Electronics Makers Race to Meet RoHS Deadline

Mar 31, 2006 Ι Industry News Ι Electronics and Computers Ι By Ken, CENS
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Last year, Taiwan turned out US$169.7 billion worth of electrical and electronic equipment, over half of which went overseas. However, this export cash cow could face a serious setback next year if manufacturers of electronic devices fail to comply with a European Union (EU) environmental protection directive that will come into effect on July 1, 2006.

The directive, known as the Restriction of Hazardous Substances (RoHS), sets strict new standards on what materials can be used on products sold in the EU market. Those manufacturers that don't come up to muster will effectively find the door closed to this lucrative market.

"Domestic manufacturers that don't meet the directive requirements by July 1 will not be able to win even a single order from European buyers," stresses Hsing Hsu, executive secretary of Information & Membership Department of the Taiwan Electrical and Electronic Manufacturers' Association (TEEMA). The association represents over 4,000 Taiwanese manufacturers.

Hsu's statement is a serious warning as the production and the export of the local electronics industry accounted for 49.19% and 49.8% of Taiwan's industrial output and total export, respectively, last year, not to mention the island's status as primary original equipment/design manufacturing (OEM/ODM) base for leading brand name suppliers like Sony, IBM, Dell Computer and Hewlett-Packard (HP). The Ministry of Economic Affairs (MOEA) estimates the directive will have a direct impact on 35,000 electrical and electronic manufacturers in Taiwan, or a combined annual production value of NT$244.6 billion (US$7.1 billion at US$1:NT$33).

Green Plan

Aware of the seriousness, the ministry has taken steps to help local manufacturers meet the RoHS standard, which places strict restrictions on six toxic substances-lead, mercury, cadmium, hexavalent chromium, polybrominated biphenyls (PBB) and polybrominated-in electrical and electronics devices.

The first step is a "Green Plan," which the ministry launched on July 27. The plan aims at assisting at least 1,000 local manufacturers in complying with the RoHS regulation by late June next year. To achieve this goal, the MOEA has helped set up 15 synergy systems in cooperation with several local brand-name suppliers, verification institutions, industry associations, information service providers, and insurers.

Among the affected suppliers are several major players in the IT sector, including Asustek Computer, MiTac International, First International Computer and Accton Technology. These companies and their contract suppliers are working to improve their manufacturing processes based mainly on ISO9001 and ISO14000 standards before TEEMA drafts industrial standards for sampling, testing, examination and verifications based on the RoHS directive at year end.

Verification institutes, such as the Electronics Testing Center (ETC), Taiwan branch of UL International, L.L.C., Sgs Taiwan Ltd., and Bureau of Standards, Metrology and Inspections (BSMI) of the MOEA will help examine the manufacturing processes of local electronics makers and help them set up qualified processing systems. These certification service firms will set up a database with information on qualified contract manufacturers for brand name suppliers to facilitate the location of RoHS-compliant suppliers. "Eventually, we hope that all international certification laboratories will mutually recognize their standards so that the manufacturers across the world can avoid duplicate spending on product verification procedures," Hsu notes.

TEEMA has also coordinated domestic manufacturers to organize a "GP [green product] User Group." The group has established a standard committee, a data platform committee and a promotion committee to push the establishment of certification standards, qualified supplier databases and common data exchange standard. It has, furthermore, organized five Special Interest Groups (SIGs) including a testing SIG, GPMS (green product management system) SIG, non-lead SIG, and WEEE (waste electrical and electronic equipment) SIG to set up a green-supply chain and lobby multinational companies to procure green electronics and devices from Taiwan. "We hope 'Made In Taiwan' will become a symbol of green products through these efforts," says Hsu, who is spearheading the "Green Plan" at TEEMA.


While the RoHS directive has posed challenges for many manufacturers, it has also proven to be a bonanza for those companies that are helping local manufacturers bring their companies into compliance with the new environmental standard. The beneficiaries have included certification service companies, which providers say are developing as an independent industry with significant revenue.

