Coronavirus Outbreak Has Led to Global Shortage and Price Gouging of Surgical Masks • Resilinc Identified 213 Suppliers and 491 Sites Available in Database

SUPPLY Coronavirus CHAIN Outbreak RISK The case for planning, preparedness REPORT and proactive action

2nd in a Series of Conference Calls UPDATED MARCH 4, 2020

CONFIDENTIAL – FOR YOUR EYES ONLY

Moderated by:

Jigar Shah Sr. Director of Marketing Resilinc

Bindiya Vakil Founder and CEO Resilinc

© 2020 Resilinc Corporation. All rights reserved. 3 Agenda • Background Assessing • Notes for SC professionals • Current Updates • Just the Numbers: COVID-19 Planning • Mapped: worldwide exposure • Global impact by industry • Supply chain mapped: suppliers, sites, & parts Preparedness • Recommendations • Scenarios and Planning Horizons • What Resilinc is doing • What we suggest Action • Q & A

Background

• Nearly 100,000 infected with almost 3,300 fatalities Dec 31, ’19 China reports pneumonia-like cases in Wuhan to WHO China authorities reported signs of pneumonia-like outbreak in Jan 4, ’20 • Similar to SARS and MERS (2012), also the common cold, Wuhan but has spread wider Jan 9, ‘20 WHO identifies virus as a coronavirus (similar to SARS) Jan 22, ‘20 All travel in/out and intra-province transit within Wuhan is at a • Known cases are due to direct, second and third level standstill contact i.e. spreading through touching infected surfaces Jan 30, ‘20 WHO designates Coronavirus as a Global Public Health Emergency • 1 Person can spread to 2.2 people (R-naught) compared to Feb 4, ’20 South Korea: Hyundai and Kai suspend manufacturing Spanish Flu which had an R-naught of 1.8 operations Feb 11, ’20 WHO official names Coronavirus as COVID-19 • Current fatality rate 3.4%, was 2% before March (this is Feb 18, ’20 Global Economy: China will decline by an est. 4.5% in possibly lower, because mild cases not known) Q1Y20 and Japan projected 6.3% annual decline • MERS (35%) Feb 22, ‘20 South Korea: Samsung, LG Electronics, LG Display, Toray • SARS (10-14%) Group and other companies pause manufacturing operations • 1918 Spanish Flu (2.5%) Feb 24, ’20 South Korea Raises Threat Alert Level; Turkey and Pakistan Close Border with Iran as Covid-19 Continues to Spread • Flu (0.1%) • Swine Flu (0.02%) Mar 2, ‘20 WHO Calls Coronavirus in South Korea, Italy, Iran and Japan Its ‘Greatest Concern’ • No specific treatment options for Coronaviruses (CDC) Mar 2, ‘20 US supply chains and ports under strain from coronavirus: warnings of extended disruptions as heighten focus on China’s outsized role in global sourcing

• Phase 1: A virus in animals has caused no known World Health Organization’s infections in humans. Phases of Pandemic • Phase 2: An animal flu virus has caused infection in humans.

• Phase 3: Sporadic cases or small clusters of disease occur in humans. Human-to-human transmission, if any, is insufficient to cause community-level outbreaks.

• Phase 4: The risk for a pandemic is greatly increased but not certain.

• Phase 5: Spread of disease between humans is occurring in more than one country of one WHO region.

Source: https://www.webmd.com/cold-and-flu/what-are-epidemics-pandemics-outbreaks#2 • Phase 6: Community-level outbreaks are in at least one additional country in a different WHO region from phase 5 - a global pandemic is under way.

