Cover Story
Green Services Expand To Meet Rising OEM Demand
News
Flextronics to Acquire Flex Circuit House
Solectron Selling Microtechnology Unit
Tabulated Q2 and 6-month financial results
Plexus and SRI in Medical Alliance
Last Word
EMS providers, especially the largest ones, have been working on lead-free assembly for a while, in some cases five or six years. But as the July 1, 2006 deadline for RoHS compliance nears, most OEMs are not yet ready for lead-free manufacturing. What they need now is an assessment of where their products stand with respect to the RoHS directive (Restriction on the Use of Certain Hazardous Substances), which bans lead and five other hazardous materials from nonexempt products to be sold in the European Union. That analysis will allow them decide whether to let a product reach end of life naturally, replace it early with a new product designed for RoHS, or convert the existing design to comply with the directive. Resource-limited OEMs must then find a way to perform product conversions in advance of the deadline as well as design-for-environment work on new products.
Tier-one EMS providers are stepping in to help their customers with such front-end tasks that must be completed before products start flowing through the lead-free processes supplied by these providers (see also April 2003, p.1-3; May 2003, p. 3-4). As a result, most, if not all, tier-one providers have expanded their suite of green services as OEMs start gearing up to meet the July 2006 deadline. For example, Celestica has introduced an end-to-end offering called Green Services. Jabil Circuit has wrapped its environmental solutions around the name Environmental Sound Execution. Solectron has placed its front-to-back green offering under the umbrella of Design for Environment Services and Solutions. And Sanmina-SCI tells MMI that it will soon release a statement describing its green offering, while Flextronics also offers a lead-free soldering program that presumably includes other green services.
Think the above labels are just marketing gimmicks. Think again. Tier-one providers are responding to a fast-growing demand for help with RoHS. “I think people a year ago or even a half a year ago were asking what is it. Now the questions are how do I do some specific conversion things,” said Dan Henes, GM of engineering services at Celestica. The company estimates it is seeing exponential growth quarter to quarter in requests for its green services. “It’s probably double the number of customers that are talking to us today than even just two months ago,” said Henes.
What’s all the fuss about? A recent interpretation of RoHS has serious implications. An EU committee has ruled that RoHS compliance applies at the level of a “homogenous material,” in essence a discrete material such as bonding wire, leadframe and epoxy, each serving as part of an IC component. This means that compliance must be achieved even within a component. “Just one non-compliant component would technically render the product ineligible [for sale in the EU],” said Jennifer Shepherd, senior manager of environmental affairs at Solectron.
For Solectron, BOM scrubs and conversions are the green service currently with the greatest demand. “I would safely say that 80 [or] 90% of our customers are in this phase,” said Art Morgan, senior manager of technical marketing at Solectron. “This is a bubble. This is going to be a temporary thing to do BOM scrubs because ultimately you want to be able to design in the right components from day one.”
A BOM analysis allows an OEM to assess products for RoHS compliance by providing status on all the components in the BOM. At Solectron, for example, components are coded green for compliant, red for non-compliant, and yellow for non-compliant with a future date given for compliance. Such analysis can also be done at the AVL level.
In order to do a BOM analysis, a provider must have developed a component database with fields for environmental compliance. Solectron’s database tracks 40 different chemical weights to satisfy customers with environmental concerns beyond RoHS. The database includes other information such as component weight, temperature and moisture sensitivity ratings, and lead finishes as well as links to datasheets and supplier survey responses.
Not everyone uses the same method for building the database. At Solectron, component engineers review and manually enter the data, but the company subcontracts lower level activities such as phoning suppliers. The company reports that on average it takes about six phone calls to get the proper data back from a supplier. Celestica’s process auto-loads supplier-provided data into the company’s component database. Prior to data transfer, there is a validation step to ensure the database remains accurate. This step would detect errors such as incorrect unit of measure or typos.
