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Thursday, July 20, 2006

Beyond ROHS: the greening of global markets

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For the past three years, the electronics industry has been eyeing this month as the time that the European Union's ROHS (reduction-of-hazardous-substances) directive was supposed to take effect for some electronic products. Barring any last-minute legal maneuvers or postponements, electronic products bound for the multibillion-dollar European consumer market will need to satisfy the directive's limitations on six hazardous materials: lead, mercury, cadmium, hexavalent chromium, polybrominated biphenyls, and polybrominated biphenyl ethers. The directive mandates that electronic products that do not comply with the directive's restrictions, calling for the elimination of these six substances, will face removal from the market and their manufacturers will have to pay fines.

Predictions of what will happen this month in Europe as the deadline passes run the gamut from business as usual with a smooth transition to a brave, new, lead-free world to major lawsuits halting the imposition of the directive. Some scenarios even predict a nightmare for European officials as they attempt to establish documentation requirements and enforce them on the fly. Regardless of the short-term outcome, the world of electronics will never go back to its "pregreen" state; rather, EU ROHS is just the first of many government-imposed regulations of environmental substances.

China passed its own version of ROHS in February, with an effective date of March 1, 2007. The law specifies the same six substances as the European ROHS and then throws in a wild card: "other toxic or hazard substances or elements set by the State." China may not only regulate more substances but also allow a different amount of those substances. " 'Lead-free' in the EU ROHS means it has less than 1000 ppm of lead in it," says Greg Roberts, marketing vice president of EMA, a value-added reseller of Cadence software. "Other countries selling products into China will be subject to China's ROHS directive, which may have a lower allowable lead content. A product that could be lead-free or ROHS-compliant for Europe may not be compliant in China." (For some suggestions on how to make your designs globally compliant, see sidebar "Seven tips for the brave new world of 'green' regulations.")

The EU has not yet spelled out what kind of a documentation system it expects or what is sufficient for a manufacturer to prove it and its suppliers are in full compliance. It will determine what constitutes adequate documentation during these early months of the ROHS implementation, with companies involved in early test cases serving as guinea pigs. However, China's ROHS apparently will be more hands-on, with companies possibly having to prove their compliance upfront by undergoing testing at labs in China.

Some manufacturers currently track their EU ROHS parts' compliance with a simple spreadsheet listing each part and a yes/no check box under ROHS compliance. Is this enough documentation to satisfy the EU's directive? "It is until somebody challenges you," says EMA's Roberts. "The directive says you have 30 days to compile all the documentation on every component in your product line, including the traceability of the information. It requires materials declaration for everything in your product all the way down to the resistors, including the box it's in and the labels on it."

The OEM that the product packing lists is liable for compliance for the entire system. For example, if you purchase a power supply for your design and the manufacturer claims that it complies with the directive, you as the system manufacturer are still responsible for the liability of that entire assembly. "Many component vendors just give you a certificate and say 'yes, we're compliant,'" says Keith Hopwood, vice president of marketing for Phihong USA. "I say, 'show me.'"

A simple yes/no spreadsheet probably will not survive an EU ROHS challenge, and it has the additional drawback of being unable to adapt as regions impose different regulations. A robust system will go beyond yes/no EU ROHS compliance and track the actual parts-per-million count for all environmentally sensitive substances. However, it may be difficult to achieve that goal in the allotted time frame, cautions Eric Larkin, chief technology officer for Arena Solutions, a provider of Web-based PLM (product-life-cycle management). "If you believe that you're going to be able to get a full substance-level breakdown for every single component on your pc board within the 2006 to 2007 time frame, I don't see that happening," he says. "We know of only four component manufacturers that are looking at publishing the detailed substance-level breakdown."

A survey of customers by Toshiba's Discrete Products Division corroborates Larkin's view. "Lack of material content information is one of the biggest hurdles that many companies are facing right now," says Cynthia Pham, senior quality-assurance engineer for Toshiba.

