PSi Technologies Holdings (PSIT)

Suppliers

We have two primary categories of suppliers: equipment suppliers and raw materials suppliers. We periodically purchase equipment through several suppliers to meet our assembly and testing requirements. We have no binding supply agreements with any of our equipment suppliers and orders are placed on an as needed basis.

The principal raw materials used in our assembly process are lead frames, molding compound and gold/aluminum wire.

The pricing of our raw materials is currently dictated by the increases in the prices of commodities, which influence total cost. Copper for instance has significantly increased for the past 3 years. Copper was at $7,115 in 2007, $6,280 per ton in 2006 and $4,585 per ton in 2005 based on London Metal Exchange history. Because copper is the biggest component of our lead frames, a pre-negotiated formula was agreed to with almost all of our lead frame suppliers and reviews for price changes are usually done every quarter. The price of gold wire used for wire bonding changes according to the price of gold in world commodity markets. The price of other commodities used in our raw materials and manufacturing process also changes according to the price of these commodities in world commodity markets. We negotiate with our customers to absorb the impact of these price increases, however, such negotiations may not always be successful. In 2007, we have continued to focus on cost reduction, especially with regard to material and supplier substitution, improvement on material rejection and freight/brokerage reduction. We review weekly the detailed plans defined to support the strategies developed to attain its cost reduction targets.

Crude oil prices were higher by 65.5%%, gold prices were higher by 14.8%, silver prices were higher by 15.8%, copper prices were higher by 37%, and nickel prices were higher by 83.5% in 2007 as compared to 2006. We review and discuss price changes weekly in an internal Cost Review Committee, to develop short-term and long-term strategies and action plans to manage and lower our raw materials costs. For lead frames, we review the prices on a quarterly basis due to the increasing trend in copper prices.

Deliveries of lead frames are based on notice from the Purchasing Department. We provide suppliers with purchase order coverage according to their lead times and also provide them with weekly forecast of demand, which becomes their reference for ordering materials and initiating production. For molding compounds and packaging materials, we have warehousing agreements with two (2) major suppliers wherein each supplier

maintains buffer stocks in the warehouse. We will only require delivery according to dice availability from customer. For spare parts we maintain on the average six (6) major suppliers for our major requirements, each under a consignment agreement.

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We generally purchase raw materials based on non-binding forecasts provided by our customers. Our customers are generally responsible for any unused raw materials that result from a forecast exceeding actual orders. We however may not be successful all the time in enforcing such requirement from our customers. We work closely with our primary raw materials suppliers to insure that materials are available and delivered on time. We are now moving towards supplier partnerships with lead frames and molding compound suppliers, which increases our volume leverage and thus increases the total cost advantage. We work with several mold manufacturers to produce mold tooling for the plastic packaging.

Suppliers

We have two primary categories of suppliers: equipment suppliers and raw materials suppliers. We periodically purchase equipment through several suppliers to meet our assembly and testing requirements. We have no binding supply agreements with any of our equipment suppliers and orders are placed on an as needed basis.

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Table of Contents

The principal raw materials used in our assembly process are lead frames, molding compound and gold/aluminum wire.

The pricing of our raw materials is currently dictated by the increases in the prices of commodities, which influence total cost. Copper for instance has significantly increased for the past 4 years. In 2004, Copper was at $3,144 per ton based on the historical London Metal Exchange. Copper was at $4,585 per ton in 2005 and $6,280 per ton in 2006. Because copper is the biggest component of our lead frames, a pre-negotiated formula was agreed to almost all lead frame suppliers and reviews for price changes is usually done every quarter. The price of gold wire used for wire bonding changes according to the price of gold in world commodity markets. The price of other commodities used in our raw materials and manufacturing process also changes according to the price of these commodities in world commodity markets. We negotiate with our customers to absorb the impact of these price increases, however, such negotiations may not always be successful. In 2007, we have continued to focus on cost reduction, especially with regard to material and supplier substitution, improvement on material rejection and freight/brokerage reduction. We review weekly the detailed plans defined to support the strategies developed to attain its cost reduction targets.

Crude oil prices were higher by 40.5%, gold prices were higher by 25.8%, silver prices were higher by 50.9%, copper prices were higher by 37%, and nickel prices were lower by 158% in 2006 as compared to 2005. We review and discuss price changes weekly in an internal Cost Review Committee, to develop short-term and long-term strategies and action plans to manage and lower our raw materials costs. For lead frames, we review the prices on a quarterly basis due to the increasing trend in copper prices.