• Media coverage • Frequent media reports of new cases, fatalities and spread • Media coverage of government response measures triggers a chain reaction • 1.9 trillion links referencing coronavirus (and growing) • Individual response to news • People staying home, avoiding workplaces, keeping children home, curbing essential travel • Hoarding of medication and essential supplies can cause supply chain demand – supply gaps and signification local and global upheaval • Government action • Large scale and widespread shut down of cities or affected towns can disrupt global supply chains far away from affected areas, cause extended transportation delays, capacity shortages, supply constraints and factory downtime or allocations. • Strong Market reaction • Stock market investors reacting to concerning news growing in scale can start selling stocks to switch to safer investment options, affecting stock prices in the near term, thereby affecting companies’ ability to raise capital. • Medium term, this can lead to accelerated layoffs, profit warnings, bankruptcies, supplier failure.

• Part shortages: 75% By end of March, all • Workforce outages: 55% could be Red, if shut • Transportation disruptions: 70% down & quarantines expand through March • Cannot deliver to customers: 22% • Capacity under-utilized due to all above reasons: 33% Heavy reliance on inventory and allocation of constrained parts through mid-March

Auto, High Tech & Industrial, Medical Pharma- Life Consumer Consumer Semiconductor Healthcare Current Observations Heavy Devices Sciences Goods electronics Machinery FG Inventory buffers reduced Lead times getting pushed out PO deliveries delayed Supplier allocations Lines down Customers on allocation Revenue Lost

Current 78% Companies in China report that there is not enough staff to resume work 3%-7% Workers able to return to work in affected areas 25% Businesses operating normally in Central Sichuan province

6-Month Outlook: • Workers not paid by employers during shutdown (or partially paid) will leave • Some workers permanently displaced – will find better paying jobs at larger companies • Some jobs will be lost to layoffs • Larger, cash rich companies will be able to secure workers by paying premiums • Smaller companies will struggle to fill positions and restart operations

Workforce disruptions expected to continue well into next two quarters

Logistics Companies: A Mixed Outlook

Near term risks: 6-month outlook for shippers: • Drop in ocean freight traffic  Lost revenue • Transfer of shipments to air freight for expediting shipments • Inability to secure staff to resume • Near term low fuel costs will help offset loading/unloading and processing some shipping costs, but expected to rise operations  inability to take advantage of through recovery near-term opportunities • Demand for higher capacity in coming • Current reduced pricing could get locked months on key lanes could cause into long term contracts  some shipping companies to reduce capacity on less lines could experience financial distress profitable lanes • Logistics pricing expected to be volatile in the medium term to fuel recovery • Capacity constraints expected on all modes once recovery resumes

• Types of losses companies are incurring: Financial losses include lost revenue, premiums paid to secure raw materials and parts, emergency labor costs, expedited freight costs, cash burn due to factory downtime, employee monitoring and protection costs ______• Property policies usually cover physical loss or damage to insured property resulting from a covered risk. • Site has to suffer physical damage • Risk has to be covered peril  loss of profits because of people not able to come to work, or government travel restrictions generally does not trigger property insurance coverage. • Contingent Business Interruption (CBI) requires covered direct physical damage to property of a named customer or supplier. Coronavirus has not caused physical damage to property, so financial losses would generally not be covered. • Trade disruption insurance (TDI) covers loss of earnings, unforeseen costs and contractual penalties that result from disrupted trade flows. • Generally TDI does not require that there be a direct physical loss to goods or their conveyances. • Could provide some level of protection to companies

Source: https://www.willistowerswatson.com/en-US/Insights/2020/02/would-insurance-policies-cover-losses-related-to-coronavirus © 2020 Resilinc Corporation. All rights reserved. 12 Small Company Financial Distress Risk is Very High

Current situation: • Fall in demand – some lost forever (e.g. closed restaurants, canceled trade shows, public gatherings, travel plans etc.) • Companies that can supply parts have found customer factories are shut down and cannot receive shipments, therefore, cannot collect payment • Cash remains tied up in FG, collections at standstill, payments continue to pile up.