Despite the well-publicized ROHS deadline of July 1, 2006, regional preparedness varies widely. According to Jim Smith, senior vice president of warehouse and distribution worldwide at Avnet Logistics, EU countries' ROHS readiness is well ahead of the Americas', which in turn is ahead of the Asian countries. The reason that the EU is so far ahead is that the directive is the region's own regulation. Also, although European market share might account for only15% of US vendors' market share, it accounts for at least half for most European OEMs. A more subtle reason is that Europeans have seen a well-publicized example of the EU's will to enforce environmental regulations. In 2001, the Dutch government blocked the sales of 1.3 million Sony PlayStations in the EU because the systems' cables violated an EU environmental directive limiting the amount of cadmium (Reference 3). The incident demonstrates that even large, well-known brands are subject to the regulations. Although Sony's supplier provided the noncompliant cables, Sony incurred the penalties and loss of revenue.

What can trigger an EU ROHS challenge? Companies that have incurred the expense and time of complying with EU ROHS use their compliance as a competitive advantage against less green competitors. They can file a claim, triggering an EU audit of another company's system. Compliant vendors see this whistle-blowing as a fair tactic against noncompliant competitors.

Another reason that Asian manufacturers may lag behind in ROHS compliance is that they are waiting to see what China's ROHS initiative comprises. China's directive may not be significantly stricter than the EU ROHS because one of China's strengths is its competitive market pricing, and the Chinese government may be loath to put that advantage at risk. Regardless of China's eventual stance, you can expect the industry standard to evolve from the regulations of those regions with significant markets and that impose the strictest regulations.

Component manufacturers cannot justify multiple production lines for parts with the same functions. This reluctance or inability to make both green and nongreen versions has important implications for companies that assume that the EU ROHS doesn't affect them—either because they don't sell into the EU market or because they have an exemption. Expect to see longer leadtimes, part shortages, and rising prices for noncompliant parts; ultimately, manufacturers will consign these parts to end-of-life status.

For example, medical and military devices are exempt from EU ROHS compliance and can continue to use leaded solder. "Defense vendors might have a problem before too long, because, once a supplier consigns a part to end-of-life status, raises the price, or extends the leadtime, that has huge ramifications in the supply chain," says Avnet's Smith. "If I'm the manufacturer of a part, I have to decide: If I can't make money doing both, which do I eliminate?" As EMA's Roberts points out, "The supply chain is the real driver in industry, not legislation."

ROHS has a companion directive, WEEE (waste electrical and electronics equipment), which specifies the marking of electrical and electronic products to facilitate their recycling. Again, determining how to make disposal and recycling more efficient goes beyond EU countries: Japan has had such a regulation, the HARL (Home Appliances Recycling Law), in place since 2001, and California is moving toward a similar law, with other states likely to follow. HARL and WEEE both require manufacturers to be responsible for accepting and recycling their products. However, the Japanese law allows for the consumer to pay a separate fee for recycling, whereas WEEE requires that the regional price of the equipment include the fee. This new additional cost to the manufacturer will drive designers to allow for the most effective means of recycling their products. Phihong USA's Hopgood gives an example the company encountered: "Under WEEE, if capacitors are over a certain size, they have to be removed from the board before recycling," he says. "Designers will want to avoid using parts that trigger recycling exceptions, if possible."

ROHS is not an anomaly. Arena Solution's Larkin gives this perspective: "Go back to Upton Sinclair's The Jungle 100 years ago. When he wrote his novel about the Chicago slaughterhouses, the public became aware that there was a compelling public interest in regulating the quality and preparation of food and medicine. That realization led to the creation of the Food and Drug Administration and the regulatory environment under which both the food and medical industry work today." Just as today, we take for granted that modern producers provide food and medicine with regulations and laws, so too, will electronic-equipment manufacturing evolve into a regulated process. And the best, most efficient product designs will be ready and able to adapt to these regulations.

Source EDN, July 20, 2006

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