Deliveries of lead frames are based on notice from the Purchasing Department. We provide suppliers with purchase order coverage according to their lead times and also provide them with weekly forecast of demand, which becomes their reference for ordering materials and initiating production. For molding compounds and packaging materials, we have warehousing agreements with two (2) major suppliers wherein each supplier maintains buffer stocks in the warehouse. We will only require delivery according to dice availability from customer. For spare parts we maintain six (6) major suppliers, each under a consignment agreement.

We generally purchase raw materials based on non-binding forecasts provided by our customers. Our customers are generally responsible for any unused raw materials that result from a forecast exceeding actual orders. We however may not be successful all the time in enforcing such requirement from our customers. We work closely with our primary raw materials suppliers to insure that materials are available and delivered on time. We are now moving towards supplier partnership with lead frames and molding compound suppliers. Such move increases the volume leverage thus increases the total cost advantage. We work with several mold manufacturers to produce mold tooling for the plastic packaging.

Suppliers

We have two primary categories of suppliers: equipment suppliers and raw materials suppliers. We periodically purchase equipment through several suppliers to meet our assembly and testing requirements. We have no binding supply agreements with any of our equipment suppliers and orders are placed on an as needed basis.

27

Table of Contents

The principal raw materials used in our assembly process are lead frames, molding compound and gold/aluminum wire.

The pricing of our raw materials is currently dictated by the increases in the prices of commodities, which influence total cost. Copper for instance has significantly increased for the past 4 years. In 2004, Copper was at $3,144 per ton based on the historical London Metal Exchange. Copper was at $4,585 per ton in 2005 and $6,280 per ton in 2006. Because copper is the biggest component of our lead frames, a pre-negotiated formula was agreed to almost all lead frame suppliers and reviews for price changes is usually done every quarter. The price of gold wire used for wire bonding changes according to the price of gold in world commodity markets. The price of other commodities used in our raw materials and manufacturing process also changes according to the price of these commodities in world commodity markets. We negotiate with our customers to absorb the impact of these price increases, however, such negotiations may not always be successful. In 2007, we have continued to focus on cost reduction, especially with regard to material and supplier substitution, improvement on material rejection and freight/brokerage reduction. We review weekly the detailed plans defined to support the strategies developed to attain its cost reduction targets.

Crude oil prices were higher by 40.5%, gold prices were higher by 25.8%, silver prices were higher by 50.9%, copper prices were higher by 37%, and nickel prices were lower by 158% in 2006 as compared to 2005. We review and discuss price changes weekly in an internal Cost Review Committee, to develop short-term and long-term strategies and action plans to manage and lower our raw materials costs. For lead frames, we review the prices on a quarterly basis due to the increasing trend in copper prices.

Deliveries of lead frames are based on notice from the Purchasing Department. We provide suppliers with purchase order coverage according to their lead times and also provide them with weekly forecast of demand, which becomes their reference for ordering materials and initiating production. For molding compounds and packaging materials, we have warehousing agreements with two (2) major suppliers wherein each supplier maintains buffer stocks in the warehouse. We will only require delivery according to dice availability from customer. For spare parts we maintain six (6) major suppliers, each under a consignment agreement.

We generally purchase raw materials based on non-binding forecasts provided by our customers. Our customers are generally responsible for any unused raw materials that result from a forecast exceeding actual orders. We however may not be successful all the time in enforcing such requirement from our customers. We work closely with our primary raw materials suppliers to insure that materials are available and delivered on time. We are now moving towards supplier partnership with lead frames and molding compound suppliers. Such move increases the volume leverage thus increases the total cost advantage. We work with several mold manufacturers to produce mold tooling for the plastic packaging.

Suppliers

We have two primary categories of suppliers: equipment suppliers and raw materials suppliers. We periodically purchase equipment through several suppliers to meet our assembly and testing requirements. We

30

Table of Contents

have no binding supply agreements with any of our equipment suppliers and orders are placed on an as needed basis.

The principal raw materials used in our assembly process are leadframes, molding compound and gold/aluminum wire.

