Nex GenPower's Supply Chain Control Process and Flowchart

I. General Principles for Supply Chain Control

Nexgenpower's supply chain management is centered on "compliance and controllability, efficient collaboration, cost reduction and efficiency improvement, and risk early warning," focusing on the entire supply chain of GaN (gallium nitride) power adapters across multiple power ratings (30W/45W/65W/100W/140W) and covering supplier management.

The system encompasses six key dimensions—management, procurement control, warehousing control, logistics control, inventory control, and emergency response control—covering the entire supply chain from raw material procurement, storage, and distribution to finished product release and delivery. It aligns closely with industry trends of GaN supply chains becoming predominantly IDM-driven and 8-inch wafers emerging as the mainstream standard by 2026. The core objective is to establish a stable, efficient, and cost-effective supply chain that ensures timely and quality-compliant raw material supply, precise and efficient production and delivery, well-managed inventory levels, while mitigating supply chain risks (such as supplier defaults, material shortages, or logistical delays). This framework supports mass production and meets market delivery requirements, complying with global safety standards and green supply chain principles.

Core Principles: Prioritizing quality as the foundation, efficiency as the core focus, and risk management as the fundamental requirement; adhering to "end-to-end control, full-process traceability, and cross-departmental collaboration"; balancing supply chain flexibility with stability; placing particular emphasis on ensuring supply chain security for GaN core components (chips, substrates, epitaxial layers, etc.); optimizing supplier structure; achieving cost efficiency, timely delivery, and minimized risks across the supply chain; thereby enabling enterprises to gain a competitive edge in the GaN power supply sector.

II. Comprehensive Supply Chain Control Process (7 Key Stages, Including Control Points + Implementation Standards + Deliverables)

Phase 1: Supplier Access and Tiered Management (Source Control | Sustainable Over Time)

Core objective: To identify high-quality, compliant, and competitive suppliers; establish a tiered management system to ensure supply chain quality and stability at the source; align with the IDM-driven development trend of the GaN supply chain; and mitigate risks such as non-compliant supplier qualifications or insufficient production capacity.

• Control Node 1: Supplier Access Review – Focuses on GaN core components (chips, substrates, epitaxial wafers), conventional components (PCB boards, capacitors, enclosures), logistics service providers, and outsourced manufacturers; conducts comprehensive multi-dimensional access reviews including qualification verification (business license).

Production license, safety certification, production capacity certification; quality system audits (ISO 9001, IATF 16949, etc.); technical capability assessments (GaN device manufacturing/processing technologies and R&D capabilities); production capacity evaluations (whether meeting Nanjing Silicon Industry Group's mass-production requirements, e.g., supply capacity for 8-inch GaN wafers).

After-sales service review; prioritize GaN suppliers with IDM capabilities or high-quality contract manufacturing capabilities, such as industry leaders like Innosys and Infineon, along with their qualified suppliers.

• Control Node 2: Supplier Classification Management – Based on audit results, suppliers are categorized into three groups: Core Suppliers (suppliers of critical materials such as GaN chips and core controllers, e.g., Innosys, Infineon), Qualified Suppliers (standard component suppliers), and Alternative Suppliers; a corresponding supplier management framework is established.

Maintain a tiered supplier registry: core suppliers must sign long-term cooperation agreements, while maintaining a sufficient number of alternative suppliers to ensure supply chain redundancy.

• Control Node 3: Dynamic Supplier Evaluation   1. Conduct quarterly dynamic evaluations of suppliers, using metrics such as on-time delivery rate, material compliance rate, price competitiveness, after-sales service response speed, and production capacity stability. Evaluation results are linked to supplier grading and partnership share allocation.

Suppliers that fail inspection will have their cooperation suspended and be required to rectify; those failing to meet the requirements after rectification will be removed from the list of qualified suppliers.

• Implementation Standards: Core suppliers must possess complete qualifications, GaN-related production technologies and capacity, with a material qualification rate ≥99.8% and delivery on-time rate ≥99%; qualified suppliers must achieve a material qualification rate ≥99% and delivery on-time rate ≥98%; supplier assessment pass rate ≥90%, with core suppliers required to meet these criteria annually.