65% of small companies in China have 2 months of cash

What we recommend: • Invest in robust supplier financial monitoring (focus on private companies) • Calculate revenue impact of a supplier • Establish an emergency fund to prop up weak supplier with high revenue impact • Set aside budget to secure life-time buy inventory where supplier failure is highly likely • Don’t just monitor China based suppliers – all small companies are potentially at risk because of the evolving outbreak and interconnected supply chain

Just the Numbers: COVID-19

• 2019 manufacturing GDP from Asia was more than $7.1T • Driving manufacturing in Asia: China’s 2019 manufacturing GDP was 58.3% ($4.1T) • Japan and South Korea is rounds out the top 3 respectively

• Japan’s manufacturing GDP is more than $1T and accounts for 14.7% of the Asian market

• South Korea’s manufacturing GDP is nearly $500B and accounts for 6.3%

Supplier Sites vs. Disrupted Sites (Percentage / Country) China South Korea Japan Taiwan Supplier Sites 32.7% 10.5% 13.5% 11% Across Asia (%)

Supplier Sites 10.8% 11.2% 5%-10%* 6%-9%* Disrupted (%)

*Estimated data due to indirect event disruptions due to coronavirus All data provided by Resilinc on March 2, 2020

Sourced: http://www.business-demographics.com/Portals/0/Files/Manufacturing%20Trend%20Data%20190723.pdf © 2020 Resilinc Corporation. All rights reserved. 15 Wuhan and the surrounding cities are critical to global supply chains

Restricted areas Industries Affected • Chibi, Hubei, China • Aerospace • Xiantao, Hubei, China • Automotive Wuhan, Huanggang, • Zhijiang, Hubei, China • High Tech • General Ezhou region • Qianjiang, Hubei, China Manufacturing • Xianning, Hubei, China • Consumer Goods • Jingzhou, Hubei, China • Consumer Electronics • Xiaogan, Hubei, China • Food & Beverage • Huangshi, Hubei, China • Furnishing Goods • Enshi, Hubei, China • Healthcare • Lichuan, Jiangxi, China • Life Sciences First 10 of 50 cities on • Oil & Gas lockdown • Tobacco and E- cigarettes • Packaging • Industrial Chemicals • Power & Energy

© 2020 Resilinc Corporation. All rights reserved. SPECIAL NOTATION: 16 Impacted Regions: Chibi, Xiantao, Zhijiang, Qianjiang, Xianning, Jingzhou, China Xiaogan, Huangshi, Enshi, Hubei, Lichuan, Jiangxi Impacted Sites / Parts Sourced from Resilinc Discovery Data Services

Suppliers Sites within China by Industry Healthcare, Biotechnology & Pharmaceutical

Consumer Electronics 6% 6% 36,000+ PARTS 24% Automotive 7% General Manufacturing

8% 9,000+ SITES Power & Energy

8% Others 23% 1,500+ SUPPLIERS Consumer Goods Unique Tier-1/ sub-tier suppliers 17% Aerospace & Defence

Centers for Disease Control and Prevention Korea

Electronic Manufacturing, Semiconductors, Consumer Electronics products related parts

RESISTORS & CAPICITORS 23.27%

MECHANICAL 16.88%

ELECTRICAL 8.77%

PACKAGING BOXES 7.56%

MISC. METAL/PLASTIC COMPONENTS 95,442 7.53%

OUTSOURCING AUTO 5.43% Components & Subassemblies

SEMICONDUCTOR 5.36% sourced from lock-down and quarantine areas SSD/MOD MATERIAL 4.77%

CERAMIC GLASS 4.56%

HARDWARE 3.85%

OUTSOURCING HMM 3.45%

HEAT SINKS 3.17%

CONNECTORS 2.83%

ELECTRONICS 2.58%

Exports from China overall touch all industries

1. 20% drop in ocean traffic reported from China

2. Ships that have left China ports have not been full, in some cases 20-35% of capacity Exports from China as a whole in 2017 Not just lockdown areas

China Export Tree map by Product (2017) from Harvard Atlas of Economic Complexity © 2020 Resilinc Corporation. All rights reserved. SPECIAL NOTATION: 19 Impacted Regions: Daegu, Ulsan, Busan, Gyeongsangnam, Incheon, Seoul, South Korea Gyeonggi-do Impacted Sites / Parts Sourced from Resilinc Discovery Data Services