The pricing of our raw materials is currently dictated by the increases of commodities, which influence its total cost. Copper for instance has significantly increase for the past 4 years. In 2004, Copper was at $3,144 per ton based on the historical London Metal Exchange. By 2005, Copper was at $4,585 per ton. Since copper is the majority content of our leadframes, a pre-negotiated formula was agreed to almost all leadframe suppliers and reviews for price changes is usually done every quarter. The price of copper has already reached $ 8,619 per ton on certain days in May 2006. The price of the gold wire used for wire bonding changes according to the price of gold in world commodity markets. The price of other commodities used in our raw materials and manufacturing process also changes according to the price of these commodities in world commodity markets. We negotiate with our customers to absorb the impact of these price increases, however, such negotiations may not always be successful. In 2006, we have continued to focus on cost reduction, especially with regard to material and supplier substitution, improvement on material rejection and freight/brokerage reduction. We review weekly the detailed plans defined to support the strategies developed to attain its cost reduction targets.

Crude oil prices were higher by 33.6%, gold prices were higher by 15.4%, silver prices were higher by 26.3%, copper prices were higher by 40.0%, and nickel prices were lower by 11.2% in 2005 as compared to 2004. We review and discuss price changes weekly in an internal Cost Review Committee, to develop short and long-term strategies and action plans to manage and lower our raw materials costs. For leadframes, we review the prices on a quarterly basis due to increasing trend in copper prices.

Deliveries of leadframes are based on notice by the procurement department. We provide suppliers with purchase order coverage according to their leadtimes and also provide them with weekly forecast of demand, which becomes their reference for ordering materials and initiating production. For molding compounds and packaging materials, we now have warehousing agreements with two (2) major suppliers wherein each supplier keeps buffer stocks in the Philippine warehouse according to forecast requirements. We will only require delivery according to dice availability from customer. For spare parts we have six (6) major suppliers, each under a consignment agreement.

We generally purchase raw materials based on the non-binding forecasts provided to us by our customers. Our customers are generally responsible for any unused raw materials that result from a forecast exceeding actual orders. We however may not be successful all the time in enforcing such requirement from our customers. We work closely with our primary raw materials suppliers to insure that materials are available and delivered on time. We are now moving towards supplier partnership with leadframes and molding compound suppliers. Such move increases the volume leverage thus increases the total cost advantage. We work with several mold manufacturers to produce mold tooling for the plastic packaging.

Suppliers

We have two primary categories of suppliers: equipment suppliers and raw materials suppliers. We periodically purchase equipment through several suppliers to meet our assembly and testing requirements. We

30

Table of Contents

have no binding supply agreements with any of our equipment suppliers and orders are placed on an as needed basis.

The principal raw materials used in our assembly process are leadframes, molding compound and gold/aluminum wire.

The pricing of our raw materials is currently dictated by the increases of commodities, which influence its total cost. Copper for instance has significantly increase for the past 4 years. In 2004, Copper was at $3,144 per ton based on the historical London Metal Exchange. By 2005, Copper was at $4,585 per ton. Since copper is the majority content of our leadframes, a pre-negotiated formula was agreed to almost all leadframe suppliers and reviews for price changes is usually done every quarter. The price of copper has already reached $ 8,619 per ton on certain days in May 2006. The price of the gold wire used for wire bonding changes according to the price of gold in world commodity markets. The price of other commodities used in our raw materials and manufacturing process also changes according to the price of these commodities in world commodity markets. We negotiate with our customers to absorb the impact of these price increases, however, such negotiations may not always be successful. In 2006, we have continued to focus on cost reduction, especially with regard to material and supplier substitution, improvement on material rejection and freight/brokerage reduction. We review weekly the detailed plans defined to support the strategies developed to attain its cost reduction targets.

Crude oil prices were higher by 33.6%, gold prices were higher by 15.4%, silver prices were higher by 26.3%, copper prices were higher by 40.0%, and nickel prices were lower by 11.2% in 2005 as compared to 2004. We review and discuss price changes weekly in an internal Cost Review Committee, to develop short and long-term strategies and action plans to manage and lower our raw materials costs. For leadframes, we review the prices on a quarterly basis due to increasing trend in copper prices.

Deliveries of leadframes are based on notice by the procurement department. We provide suppliers with purchase order coverage according to their leadtimes and also provide them with weekly forecast of demand, which becomes their reference for ordering materials and initiating production. For molding compounds and packaging materials, we now have warehousing agreements with two (2) major suppliers wherein each supplier keeps buffer stocks in the Philippine warehouse according to forecast requirements. We will only require delivery according to dice availability from customer. For spare parts we have six (6) major suppliers, each under a consignment agreement.

We generally purchase raw materials based on the non-binding forecasts provided to us by our customers. Our customers are generally responsible for any unused raw materials that result from a forecast exceeding actual orders. We however may not be successful all the time in enforcing such requirement from our customers. We work closely with our primary raw materials suppliers to insure that materials are available and delivered on time. We are now moving towards supplier partnership with leadframes and molding compound suppliers. Such move increases the volume leverage thus increases the total cost advantage. We work with several mold manufacturers to produce mold tooling for the plastic packaging.

