Applied Optoelectronics (AAOI) SDConflict minerals disclosure

Exhibit 1.01

Applied Optoelectronics, Inc.

Conflict Minerals Report

For The Year Ended December 31, 2021

This report for the year ended December 31, 2021 is presented to comply with Rule 13p-1 under the Securities Exchange Act of 1934, as amended (the “Rule”). The Rule was adopted by the Securities and Exchange Commission (“SEC”) to implement reporting and disclosure requirements related to conflict minerals as directed by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The Rule imposes certain reporting obligations on SEC registrants whose manufactured products contain Conflict Minerals which are necessary to the functionality or production of their products. Conflict Minerals are defined as cassiterite, columbite-tantalite, gold, wolframite, and their derivatives, which under current guidance are limited to tin, tantalum, and tungsten (“3Ts”). These requirements apply to registrants whatever the geographic origin of the Conflict Minerals and whether or not they fund armed conflict.

This report has been prepared by the management of Applied Optoelectronics, Inc. (herein referred to as “AOI,” the “Company,” “we,” “us,” or “our”). The information includes the activities of all majority-owned subsidiaries.

AOI is a leading, vertically integrated provider of fiber-optic networking products, primarily for four networking end-markets: internet data center, cable television, or CATV, and fiber-to-the-home, or FTTH, and telecom. We design and manufacture a range of optical communications products at varying levels of integration, from components, subassemblies and modules to complete turn-key equipment. Conflict Minerals are necessary to the functionality or production of semiconductor and module products.

In designing products for our customers, we begin with the fundamental building blocks of lasers and laser components, which require the use of metals, including the 3Ts and gold (“3TG”). From these foundational products, we design and manufacture a wide range of products to meet our customers’ needs and specifications, and such products differ from each other by their end market, intended use and level of integration. We are primarily focused on the higher-performance segments within all four of our target markets, which increasingly demand faster connectivity and innovation. Therefore, the majority of our semiconductor and module products, as well as components that are part of those products, require the use of Conflict Minerals.

The supply chain for 3TG consists of many supplier chain tiers. Before reaching AOI’s direct suppliers, 3TG will go from mines, to traders, exporters, smelters or refiners (referred to collectively as smelters), alloy producers and component manufacturers, and sometimes intermediate suppliers. Since one or more of the 3TG metals are contained in the majority of AOI’s products, a significant portion of AOI’s suppliers also use these metals in their products. AOI sources products and components from approximately 1184 first tier suppliers globally. First tier suppliers are those suppliers that AOI selected and with whom we have a direct business relationship. These first tier suppliers select their suppliers (second tier suppliers), which in turn have their own group of suppliers (third tier), and so on. AOI works with and through its first tier suppliers to investigate the deeper levels of our supply chain, in order to determine the origin of 3TG metals contained in AOI products.

Because of our size, the complexity of our products, and the depth, breadth, and constant evolution of our supply chain, it is difficult to identify actors upstream from our direct suppliers. Accordingly, we participate in a number of industry-wide initiatives as described below.

AOI is committed to working with our global supply chain to ensure compliance with the SEC’s conflict minerals rules. We have established a conflict minerals compliance program that is designed to follow the framework established by the Organization for Economic Co-operation and Development (“OECD”).

Pursuant to our conflict minerals compliance program, our supplier contracts include conflict mineral due diligence and reporting requirements. Any direct sourcing by AOI of tin, tungsten, tantalum and gold is sourced with the goal that it only be from Democratic Republic of Congo Conflict-Free sources, as defined in the SEC’s conflict minerals rule. As we become aware of instances where minerals in our supply chain potentially finance armed groups, as defined in the SEC’s conflict minerals rule, we work with our suppliers to find alternate conflict-free sources.

Our policy is publicly available on our website at http://ao-inc.com/about-our-company/global-compliance.