Equipment suppliers, like TechMax Technical Co., Ltd., are also reaping rewards from RoHS. "We are selling 100 to 200 analyzers a year, compared with barely 10 systems in the past thanks to RoHS," says the company's sales manager, Mark Lin. His company is the Taiwan agent of Innov Systems of the United States, which is known for handheld and desktop x-ray analyzers for examining the six substances regulated by RoHS. The U.S. company, according to Lin, controls 60% of Taiwan's market for the analyzers.

"Taiwanese and Japanese suppliers are the most determined to make their products RoHS compliant," Lin comments.

Tekserve Corp., an importer of BGA (ball grid array) rework equipment, has also felt an RoHS boost. "We expect demand for lead-free process equipment in Taiwan to surge through the first half next year based on a flood of buyer inquiries," says Tommy Ting, a sales representative of the company's sales and marketing department. The equipment is mostly used for back-end processing of electronics components.

The company imports non-lead process equipment from a German supplier. "Some of our customers are still closely watching the situation, fearing that they will not secure the orders needed to justify the purchase of new equipment," Ting says. "Most of them are second-tier and third-tier contract suppliers," he adds. Ting claims that his company has grabbed around 60% of Asian market for such equipment.

Getting the Lead out

Meeting RoHS requirements is by no means a cheap task for electrical and electronic equipment suppliers. "The cost is pretty high because you have to locate replacement materials for lead and also have the ability to process the new materials," comments Matt Chien, a sales engineer at Lelon Electronics. The company is ranked as the world's fifth-largest supplier of aluminum electrolytic capacitors, according to Chien. His company's products are used mostly in consumer electronics, computers and communication equipment. About 75% of the company's output is exported.

Lelon has long used lead to make its capacitor pins. Now, like most of its industrial peers, the company has replaced lead with zinc, which has a much higher melting point than lead. Zinc's higher melting point is a challenge to most of the manufacturers, especially those depending on surface mount device (SMD) technique, as the mount must be as perfect as possible on printed-circuit boards and melting temperature is usually a decisive element, according to Chien. "Zinc's higher temperature means it is harder than lead to mount on the boards. It requires a higher temperature to melt. This is a challenge that manufacturing equipment suppliers have to resolve," he explains.

Lelon, Chien notes, began plans to use non-lead materials in 2000 at the request of Sony, one of its major customers. The company introduced non-lead processes two years later and completely replaced lead with zinc last year.

Compared with Lelon, Kai Suh Suh (KSS) Enterprise Co., Ltd.'s spending on toxic substance analysis should be much higher as it now supplies over 1,000 types of products, most of which are electrical wiring accessories. "The more product types your company offers, the more you have to spend on substance analysis since each product type requires a separate examination," says Shu-hwa Yu, a KSS sales director. "Fortunately, most of our products are non toxic," she notes. Her company is Taiwan's largest supplier of the accessories, whose products are now available in 108 countries.

An official at Kinsun Industries Inc.'s official reports that spending on lead-free materials and new production processes has increased their company's production costs by 30% to 40%. The company supplies various electrical connectors including antennas, universal serial bus cables and buses, switchboard connectors and stamped parts.

The number of certification applications has increased sharply in the second half of the year, according to Ted Chang, a specialist auditor at SGS Taiwan Ltd. "Demand is increasing," he says. Chang estimates the demand will peak next year after the government here enacts regulations based on the Green Plan.

Most of the applications, Chang notes, are for examinations that prove whether their products are toxic or not. "Once they are proved to be toxic, we can help them decrease toxic substances according to the EIA/ECCB 954 standard," Chang says. The standard is co-established by Electronic Industries Alliance (EIC) and Electronic Components Certification Board (ECCB) of the United States. Taiwan's electronics component manufacturers, Chang notes, have mostly replaced welding materials composed of zinc-lead alloy with zinc-silver-copper alloy equivalents.

Chang analyzes that a plethora of different standards is one of the primary problems that domestic component suppliers are facing now. "Now, system suppliers are seeking to set up a common processing standard in hope of streamlining the examinations," he says.
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