Suppliers

We have two primary categories of suppliers: equipment suppliers and raw materials suppliers. We periodically purchase equipment through several suppliers to meet our assembly and testing requirements. We have no binding supply agreements with any of our equipment suppliers and orders are placed on an as needed basis.

The principal raw materials used in our assembly process are leadframes, molding compound and gold/aluminum wire.

The pricing of our raw materials is negotiated on a yearly basis based on our volume demands. We are offered price discounts for volume purchases. The price of the gold wire used for wire bonding changes according to the price of gold in world commodity markets. The price of copper used in lead frames changes according to the price of copper on the London Metal Exchange. The price of other commodities used in our raw materials and manufacturing process also changes according to the price of these commodities in world commodity markets. In 2004, the Reuters/Jefferies CRB Spot Index (an index that tracks the prices of certain commodities) increased by 3.3%. Crude oil prices were higher by 33.6%, gold prices were higher by 6.9%, silver prices were higher by 20.5%, copper prices were higher by 49.0%, and nickel prices were higher by 7.4% in 2004 as compared to 2003. We review and discuss price changes weekly in an internal Cost Review Committee, to develop short and long-term strategies and action plans to manage and lower our raw materials costs.

Deliveries of leadframes are based on notice by the procurement department. We provide suppliers with purchase order coverage according to their leadtimes and also provide them with weekly forecast of demand, which becomes their reference for ordering materials and initiating production. For molding compounds and packaging materials, we now have warehousing agreements with two (2) major suppliers wherein each supplier keeps buffer stocks in the Philippine warehouse according to forecast requirements. We will only require delivery according to dice availability from customer. For spare parts we have six (6) major suppliers, each under a consignment agreement.

We generally purchase raw materials based on the non-binding forecasts provided to us by our customers. Our customers are generally responsible for any unused raw materials that result from a forecast exceeding actual orders. We however may not be successful all the time in enforcing such requirement from our customers. We work closely with our primary raw materials suppliers to insure that materials are available and delivered on time. We are not dependent on any one supplier for our leadframes, aluminum wire or molding compound. We work with several mold manufacturers to produce mold tooling for the plastic packaging.

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Table of Contents

Suppliers

We have two primary categories of suppliers: equipment suppliers and raw materials suppliers. We periodically purchase equipment through several suppliers to meet our assembly and testing requirements. We have no binding supply agreements with any of our equipment suppliers and orders are placed on an as needed basis.

The principal raw materials used in our assembly process are leadframes, molding compound and gold/aluminum wire.

The pricing of our raw materials is negotiated on a yearly basis based on our volume demands. We are offered price discounts for volume purchases. The price of the gold wire used for wire bonding changes according to the price of gold in world commodity markets. The price of copper used in lead frames changes according to the price of copper on the London Metal Exchange. The price of other commodities used in our raw materials and manufacturing process also changes according to the price of these commodities in world commodity markets. In 2004, the Reuters/Jefferies CRB Spot Index (an index that tracks the prices of certain commodities) increased by 3.3%. Crude oil prices were higher by 33.6%, gold prices were higher by 6.9%, silver prices were higher by 20.5%, copper prices were higher by 49.0%, and nickel prices were higher by 7.4% in 2004 as compared to 2003. We review and discuss price changes weekly in an internal Cost Review Committee, to develop short and long-term strategies and action plans to manage and lower our raw materials costs.

Deliveries of leadframes are based on notice by the procurement department. We provide suppliers with purchase order coverage according to their leadtimes and also provide them with weekly forecast of demand, which becomes their reference for ordering materials and initiating production. For molding compounds and packaging materials, we now have warehousing agreements with two (2) major suppliers wherein each supplier keeps buffer stocks in the Philippine warehouse according to forecast requirements. We will only require delivery according to dice availability from customer. For spare parts we have six (6) major suppliers, each under a consignment agreement.

We generally purchase raw materials based on the non-binding forecasts provided to us by our customers. Our customers are generally responsible for any unused raw materials that result from a forecast exceeding actual orders. We however may not be successful all the time in enforcing such requirement from our customers. We work closely with our primary raw materials suppliers to insure that materials are available and delivered on time. We are not dependent on any one supplier for our leadframes, aluminum wire or molding compound. We work with several mold manufacturers to produce mold tooling for the plastic packaging.

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