But it takes more than the snapshot offered by a database to determine which portions of a BOM will be OK and which ones are likely to create compliance problems later on. “If you add that [database] to knowing where your supplier roadmaps are, where they’re heading, you have a pretty good indication as to where they likely will be a quarter from now and a couple of quarters from now,” said Celestica’s Henes.
For OEMs with product designs in need of conversion for RoHS compliance, providers such as Celestica and Solectron are offering the requisite engineering services. Obviously, these services involve designing in compliant components and doing the necessary re-spins. Celestica is promoting the ability to factor into its design offering the company's lead-free experience in such areas as reliability.
“We’ve had a number of our customers on the OEM base actually come back and say that given the large undertaking, because they have so many products, they are likely to look for their partners to help them in terms of transitioning their existing product set,” said Joe Scala, Celestica director of operations, responsible for RoHS/WEEE global implementation.
Providers are also incorporating NPI services into their green offerings. These services include prototype builds and design maturity testing. Solectron believes its lead-free knowledge will pay big dividends in this area as customers grapple with reliability issues associated with lead-free processing.
Other green services are cropping up as well. Celestica, for example, has announced an environmental compliance acceleration program, a consulting service for OEMs that get a late start in RoHS compliance. On the post-manufacturing side, a sister directive, WEEE (Waste Electrical and Electronic Equipment), opens up service opportunities in reverse logistics.
Tier-one providers are leading the way in offering a menu of green services that prepare OEMs for RoHS compliance. The rest of the EMS industry should take note.
Flextronics (Singapore) continues to add capabilities to its end-to-end offering. Through its Multek subsidiary, Flextronics intends to acquire Sheldahl (Northfield, MN), a supplier of flexible circuits and electronic materials. The world’s largest EMS provider also plans to make an equity investment in frog design (Sunnyvale, CA), a firm with a history of accomplishments in industrial design.
In building up design capabilities, Flextronics has made other design investments, some of which have not been made public. One of the latest investments would be the acquisition of Future Software (Chennai, India), if a report from the Internet edition of The Hindu Business Line is correct.
Multek will acquire privately held Sheldahl in a stock-for-stock deal, based on an agreement between the two companies. Sheldahl manufactures flexible printed circuitry, technical materials such as flat cable tape, and printed circuit materials including Novaclad laminate for flexible circuits. Part of Sheldahl’s intellectual property portfolio, the patented Novaclad process is used to make adhesiveless laminates for fine-line circuitry. The company sells primarily to the automotive and datacom markets.
Flextronics presented this deal as combining Multek’s rigid PCB capabilities with Sheldahl’s flexible circuit capabilities in order to offer a much wider and complete product portfolio to customers of both companies. Customers, of course, will include parent company Flextronics.
“Our customers require products and solutions that are increasingly more complex with dense features, and at a very competitive price structure. With the acquisition of Sheldahl, we are better positioned to fulfill this need as there are many synergies between the two companies. Today’s announcement will also enhance our ability to provide a complete interconnect offering that enables us to develop new products and to serve new and existing markets such as automotive, cell phones, antennas, RFID tags, smart cards, personal communication devices, printers and many others,” stated Werner Widmann, president of Multek.
Within the PCB industry, flexible circuits “happen to be the fastest growing sector in that industry. And we haven’t been in it,” said Michael Marks, Flextronics’ CEO, in an August conference call.
“We are increasingly using flexible circuits in products we’re designing. And it’s not a robust industry segment from a supplier standpoint. It’s a robust segment from a demand standpoint,” said Marks. He reported that flexible circuit users are worried about the supply of that product. “That’s not as strong a supply base as in the rigid circuit board (segment). And we’re going to be using a lot of that product in camera modules and printer modules and those kinds of products,” he said.
“There are number of other uses of those [flexible circuits] in industrial, automotive and medical and some consumer segments that we’re not in like camcorders and those kinds of products. So it should give us some very nice diversification as well,” said Marks.