Others, 1% 2,000+ PARTS High Tech, 10%

1,000+ SITES Automotive, 86%

Health care, 3%

500+ SUPPLIERSUnique Tier-1/ sub-tier suppliers

South Korea Export Treemap by Product (2014) from Harvard Atlas of Economic Complexity Sourced from Centers for Disease Control and Prevention Korea © 2020 Resilinc Corporation. All rights reserved. 20 Categories in High Tech, Semiconductor and Consumer Electronics Sourced from S. Korea (Overall)

Electronic Manufacturing, Semiconductors, Consumer Electronics products related parts

ELECTRICAL 17.40%

RESISTORS 15.60%

CAPACITORS 11.00%

MAGNETICS 8.20%

PACKAGING BOXES 8.10%

SSD/MOD MATERIAL 8.10%

HARDWARE 6.00%

MISC. METAL/PLASTIC 5.60%

HEAT SINKS 5.40%

CONNECTORS 5.00% 56,220 Components & PASSIVES(CAP/RES) 3.30% Subassemblies

COMMODITY 2.30%

SEMICONDUCTOR 2.20%

INDUCTORS & TRANSFORMERS 1.80% South Korea Export Tree map by Product (2017) from Harvard Atlas of Economic Complexity © 2020 Resilinc Corporation. All rights reserved. 21 Rest of Asia Potential Impacted Sites / Parts Sourced from Resilinc Discovery Data Services Sites supplying to impacted sites in China S. Korea 9,000+ PARTS SPECIAL NOTATION: • Japan 4,500+ SITES • Taiwan • Singapore • Malaysia SUPPLIERS • Hong Kong 1,000+ Unique Tier-1/ sub-tier suppliers • Vietnam • Thailand

Centers for Disease Control and Prevention Korea

Other 6% Life Sciences 9% 3,800+ PARTS High Tech 38%

1,750+ SITES Bio-Pharma 23%

1,000+ SUPPLIERSUnique Tier-1/ sub-tier suppliers

Health care 24%

Source: http://www.salute.gov.it/nuovocoronavirus

INDUSTRY REVIEW: High Tech, Semiconductor, Consumer Electronics Life Sciences, Healthcare, BioPharma, Med Devices, Food products related part

Home appliance Food & Beverage 44 Audio 5% Life Sciences 1,862 Automotive 13% 170 Components & Info Tech Subassemblies Memory 14,368 302 Part/Materials

422

Health care 56% 924 Bio-Pharma 26%

Source: http://www.salute.gov.it/nuovocoronavirus

• The coronavirus outbreak has led to global shortage and price gouging of Surgical Masks • Resilinc identified 213 suppliers and 491 sites available in database

United States of… 189 Japan 36 Assessment Summary China 28 Canada 26 France 21 • 213 Supplier Singapore 16 United Kingdom 15 • 491 Sites Worldwide Germany 15 • 80 Sub-tier Suppliers Malaysia 14 • 318 Sub-tier Suppliers Sites Mexico 12 • 1073 Parts Mapped on Tier 1 Sites Taiwan… 11 India 9 Thailand 7 Brazil 7 Australia 6

Recommendations

Key Stats Confirmed Cases 94,261 Total Recovered 51,039 (54%) Total Deaths 3,214 (3.4%)

Source https://gisanddata.maps.arcgis.com/apps/opsdashboard/ind ex.html#/bda7594740fd40299423467b48e9ecf6

© 2020 Resilinc Corporation. All rights reserved. Source: https://gisanddata.maps.arcgis.com/apps/opsdashboard/index.html#/bda7594740fd40299423467b48e9ecf6 Impact planning for the coming weeks months 28

WORST CASE SIMILAR TO H1N1* BEST CASE (Months until vaccine or (3-6-month disruption) (Resolves within weeks with effective treatment is identified) more data)