The re-evaluation was conducted once, aligning with industry trends such as the restructuring of GaN supply chain contract manufacturing and the shift toward 8-inch wafer production.

• Deliverables: Supplier eligibility review report, List of qualified suppliers, Supplier classification ledger, Dynamic supplier performance evaluation report, Cooperation agreement.

Phase 2: Procurement Planning and Source Selection Management (Procurement Initiation | Once per month)

Core Objective: By integrating production planning, inventory levels, and market demand, develop a scientifically sound procurement plan; optimize the sourcing process; ensure that material specifications, quantities, and delivery cycles precisely meet production requirements; control procurement costs; and adapt to fluctuations in GaN material prices and changes in production capacity.

• Control Node 1: Procurement Requirements Collection – Collaborate with production, R&D, and quality departments to gather material procurement requirements, specifying material specifications (e.g., GaN chip models, PCB parameters), quantities, delivery timelines, and quality standards. In conjunction with the finalized BOM list from R&D, prioritize verifying the technical parameters and supply cycles of core GaN components.

• Control Node 2: Procurement Planning Development   1. Develop monthly procurement plans by integrating existing inventory levels, production schedules, and material loss rates, specifying the quantity required for each material, suppliers, delivery timelines, and purchase prices. For GaN core components, establish a safety stock procurement plan to mitigate industry risks such as TSMC's withdrawal from GaN foundry services and capacity constraints, ensuring stable supply.

• Control Node 3: Procurement Sourcing and Negotiation – For core materials, a sourcing strategy of "prioritizing key suppliers with alternative suppliers as backup" is adopted, involving inquiry-based price comparison, bidding, or competitive negotiations to ensure reasonable procurement prices and controllable quality; for routine materials, centralized procurement is employed to reduce costs, a price database is established, and the entire procurement process is fully documented and traceable.

• Control Node 4: Signing of Procurement Contracts – Enter into formal procurement contracts with suppliers, specifying material specifications, quantities, prices, delivery timelines, quality standards, liability for breach, and intellectual property clauses. Emphasize defining the technical parameters, acceptance criteria, and production capacity guarantees for GaN materials to mitigate risks of patent infringement and supply breaches.

• Implementation Standards: Procurement plans must achieve an accuracy rate ≥98%, aligning with production schedules and inventory levels; core materials should be sourced from at least two key suppliers, while routine materials should be sourced from at least three qualified suppliers; procurement prices shall not exceed market averages; contract terms must be comprehensive and compliant; and the procurement cycle for GaN materials must adhere to industry supply patterns.

• Deliverables: Procurement requirements list, monthly procurement plan, sourcing and comparison report, procurement contract, price database ledger.

Phase 3: Material procurement and warehousing control (pre-storage approval | synchronized procurement and delivery)

Core Objective: Conduct comprehensive inspection and control of all procured materials to prevent nonconforming items from entering inventory, ensure that incoming materials align with procurement contracts and production requirements, and prioritize quality assurance and traceability management for core GaN components.

• Control Node 1: Material Arrival Verification – Upon material receipt, verify the name, specifications, quantity, batch number, and supplier against the procurement contract and delivery note; inspect packaging integrity and label clarity, with particular attention to comparing the batch number, model, and traceability information of GaN chips.

• Control Node 2: Material Inspection Control – Collaborate with the Quality Department (IQC) to conduct graded inspections on incoming materials: GaN core components (chips, substrates, etc.) require 100% comprehensive inspection covering appearance, electrical performance, safety compliance, and traceability information; routine materials undergo sampling inspections at a rate of ≥15%; non-compliant materials must be immediately isolated, labeled, and reported to the supplier for return or replacement, with corresponding updates to the supplier's quality records.

• Control Node 3: Material Inventory Registration – Qualified materials shall be classified and stored, with detailed records including batch number, supplier, storage date, and quantity entered into the inventory ledger. A comprehensive material traceability system is established to enable full-chain tracking from supplier to production utilization, with particular emphasis on enhancing the traceability chain for GaN materials to meet industry compliance requirements.

• Implementation Standards: 100% accuracy rate in material arrival verification; 100% pass rate for GaN core components, and ≥99% pass rate for conventional materials; timely and accurate inventory record maintenance with complete traceability information, free from omissions or errors.