Sheldahl employs about 450 people and maintains some 300,000 ft2 of manufacturing space in Northfield, MN, the Philippines and Mexico. Company CEO Benoit Pouliquen, told the Star Tribune of Minneapolis that Sheldahl contracts for another 450 workers. According to the newspaper, nearly all of Sheldhal’s employees work in Northfield.
The acquisition is projected to add about $80 million to Flextronics’ annual sales. Excluding synergies and amortization, it is expected to increase Flextronics’ annual earnings per diluted share by at least one cent, including the incremental shares issued for the merger. Subject to customary conditions and regulatory approvals, the deal is slated to close at the end of August.
In 2002, Sheldahl filed for reorganization under Chapter 11 of the US Bankruptcy Code. A bankruptcy court approved the sale of substantially all of Sheldahl’s continuing business assets to a company formed by its three largest shareholders, Molex, Morgenthaler Partners and Ampersand Ventures. The purchase price was about $18 million. At that point, Sheldahl had consolidated operations into its Northfield location. The Star Tribune quoted Pouliquen as saying that Sheldahl has been profitable since it emerged as a new company.
One of the things Sheldahl gets out of this deal is access to Multek’s capabilities in China.
Flextronics has made no secret of its aim to add design capabilities. One of its recent moves in the design area is to buy an interest in frog design, a firm that stands out in the annals of industrial design. The firm supplied product design for the Sony Trinitron TV and the Apple Macintosh computer, to name two well-known examples. Besides doing the industrial design and mechanical engineering for product design, frog offers design services on the digital side. For instance, the 1999 launch of Dell’s e-commerce website utilized frog’s design expertise. Digital design services consist of software user-interface design, Web and e-commerce development, and media and sound design. Branding services are also part of frog’s offering.
BusinessWeek reported that Flextronics is paying almost $30 million for a majority stake in the global design firm with 170 employees. In addition to its Sunnyvale headquarters, frog has offices in San Francisco, CA; New York, NY; Austin, TX; and Herrenberg, Germany. According to the magazine, frog’s sales were around $35 million last year.
“In today’s crowded consumer markets, where low price and increased functionality is the rule, industrial design is a key competitive differentiator,” said Michael Marks, in a statement released by frog design. “By investing in frog design, we will be able to expand our front-end creative capabilities within our design services group and offer OEM customers a more strategic approach to their product creation process.”
In addition, Marks told analysts this month, “We have some industrial design capabilities in the company. We’ve been doing some work with frog with some customers who want both design and manufacturing in actually some new market segments. Frog was looking for a manufacturer. We were looking to beef up the industrial design.”
Hartmut Esslinger, a legend in industrial design, founded what is now frog design in 1969. He serves as the firm’s co-CEO. “Upon completion of the investment, we look forward to increasing our value to clients by adding global manufacturing solutions to our fully integrated strategic design services,” stated Esslinger.
One of the firm’s latest achievements is the frog-designed Disney Dream Desk PC Set.
The proposed investment is subject to regulatory approval.
Flextronics has made some other design moves involving smaller groups that do not warrant a press release, Marks reported to analysts. “But we are filling in capabilities in a number of markets, and we think what this is going to do is drive a much higher profitability margin overall,” he added.
One of those moves might be the acquisition of Future Software, an Indian supplier of communication software services and products. The Internet edition of an Indian publication, The Hindu Business Line, reported that Flextronics signed a deal to acquire Future, but a Flextronics spokesperson had nothing to say regarding Future.
The Indian firm offers expertise in internetworking, broadband, telecom, wireless, network management, and embedded systems. Future operates subsidiaries in San Jose, CA, for the North American market and in London, UK, for the European market. Among the customers listed by Future are Agere Systems, Alcatel and China’s Huwaei Technologies.
If true, the Future deal follows Flextronics’ purchase of a controlling interest in another Indian provider of software products and services – Hughes Software Systems (June, p.1).
Back to TOC
Neways Electronics International N.V. (Son, The Netherlands) has purchased an EMS business, Stork Electronics, from Dutch conglomerate Stork N.V. (Naarden, The Netherlands).