We conducted a survey of our supply chain by adopting the template developed by the Responsible Minerals Initiative (“RMI”) Conflict Minerals Reporting Template (“CMRT”). The CMRT was developed to facilitate disclosure and communication of information regarding smelters that provide material to a company’s supply chain. It includes questions regarding a company’s conflict-free policy, engagement with its direct suppliers, and a listing of the smelters the company and its suppliers use. In addition, the template contains questions about the origin of conflict minerals included in their products, as well as supplier due diligence. Written instructions and recorded training illustrating the use of the tool is available on RBA’s website. The CMRT is being used by many companies in their due diligence processes related to conflict minerals.

AOI does not engage directly with mines or smelters and thus AOI does not have information on 3TG country of origin. We rely on information from the Responsible Minerals Assurance Process (“RMAP”), a voluntary initiative managed by the RMI in which an independent third party audits the procurement activities of a smelter or refiner to determine, with reasonable confidence that the minerals it processes originated from conflict-free sources. Upon completion of a successful audit, the smelter or refiner is designated by the RMI as “Compliant.”

AOI has established management systems and due diligence measures as a basis for supply-chain management and disclosure compliance relating to the Conflict Minerals necessary to the functionality or production of our products and required to be reported under the Rule.

Our due diligence measures have been designed to conform, in all material respects, to the five-step framework in the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas (OECD Guidance). The design of AOI’s Conflict Mineral Process includes the following:

Step #1: Establish Strong Company Management Systems

Step #2: Identify and Assess Risk in the Supply Chain

Step #3: Design and Implement a Strategy to Respond to Identified Risks

Step #4: Carry Out Independent Third-Party Audit of Supply Chain Due Diligence at Identified Points in the Supply Chain

Step #5: Report on Supply Chain Due Diligence

Annually, AOI requests CMRTs from our supply chain. It is the responsibility of our supply chain to provide AOI with a CMRT and to ensure their supply chains are conflict free. Once AOI receives the completed CMRT, AOI will review the submission for completeness and consistency. AOI will then compare smelter data, made available by the RMI, concerning the country of origin. If a vendor submits a CMRT that does not contain a non RMI-Compliant smelter, then no further action will be taken by AOI.

For vendors that do not submit a CMRT, AOI will follow up with the vendor and continue to request a completed CMRT. If the vendor does not submit a CMRT after multiple requests, then corrective actions, up to and including disengaging in trade, will be taken.

For vendors that submit a CMRT containing a non RMI-Compliant smelter, AOI will request that the vendor take corrective actions and become conflict free. If the vendor does not satisfactorily implement steps to become conflict free, then corrective actions, up to and including disengaging in trade, will be taken.

AOI works with and through its first tier suppliers to investigate the deeper levels of our supply chain, in an effort to determine the origin of 3TG metals contained in AOI products.

The results of our due diligence indicates that the sources of Conflict Minerals are (1) from recycled or scrap materials, (2) from within the Democratic Republic of the Congo or adjoining countries (the “Covered Countries”), or (3) from outside the Covered Countries. From the responses we have received from our direct suppliers from our supply chain survey for 2020, 242 smelters and refiners were listed within their supply chains. All 239 have been designated as of December 31, 2021 as Active or Compliant under the RMAP. The complete list of smelters and refiners is attached in Exhibit A.

AOI does not engage directly with mines or smelters and thus AOI does not have information on 3TG country of origin.

As part of AOI’s commitment to Conflict Minerals due diligence, AOI has taken, or will take, the following steps to further mitigate the risk that our Conflict Minerals benefit armed groups in the Covered Countries:

Statements relating to due diligence improvements are forward-looking in nature and are based on our management’s current expectations or beliefs. Forward-looking statements can also be identified by words such as “expects,” “plans,” “intends,” “will,” “may,” and similar terms. These forward-looking statements are not a guarantee of performance and are subject to a number of uncertainties and other factors that may be outside of our control and that could cause actual events to differ materially from those expressed or implied by the statements made herein. Subsequent events may affect AOI’s future determinations under Rule 13p-1.

This Conflict Minerals Report and our Conflict Minerals Policy are available on our web site at http://ao-inc.com/about-our-company/global-compliance.

Exhibit A:

List of Smelters and Refiners