• Deliverables: Material arrival verification sheet, IQC inspection report, non-conforming material handling record, material inventory ledger, and material traceability form.

Phase 4: Storage and Inventory Management (Storage Control | Ongoing)

Key objectives: Standardize material storage management, optimize inventory structure, control storage costs, ensure safe and intact material storage, prevent material loss, moisture damage, or deterioration, achieve dynamic inventory balance, with particular emphasis on safeguarding GaN-sensitive components during storage.

• Control Node 1: Warehouse Environment Management   1. Materials shall be stored by type, specification, and batch. Sensitive components such as GaN chips must be kept in dedicated storage areas with anti-static protection and constant temperature/humidity conditions (15°C–30°C, 40%–60% humidity). Regular materials should be stored in designated zones according to storage requirements, with measures for moisture, dust, and damage prevention; the storage environment shall be inspected regularly.

• Control Node 2: Dynamic Inventory Management   1. Establish an inventory ledger and update stock quantities in real time; conduct regular inventory counts (monthly minor counts and quarterly major counts) to ensure consistency between records and physical stock levels; set safety stock requirements (≥7 days 'consumption for core materials, ≥3 days' consumption for routine materials) to prevent overstocking or shortages; prioritize monitoring GaN material inventories and adjust them according to supply cycles and price fluctuations.

• Control Node 3: Material Withdrawal Management   When the production department withdraws materials, it must complete the withdrawal procedures, verify specifications, quantities, and batches, adhere to the "first-in, first-out" principle, and maintain a withdrawal log. For GaN-sensitive components, proper anti-static treatment records must be documented to ensure traceability during withdrawal and prevent errors or material waste.

• Control Node 4: Inventory Optimization – Conduct regular analysis of inventory data, remove obsolete materials (those stored for over three months without use), and develop disposal plans (e.g., returns, rework, scrapping); optimize inventory structure by adjusting safety stock levels according to production schedules to reduce inventory costs, with particular focus on GaN material inventory management to mitigate obsolescence risks caused by technological advancements.

• Implementation Standards: The storage environment meets material storage requirements; GaN-sensitive components remain undamaged and free from moisture; inventory accuracy ≥99.5%; safety stock compliance rate 100%; obsolete materials are processed promptly with a handling rate ≥95%; material issuance accuracy 100%.

• Deliverables: Warehouse environment inspection records, inventory ledgers, inventory count reports, material requisition records, and obsolete material disposal reports.

Phase 5: Collaborative Control of Production Materials (Production Coordination | Synchronous Production)

Core Objective: To integrate production processes, ensure timely and accurate supply of required materials, optimize material distribution workflows, prevent material shortages or delivery delays, guarantee smooth production operations, and achieve efficient synergy between the supply chain and production stages.

• Control Node 1: Material Distribution Management – Based on the production plan, develop a material distribution schedule to deliver materials precisely to production workshops according to manufacturing processes and batches, specifying delivery times, quantities, and recipients. GaN core components require separate delivery and must be received by designated personnel, with detailed handover records maintained.

• Control Node 2: Material Shortage Alert – Monitors production material consumption and inventory levels in real time; when stock levels fall below the safety threshold, it promptly issues a shortage alert and coordinates with procurement departments and suppliers to ensure timely replenishment. For GaN core components, a dual-warning mechanism is established to anticipate supply risks in advance.

• Control Node 3: Production Material Feedback – Collaborate with the production department to collect feedback on material quality and specifications during manufacturing (e.g., non-conforming materials or specification discrepancies), and promptly relay this information to quality and procurement departments. Coordinate with suppliers for corrective actions or replacements to ensure uninterrupted production. Simultaneously, gather compatibility feedback regarding GaN materials during production to optimize procurement selection.

• Implementation Standards: Material delivery on-time rate ≥99%, delivery accuracy rate 100%; material shortage alert response time ≤2 hours, replenishment delivery on-time rate ≥98%; production material feedback processing closure rate 100%, without affecting production progress.

• Deliverables: Material distribution plan, material handover records, shortage alert reports, production material feedback records, and corrective action reports.