In 2003, Stork Electronics generated revenue of about 60 million euros and as of May had 250 full-time employees. Philips Medical Systems and ASML are important customers of the Stork unit. Neways obtained financing totaling about 15 million euros to make this purchase.
According to Neways, the Stork unit is strong in the development and engineering of electronic components and systems. The acquisition will give Neways a boost in the further development of these capabilities, which the company regards as strategic. In addition, the acquisition will enable Neways to expand its European network and to serve its customers more effectively and on a broader scale, says the company. By integrating Stock Electronics, Neways will also gain synergies in business development, purchasing and overhead.
Yet another benefit arises because Stork outsources some portion of its production to third parties. This deal will allow Neways to transfer that outsourced production to its own facilities in Eastern Europe and China.
Stork Electronics was part of the Stork Industrial Components group, which included two other operating companies. Stork sold one of those companies, Stork Industrial Modules, to VDL Group. The remaining company was folded into another Stork group, thereby eliminating the Industrial Components group. Stork said the sale is in line with its strategy to create a more focused company.
The deal closed last month, and Stork Electronics is being consolidated as of June 1. Neways expects the acquisition to contribute immediately to Neways’ EPS.
Neways was an MMI Top 50 EMS provider for 2003 with revenue of 137 million euros. The company has operating companies in the Netherlands, Germany, Slovakia, Hungary and China. Focusing on lower volumes, Neways supplies microelectronics and cable systems in addition to a range of EMS offerings.
Investments made…SigmaTron International (Elk Grove Village, IL) has increased its stake in affiliate SMT Unlimited (Fremont, CA) to just over 80% on a fully diluted basis. SigmaTron bought the interest of outside investors in the affiliate and its general partner. SigmaTron upped its ownership in SMTU from 42.5%, the figure reported in SigmaTron’s SEC form 10K. According to a statement from SigmaTron, SMTU’s managers have indicated their willingness to remain with the EMS operation, which resides in 26,000 ft2 in Fremont. SMTU specializes in NPI and engineering, while offering four SMT production lines….Singapore-listed provider Jurong Technologies has raised its stake in Taiwan-listed Min Aik Technologies from 15.8% to 20.0%. “Through this alliance, we are co-developing new customers and businesses in ODM and box-build products,” stated Jurong’s president, Lee Lok Fui. This 20% ownership effectively makes Min Aik, a manufacturer of precision components, an associate company of Jurong Technologies.
Solectron (Milpitas, CA) has signed a definitive agreement to sell its Microtechnology business to Francisco Partners (Menlo Park, CA), a private equity firm that already has an ownership stake in a business divested by Solectron. The Microtechnology business produces frequency control products and hybrid microcircuits. Terms were not disclosed. The transaction is expected to close in Q3.
Francisco Partners was part of the group that bought SMART Modular Technologies from Solectron earlier this year (Feb., p. 5; April, p. 5).
When this latest divestiture is counted, Solectron has sold or found a buyer for all seven noncore businesses that the provider had planned to sell (Dec. 2003, p. 5).
Meanwhile, Solectron has completed the sale of its Force Computers embedded computing business to Motorola (June, p. 5). Terms were not released in this case either.
