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Commentary: Are you ready for RoHS?
-- Electronic Business, 1/27/2006
Stephen Marlow, Executive Vice President
With the deadline for implementation of the European Community's Directive on the Restriction of Hazardous Substances (RoHS) approaching fast on July 1, the electronics industry is grappling with the details associated with a complex transition to Lead(Pb)-Free1 and RoHS-Compatible2 manufacturing.
The six substances restricted by the EU's RoHS Directive3, along with similar legislation in the U.S. and other regions, will affect the way that semiconductor suppliers and their customers do business. Today, most of the technical hurdles of developing products that are Lead(Pb)-Free and that do not contain more than the maximum concentration values of other restricted substances have been solved. However, many issues remain regarding product tracking, reporting compliance, and inventory balance to ensure that the right products are available when needed. Some manufacturers, particularly global suppliers, are transitioning to Lead(Pb)-Free and RoHS-Compatible manufacturing, while others don’t need to.
The RoHS regulations apply primarily to widely used personal computers and consumer electronics devices. Some other types of electronics, including telecommunications equipment, are exempted, at least initially. As a result, some manufacturers need Lead(Pb)-Free components, while others may prefer to continue using components that contain lead(Pb). To meet these needs, some components must be duplicated in lead(Pb)-contained and Lead(Pb)-Free versions.
Furthermore, to be RoHS-Compatible, a device must not contain more than the specified maximum threshold level of any of the six regulated substances or fall within the scope of an exemption. These substances are cadmium, hexavalent chromium, lead(Pb), mercury, polybrominated biphenyls and polybrominated diphenylethers.
In semiconductor manufacturing, lead(Pb) is the most widely used of the banned substances, so much of the emphasis has been on developing Lead(Pb)-Free products. In addition, lead(Pb)-based solder has been widely used in the electronics industry for the last 50 years with great success and high reliability. The transition to Lead(Pb)-Free plating alternatives and Lead(Pb)-Free solder requires additional qualification tests to ensure manufacturability and long-term reliability.
When you manufacture a million parts a day down one line, efficiency can be optimized. When you have to break that and make half a million of two different parts, it isn’t as efficient. That also results in two different channels of inventory flow and it becomes essential to make sure you have the right parts available to manufacturers at the right time.
During the transition, there may be oversupply in some areas and shortages in others. We're talking about a huge potential discontinuity that can only be mitigated by accurate forecasting and close communication throughout the supply chain.
If we don't have an understanding about the specific technologies required at a given time among suppliers, the companies who own the brands and the people in the middle who are manufacturing the products, there will be gaps in order flow, forecast and backlog coverage.
The impact of the extra inventory runs can be felt all the way from capital investment to material investment to capacity management, and to manufacturing. Furthermore, the double run rate not only adds cost, but confusion. The situation is exacerbated by the complexity of today’s distribution and contract manufacturing. Without absolutely clear, brilliant channels of communication, we run the risk of having too much of the wrong product at the wrong place at the wrong time.
To quantify the magnitude of this issue, U.S. semiconductor industry consumption is approximately $10 billion per quarter. If there is a 10 percent miss in inventory planning related to the RoHS transition, $1 billion of capital per quarter could be tied up in non-performing assets, excess inventories and lost business opportunities.
If we want a smooth transition, then we need frequent and open communication as well as accurate forecasting among all industry participants (OEM, ODM, EMS, distributors, suppliers and compliance consultants).
(Go to www.rohs.toshiba.com for frequently asked questions about the RoHS Directive and other related information.)
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1Lead(Pb)-Free4 - Toshiba Semiconductor Company defines “Lead(Pb)-Free” products as those containing no more than 0.1 percent lead(Pb) by weight in Homogenous Materials. This does not mean that Toshiba semiconductor products labeled "Lead(Pb)-Free" are entirely free of lead(Pb).
2RoHS-Compatible4 - Toshiba Semiconductor Company defines “RoHS-Compatible” semiconductor products as products that either (i) contain no more than a maximum concentration value of 0.1% by weight in Homogeneous Materials for lead, mercury, hexavalent chromium, polybrominated biphenyls (PBBs) and polybrominated diphenyl (PBDEs) and no more than 0.01% by weight in Homogenous Materials for cadmium; or (ii) fall within one of the stated exemptions set forth in the Annex to the RoHS Directive3
3RoHS Directive4 – Toshiba Semiconductor Company defines the “RoHS Directive” as the Directive 2002/95/EC of the European Parliament and of the Council of 27 January 2003 on the restriction of the use of certain hazardous substances in electrical and electronic equipment.
4Legal Note. These definitions are not intended to interpret the RoHS Directive or any other law or regulation and do not constitute legal advice. The RoHS Directive itself should always be read and understood (as it constitutes the law), in contrast with the information contained herein, which is intended to be informative but has no legal authority. You should refer to the RoHS Directive itself for a full statement of the legal requirements and in the case of any doubt take independent advice, including your own legal advice. The RoHS Directive may be revised from time to time, so users should take care to keep themselves informed.