Phase 6: Product Outbound and Logistics Management (Delivery Control | As Needed)

Key objectives: Standardize finished product outbound procedures, optimize the logistics distribution system to ensure timely and secure delivery to customers, track shipping progress, enhance customer delivery experience, control logistics costs, and meet diverse delivery requirements for GaN power supplies.

• Control Node 1: Final Product Outbound Verification   Upon receiving a customer order, verify the product specifications, quantity, batch number, and delivery address to ensure compliance with the order details. Collaborate with the quality department to conduct random inspections of product quality and packaging integrity (with a sampling rate ≥5%). Products may only be released after passing inspection, with particular attention to verifying GaN technical parameters and safety compliance markings.

• Control Node 2: Logistics Service Provider Selection – First, identify logistics service providers with comprehensive qualifications, high operational efficiency, and superior service quality; select the most suitable provider (express delivery, dedicated logistics route, maritime transport, etc.) based on customer requirements (delivery timeframe, cost); then sign a cooperation agreement with the provider specifying delivery timelines, responsibility allocation, and claim settlement terms.

• Control Node 3: Logistics Tracking and Delivery Confirmation   1. After finished products are shipped, monitor logistics progress in real time and promptly provide customers with delivery updates; upon receipt, customers confirm delivery details (quantity, quality, packaging), provide feedback, and complete delivery records; for cross-border delivered GaN products, process customs clearance procedures and compliance reviews to mitigate tariff risks.

• Control Node 4: Logistics Cost Management – Regularly compare pricing and services of different logistics providers to optimize logistics solutions and reduce costs; for bulk deliveries, adopt centralized logistics solutions to enhance efficiency and lower costs, meeting the market demands for GaN power supply batch deliveries.

• Implementation Standards: 100% accuracy in finished product outbound verification; on-time logistics delivery rate ≥98%; 100% customer delivery confirmation rate; logistics costs controlled within budget; 100% compliance rate for cross-border deliveries.

• Deliverables: finished product outbound verification form, logistics delivery note, tracking records, delivery confirmation form, and customer feedback records.

Phase 7: Supply Chain Risk Management and Continuous Optimization (Risk Prevention & Control | Long-term Sustainability)

Key objectives: Identify risks across all supply chain segments; establish a risk early-warning and response mechanism; promptly address supply chain issues; continuously optimize supply chain processes; enhance supply chain stability and competitiveness; with particular focus on mitigating industry-specific risks such as GaN supply chain patent disputes, production capacity fluctuations, and tariff changes.

• Control Node 1: Risk Identification and Early Warning – Regularly identify supply chain risks, including supplier risks (default, insufficient capacity, quality deterioration, patent infringement), material risks (shortages, significant price fluctuations, quality issues), logistics risks (delays, damage, loss), policy risks (tariff changes, updated safety regulations), and industry risks (restructuring in GaN foundry markets, technological advancements). Maintain a risk registry and establish predefined warning thresholds.

• Control Node 2: Risk Response and Management   1. Develop contingency plans for different types of risks:       -When a supplier defaults, activate alternative suppliers;       -During material shortages, coordinate with suppliers to expedite deliveries or adjust production schedules;       -In case of logistics delays, switch logistics providers or modify delivery routes;       -For GaN patent risks, verify suppliers' patent compliance to prevent infringement;       -Promptly address supply chain issues to minimize risk losses.

• Control Node 3: Continuous Supply Chain Optimization   Regularly compile data from all supply chain segments (delivery rate, compliance rate, costs, risk incidence rates), analyze identified issues (e.g., supplier delivery delays, inventory overstocking, excessive logistics costs); optimize supplier structure, procurement processes, warehousing procedures, and logistics solutions to enhance supply chain efficiency, reduce costs, and mitigate risks; monitor industry trends in the GaN supply chain and promptly adjust supply chain strategies to align with IDM adoption and 8-inch wafer production trends.

• Implementation Standards: 100% coverage of supply chain risk identification; response time for risk alerts ≤2 hours; 100% closed-loop rate for risk resolution; at least one annual supply chain process optimization to achieve a minimum 10% improvement in supply chain efficiency and a minimum 5% reduction in costs.

• Deliverables: Supply chain risk register, risk alert report, emergency response plan, records of frequently handled issues, supply chain optimization proposal, and annual supply chain summary report.