New programs…Boeing has awarded Sanmina-SCI (San Jose, CA) a contract to develop the aircraft interface unit for the Longbow Apache Manned/Unmanned Common Architecture Program. This avionics subsystem serves as the interface device between the aircraft’s system components and a high-speed data bus. The interface unit developed under this contract for Boeing’s Mesa, AZ, business unit will become the prototype for interface units that will be produced by Sanmina-SCI under the Apache Block III upgrade program. Sanmina-SCI has 16 years of experience supporting the US Army’s Apache attack helicopter….Implant Sciences (Wakefield, MA) has selected Jabil Circuit (St. Petersburg, FL) to manufacture Implant’s line of explosives detection products. Production is taking place at Jabil’s Billerica, MA, facility….Under a new multiyear supply agreement, SMTC (Markham, Ontario, Canada) and Ingenico SA (Puteaux, France) have expanded their relationship, allowing SMTC to handle manufacturing and worldwide distribution of certain global product platforms such as Ingenico’s next-generation multilane/retail terminals. Also under the agreement, which extends through 2006, Ingenico named SMTC one of its primary EMS partners. SMTC will work closely with Ingenico’s North American Design Center to support early manufacturing involvement and production launch activities as well as participating in Ingenico’s design-to-cost initiatives. SMTC had been supplying Ingenico’s North American operations....Fabrinet (Pathumthani, Thailand) has signed a three-year volume supply agreement with Northlight Optronics (Jarfalla, Sweden). In this program, Fabrinet will provide module packaging and manufacture of optical subassemblies for Northlight’s longwave optical transmitters and receivers. The company’s standard butterfly and new TOSA/ROSA products will be assembled in Fabrinet’s newly completed facility in Bangkok….PartnerTech (Malmö, Sweden) will become a principal supplier of the products of Sweden’s CashGuard, a developer of cash handling systems. The program, which will involve both NPI and production, will boost PartnerTech’s annual sales by some SEK 100 million (about $13.2 million)….Reptron Electronics (Tampa, FL) and Clear-Com Communication Systems (Emeryville, CA), a new customer, have entered into a multimillion-dollar relationship, whereby Reptron will build 150 different subassemblies and PCBs to support Clear-Com’s wired and wireless intercom products....Integrated Microelectronics, Inc. (IMI of Laguna, Philippines) has started shipping cell-phone LCD modules for Japan’s Seiko Epson….SmartPill Diagnostics (Buffalo, NY) has selected Teledyne Microelectronic Technologies (Los Angeles, CA) to integrate and package two key sensor components for the SmartPill Capsule, an ingestible medical device that measures GI tract parameters….General Dynamics Armament and Technical Products awarded LaBarge (St. Louis, MO) a $3-million contract to manufacture controllers that are part of a fire control system used in the US Navy’s Aegis combat system against air, surface and submarine threats. LaBarge has produced Aegis controllers in Huntsville, AR, for nearly a decade….CirTran (Salt Lake City, UT) through its Asia subsidiary has landed orders to supply Wal-Mart with a total of 10,000 units of a consumer product for the fitness industry. The provider has also received a $1.47-million order for 35,000 units of a new fitness machine through its Asia subsidiary.
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Tier-one providers are not the only ones adding capacity in Asia. The growing EMS market in the region has led lesser known Asian providers in the second and third tiers to expand as well.
Take Venture (Singapore), a top-10 provider that has expanded operations in more than one location. With its initial facility in Shanghai, China, at full capacity, Venture has commenced operations in a second building there. What’s more, the provider added a 40,000-ft2 facility in the Shanghai Free Trade Zone to support the growth of its e-fulfillment business there.
In Malaysia, Venture has purchased for S$12 million the 400,000-ft2 facility that it had been leasing since the end of 2002. The company cited its Johore hub as an excellent performer. Furthermore, Venture is currently exploring a suitable location for capacity expansion in Malaysia.
Venture has also expanded its Singapore operations. It added 30,000 ft2 in Singapore for its test and measurement business. The provider also co-located e-fulfillment businesses into an expanded facility.
But Venture’s expansion activities have not been confined to Asia. In the US, Venture has expanded the scope of its operations to include repair services, systems integration and box build. The company has also leased an additional 75,000-ft2 facility in Southern California. The expanded capacity and scope of activities in Southern California are part of Venture’s effort to strengthen its US cluster.
Venture is following a strategy to create clusters of EMS, ODM and e-fulfillment activities that can be combined in a synergistic manner. At present, the provider is forming three clusters of excellence covering Asia, Europe and North America.
All told, the provider added S$12 million worth of machinery and equipment in the first half of 2004. Venture expects further investment in the second half of the year.
