain, whether anticipated (such as emerging regulations), or unexpected (such as natural disasters). Our objective is to ensure that our procurement and supplier-management processes are robust and rigorous enough to prevent shipping delays, escalated costs or impacts to our reputation.

We manufacture the majority of our semiconductor products internally. This results in significantly lower risks than those faced by companies that rely exclusively on external manufacturing, because we can:

  1. Control the efficiency and quality of fabrication processes.
  2. Manage the flexibility required to address fluctuations in the different types of process technologies manufactured at each facility and customer demand for our products.
  3. Protect our proprietary technology.
  4. Increase collaboration with and performance monitoring of our foundry suppliers of semiconductor manufacturing technology.
  5. Control the timely implementation of new manufacturing technologies and installation of manufacturing equipment.
  6. Adjust the timing of third-party foundry and assembly/test subcontract services.
  7. Enhance R&D by engaging with third parties, including software suppliers, universities and select external industry consortia.