III. Supply Chain Control Workflow Diagram (Clear, intuitive, and practical for implementation)

Flowchart Description: Centered around a closed-loop process of "Supplier Management – Procurement Management – Warehouse Entry Control – Inventory Management – Production Coordination – Outbound Delivery – Risk Optimization," this diagram identifies key control points and common workflows at each stage, clarifies the responsibilities of supply chain, production, quality, procurement, and other departments, and aligns with the specific characteristics of the GaN power supply supply chain. It is designed for direct use in supply chain team training and daily operational implementation.

IV. Core Requirements and Considerations for Supply Chain Control

• Supply chain management requires establishing a multi-department collaboration mechanism (covering supply chain, procurement, production, quality control, and marketing), clearly defining each department's responsibilities, holding regular coordination meetings (at least once monthly), ensuring seamless integration across all supply chain stages, and maintaining synchronized communication with GaN suppliers and technical partners.

• Strictly implement the supplier admission and dynamic evaluation system; core suppliers must establish dedicated liaison mechanisms to promptly address issues related to material supply, quality, and production capacity; prioritize maintaining relationships with GaN core suppliers to mitigate risks associated with industry contract manufacturing consolidation.

• The procurement, inspection, storage, and issuance of sensitive components such as GaN chips must strictly comply with specialized requirements including anti-static measures and constant temperature/humidity control. Comprehensive traceability throughout the entire supply chain should be implemented to ensure stable material quality and performance, thereby preventing losses caused by improper storage or handling.

• Inventory management must adhere to the principles of "accounting consistency with physical stock and dynamic balance." Regular inventory counts should be conducted, obsolete materials promptly removed, and inventory structure optimized to prevent overstocking or shortages. Special attention should be given to monitoring GaN material inventories, aligning them with their technical evolution and supply cycle characteristics.

• Supply chain risk management must be routineized, with regular risk identification and updated emergency response plans. Priority should be given to mitigating industry-specific risks such as GaN supply chain patent disputes, production capacity fluctuations, and tariff changes, ensuring supply chain stability and preventing production or delivery disruptions caused by risks.

• All supply chain-related records (including procurement contracts, inspection reports, inventory ledgers, and logistics documents) must be retained throughout the entire process to ensure traceability, with a retention period of no less than 2 years, in compliance with industry standards for regulatory compliance and quality traceability.

• Continuously monitor industry trends in the GaN supply chain (including IDM adoption trends, 8-inch wafer capacity, and changes in supplier landscapes), promptly adjust supply chain strategies, optimize supplier structures and procurement plans, enhance supply chain competitiveness, and align with the company's long-term development strategy.

• Strengthen supply chain cost control by reducing procurement and logistics costs through centralized purchasing, optimized logistics solutions, and price negotiation, while ensuring quality and delivery, thereby enhancing the overall cost-effectiveness of the supply chain.

V. Supporting Implementation Documents

1. Supply Chain Control Gantt Chart (editable in Excel): Clearly defines key control milestones, responsible parties, objectives, and resource allocations for each stage; can be directly copied and pasted for implementation.

2. Supply chain-related record forms: including Supplier Eligibility Review Forms, Procurement Plans, IQC Inspection Reports, Inventory Ledgers, Material Withdrawal Orders, Logistics Tracking Records, and Risk Ledgers, which can be directly utilized for daily supply chain management.

3. Supply Chain Control Procedures: Provide detailed specifications for control processes, operational standards, and role assignments at each stage, tailored to supply chain team training and daily operations, with particular emphasis on defining specialized requirements for GaN material control.

4. Supplier Management Manual: Standardizes supplier admission, classification, evaluation, and rectification procedures; specifies collaboration requirements for key suppliers; aligns with the IDM-driven development trend of the GaN supply chain.

5. Supply Chain Risk Emergency Response Plan: specifies response measures, responsibility allocation, and handling procedures for various supply chain risks, with particular emphasis on specialized risks such as GaN supply chain patents, production capacity, and tariffs;

6. Material Storage Standard Manual: Specifications the storage environment, protective requirements, and requisition procedures for various materials (particularly GaN-sensitive components) to ensure material storage safety.