For the first half of 2004, Venture reported a net profit of S$111.2 million on revenue of S$1.38 billion. Revenue was flat versus last year, but increased 3% in US dollar terms. Q2 revenue of S$683.7 million was down by 8% from a year earlier. Venture expects its business activity in the second half will pick up significantly.
Then there’s PCA Technology (Singapore), an Asian provider that MMI has not covered before. Singapore-listed PCA expects to double its capital expenditure to S$17.5 million for its fiscal year ending February 2005. Of that amount, S$17 million is being used to increase production in Malaysia. The company’s Malaysian subsidiary will spend up to S$9 million on adding SMT capacity to accommodate increased demand in telecom and consumer electronics.
PCA is investing another S$8 million in its new Chip-On-Board (COB) assembly division, which offers die attach, wire bonding and encapsulation processes for connecting semiconductor chips directly to a PCB. The COB division started commercial scale production for portable storage devices in late July.
Based on robust market demand, increased production capacity as well as improved capabilities, PCA expects its profit after tax for the half year ended Aug. 31 to exceed the after-tax profit for all of the last fiscal year. For that year, fiscal 2004, the provider earned a profit of S$2.0 million after tax on revenue of S$42.3 million.
Established in 1990, PCA employs about 1600 people. PCA’s plants total four, and they are located in Singapore, Malaysia and China (Suzhou). Services include PCB assembly, box build as well as after-sales repair.
Another Singapore-listed provider, Jurong Technologies, has plans for expanding into China. The company has established a new subsidiary in Tianjin, China, and expects to set up a new plant there.
For the first half of 2004, Jurong’s revenue soared by 124% to S$461.0 million, while net profit went up by 67% to S$18.7 million. Q2 revenue climbed 158% from a year earlier to S$256.7 million.
Finally, yet another Singapore-listed provider, PCI Limited is also investing in China. The company started up a plant in Shanghai last year and is expanding the facility. When the expansion is complete in September, the floor area will be 2800 m2.
For the fiscal year ended June 30, PCI reported revenue of (US)$143.8 million, up 72% from the previous year. Net profit amounted to $9.2 million, compared with $4.5 million in the prior fiscal year.
Expansion in Europe…Elcoteq Network (Espoo, Finland) has expanded its second plant in Tallinn, Estonia, at a total cost, including equipment and current assets, of 40 million euros. This project doubles the floor space in the plant from 9000 to 18,000 m2. Demand for communications network equipment products and an increase in Elcoteq’s business and customer portfolio created the need for the plant expansion. Since January, the total number of employees at Elcoteq Tallinn has increased by 880, from 2280 to 3160. Elcoteq expects to continue hiring in Tallinn.
Some financial news…Solectron has secured a three-year, $500-million revolving credit facility. The new revolver replaces a $250-million credit facility due to expire in February 2005….PEMSTAR (Rochester, MN) has appointed Grant Thornton LLP as its independent audit firm. Grant Thornton, described as the fifth-largest US accounting firm, replaces Ernst & Young, which resigned as PEMSTAR’s auditor (June, p. 7)....Nam Tai Electronics (Hong Kong) has sold its interest in Stepmind at the price Nam Tai originally paid for those shares. Stepmind is a fabless supplier of wireless systems on a chip.
Plant to close…According to Scottish news sources, Sanmina-SCI will close its enclosure plant in Kirkcaldy, Scotland. Reportedly, the facility employs 320 people. Last month, the company announced a new round of restructuring to remove capacity from its North American and Western European operations (July, p. 5).
Plant being sold...Following a strategy to consolidate operations in Finland, Scanfil (Sievi, Finland), has signed a letter of intent to sell the business operations of its mechanics manufacturing plant in Paimio, Finland. The buyer is Elektromet Yhtiöt Oy, a manufacturer of sheet metal parts and products. About 100 Scanfil employees will transfer to Elektromet.