Cases Cases Cases Fatalities Fatalities Fatalities

Total 575,400 deaths

Jan Jan Jan Jan Jan Feb Feb Feb Jan Jan Jan Jan Jan Feb Feb Feb Jan Jan Jan Jan Jan Feb Feb Feb 20 22 26 28 30 4 10 13 20 22 26 28 30 4 10 13 20 22 26 28 30 4 10 13

Mortality rate, recovery data and vaccine availability will determine how long it plays out. If people recover, or an effective treatment or vaccine becomes available then it will be under control. Vaccine timeline historically, 6-9 months.

Supply Chain High Near Term High for near term High Near Term Disruption Severe Medium Term High for Medium term Tapering down for medium term potential

HIGH for Near term in all scenarios due to global containment measures now being activated Unlike Mexico, China is the world’s manufacturer of everything

© 2020 Resilinc Corporation. All rights reserved. * H1N1 is not a Coronavirus, but a Flu virus. The similarity noted here to generate key learnings from H1N1 outbreak, that are applicable to this development 29 Recovery Data: The key indicator for easing restrictions

~ 100,000 cases, ~55,000 recovered: 54% MILD: Mild Symptoms (Cough, Sore throat)

SEVERE: Shortness of breath, Pneumonia, Low Oxygen Recovery rate can be much Higher 44,672 because mild cases go unreported or Confirmed cases CRITICAL: Respiratory failure, septic shock, organ unanalyzed! dysfunction Deaths (1023 patients with Critical symptoms)

In the next 3-4 weeks, more information about patient recovery is expected. China CDC Study analyzed: If strong, it is possible citywide lock- 72,314 patient records down or widespread quarantines 44,672 (61.8%) confirmed cases (similar to China) might not by 16,186 (22.4%) suspected cases implemented by other countries 10,567 (14.6%) clinically diagnosed cases (Hubei) 889 (1.2%) asymptomatic cases

Fatality Rate: 2.2% (of 44,672)

© 2020 Resilinc Corporation. All rights reserved. Source: http://weekly.chinacdc.cn/en/article/id/e53946e2-c6c4-41e9-9a9b-fea8db1a8f51 https://www.nytimes.com/2020/02/27/world/asia/coronavirus-treament-recovery.html 30 Where are you on the maturity spectrum to manage this event?

• >10 years since H1N1, 8 years since MERS, 13 years since SARS… • Most organizations’ have not updated pandemic plans • Many organizations are completely unprepared and have no plan • People have moved on and no one is aware of what the plan is

Pandemic plan documented. Annual refresh in place Suppliers’ pandemic plan known Internal Pandemic No information about Documented plan Ongoing communications in place planning, refresh and Supplier Pandemic Where No refresh process Annual training program training in place planning you are No documented plan in place Table-top exercises Pandemic and Business Continuity Plan Maturity Spectrum Unprepared Uncoordinated Ready but Exposed Scrambling for Best in class What Unknown unknowns Highly vulnerable. Its Orchestrated response in any you can Last minute business as usual and then scrambling will be Supplier impact will come as a surprise. Last scenario. expect it is panic when multiple required. minute heroics to scramble for parts/capacity You may still be impacted, but suppliers begin pushing may be required you will find a coordinated, orders or increasing lead efficient and PREDICTABLE times response from your team

A Practical Approach to Managing Sourcing Risk

High Revenue • Monitor suppliers 24x7 Impact • Insure: Name supplier the CBI policy • Monitor suppliers 24x7 • Qualify or Develop alternate source • Split business to both suppliers (75%-25%) • Qualify alternate site with same supplier, if second sourcing is not • Map supplier’s sites to ensure they’re not in the same region feasible • Map sub-tiers to identify where tier 2 is the same source • Map supply chain to part origin and identify sub-tiers • Insure: Name supplier the Corporate Contingent Business • “Encourage” suppliers to invest in robust risk monitoring and Interruption (CBI) insurance policy proactive mitigation program