Plexus (Neenah, WI) and SRI International (Menlo Park, CA), a not-for-profit research institute, have formed an alliance to help medical technology companies bring their new products to market. The idea is to combine SRI’s R&D capabilities in biology, materials science, engineering, and life sciences with Plexus’ product-realization offering of product design, manufacturing and supply chain management.
The two parties have already worked together. They helped Lipid Sciences to accelerate critical aspects of its HDL Therapy product development program.
This alliance aims to improve efficiencies through interdisciplinary teams, streamlined product management, innovation on demand, and ultimately, the ability to bring medical products to market more quickly. Customers will have a single point of contact for complex projects and access to a broad set of scientists, engineers and manufacturing experts.
Founded as Stanford Research Institute in 1946, SRI performs contract R&D for government agencies, businesses and nonprofit foundations. The institute has about 1400 employees performing R&D in fields that include drug discovery and development, health sciences, materials science, engineering, and computer science.
More company news…Jabil Circuit is a member of Honeywell Team SRX (Sense and Respond Experimentation), a group that will experiment with solutions to slash time and cost from advanced defense systems. The program will be led by Honeywell’s Defense and Space Electronics Systems unit. Besides Jabil, key members are Banta, IBM, Arbortext and the University of South Florida. Team SRX will experiment with sense-and-respond processes linking Honeywell with the military; EMS providers like Jabil; and information solutions firms such as Banta, IBM and Arbortext. These processes are intended to deliver a flexible, fast response to military forces in the field and rapid replenishment of military consumables.
People on the move…David White has joined Sanmina-SCI as executive VP of finance and CFO. Before taking this job, White was senior VP and CFO of Asyst Technologies, a provider of integrated automation for semiconductor and flat-panel display manufacturing.
The conversion to lead-free products is a major undertaking for the industry. It could end up being the most far-reaching change that the industry has ever gone through. Think of all the part numbers that are involved. So it’s easy to see why OEMs, EMS providers and component suppliers have all zeroed in on the RoHS deadline of July 2006 for elimination of lead from products that fall under this European deadline. Supply chain players are also paying attention to the twin directive, WEEE, for recycling in the EU. With all the effort that is going into complying with these directives, companies deserve to breathe easy when they’ve achieve compliance. But they probably won’t be allowed to. That’s because RoHS and WEEE aren’t the only environmental decrees to come down the pike.
The European Commission has proposed a directive for the eco-design of energy-using products (EuP), such as electrical and electronic devices. This “framework” directive does not introduce regulations for specific products, but does define conditions and criteria for environmental requirements such as the energy consumption of a product. After the EuP directive is enacted, subsequent measures will set environmental requirements on specific products. The purpose of the directive is to promote eco-design, which means the integration of environmental considerations at the design phase. These considerations include energy consumption and associated negative effects on climate, consumption of materials and natural resources, waste generation and release of hazardous substances.
During research for this month’s cover story, MMI learned of another EU proposal called REACH (Registration, Evaluation and Authorization of Chemicals). Under this system, companies that manufacture or import more than one ton of a chemical substance per year must register it in a central database. Substances of very high concern would require authorizations for particular uses. In 2001, the European Commission estimated that around 30,000 new and existing substances would be registered. Of importance to electronics manufacturers, REACH includes downstream users, which will receive information to ensure that chemicals are used in a manner that is safe for workers, consumers and the environment. Solectron reports that REACH is a massive document.
Other parts of the world are also involved in such environmental regulation. Japanese industry has been out front in the lead-free movement. Now it appears that China is developing its own environmental policies.
As a result of this growing tide of environmental regulation, providers such as Celestica and Solectron have been asked to keep track of many more than the six substances banned by RoHS. This environmental trend plays into the hands of EMS providers that have the component and process knowledge that OEMs need for compliance.
So lead is not the only thing that OEMs have to worry about. They won’t get a respite as new environmental regulations emerge around the world. For the EMS industry, this is a good thing because it will generally make OEMs even more dependent on their EMS providers.