Revenue impact of losing a Supplier or Part • Monitor suppliers 24x7 • Monitor suppliers for major shifts or events like corporate • Map supply chain to part origin restructuring, etc. • Identify sub-tier suppliers and sites • Map supplier’s sites to ensure they’re not in the same region • Qualify an alternate site with the same supplier • Map sub-tiers to identify where tier 2 is the same source • “Encourage” suppliers to invest in robust risk monitoring and proactive mitigation program Low Revenue Impact

Dual/Multi-Sourced Single Sourced Sole Sourced

© 2020 Resilinc Corporation. All rights reserved. 32 Sites in China Lockdown Zones and their connection to Global OEMs across multiple industries Common Tier 2/3 Parts from Lockdown Regions Consumer High Tech Automotive Medical Device Electronics OEM OEM OEM Resistor 590

Capacitor 199

Thermal 60 Contract Tier 1 Automotive Manufacturer Module Sites PCBA 53 Sites

Plastics & Resin 50

Integrated Circuits 44

Sheetmetal 32 Component Sub-Assembly System Assembly Sites Suppliers Memory 25

Hardware 20

Cable 16 Semiconductor Sites Electricals 10

Tier 2/3 failure point, used by many higher tier suppliers Crystals & 7 Oscillators

Commonly Used 2nd and 3rd Tier Suppliers in High Tech & Semiconductor Supply Chain • Many companies have primary sites in China or Japan, alternate site in ASE AMKOR MOLEX South Korea (not necessarily in 3M TAIYO YUDEN currently quarantined areas) NXP FUJIFILM • Most commonly used companies STATS CHIP PAC SPIL SAINT GOBAIN across High Tech, semiconductor SHIN ETSU EVONICS industries, have some manufacturing TOSHIBA TE CONNECTIVITY presence in South Korea SAMSUNG LAIRD DELTA • Capacity utilization is high, therefore HENKEL SK HYNIX any disruption at one site can affect AVERY DENNISON AMPHENOL performance at other sites. DOW CORNING

• Anticipate  Protect: Develop and model likely scenarios, generate cross- functional playbooks for simulated scenarios • Look outside your own organization: Don’t forget, your suppliers are part of your plan. Pandemic Readiness Survey in Resilinc’s Survey Library • Communicate: Proactively notify leadership, customers and board about how the organization is preparing. Anticipating worst case and planning builds confidence. • Train: Set clear triggers for action, communicate with stakeholders (develop RACI, governance model, stakeholder touchpoints) • Connect the dots: Ensure plans by various functional groups are in sync, hand- offs and dependencies are identified and incorporated into playbooks • Joint planning with suppliers: Assess your suppliers’ pandemic planning preparedness measures, connect the dots to your own. Collaborate on realistic expectations. • Continuously monitor and adjust: Create internal updates, messaging and communicate cadence and discipline

• Continuous Monitoring: EventWatch is continuously monitoring new cases/fatalities/developments/town closures • Mapping suppliers to region: • Our Multi-Tier Mapping customers have already identified their suppliers, sites and sub-tier supplier sites in Wuhan and other lockdown areas • Our Part-Site Mapping customers have already triangulated down to parts originating or moving through the region. • This is based on supplier provided information in our Discovery Data Services Platform • Supplier Impact confirmation: Our RiskShield and Multi-Tier Customers have already sent out impact confirmation through Triangulate Resilinc to their suppliers. Suppliers have begun impact communicating and confirming impact directly in Resilinc. • Value added Research: Resilinc provided all Customers the scenarios to model and prepare for, and recommendations and guidance to support leadership presentations about the response, as documented here (above and beyond the EventWatch alerts) • Pandemic Readiness Supplier assessment available for customers to launch to suppliers in Survey library. Suppliers can simply approve new customers’ requests to view their response. Reduced effort for suppliers, fast Prepare response for customers! suppliers

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