Electro/Telecom Industry Trends
June 2005
The Cost of Selling into the EU: A Look at RoHS
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In a little over a year, electronics and telecom companies around the world will be facing a new challenge—the European Union’s (EU’s) Restriction of Use of Certain Hazardous Substances in Electrical and Electronic Equipment (RoHS) directive. A deceptively simple piece of legislation, RoHS requires companies to limit the amount of hazardous substances used in any product being sold in the EU. And with the July 1, 2006, deadline looming, it is forcing manufacturers to reexamine how they manage and track information about the components with which they build their products.
Passed in 2002, RoHS was created by the EU to cut back on the amount of hazardous materials entering the waste stream. It seeks to reduce six substances—lead, mercury, cadmium, hexavalent chromium, polybrominated biphenyls, and polybrominated diphenyl ethers—by requiring companies to limit use of them in their products. Under RoHS, each component in a product is under scrutiny, since the limitations discussed in the directive refer to the percentage by weight of the substances existing in each of the components used in manufacturers’ products.
RoHS applies to nearly all electrical and electronic equipment sold within the EU, including household appliances, IT and telecom equipment, consumer equipment, lighting equipment, most electrical and electronic tools, toys and leisure equipment, and automatic dispensers. However, despite the directive’s wide reach, a number of products are exempt from RoHS, such as:
- Spare parts for electrical and electronic equipment put on the market prior to July 1, 2006
- Products intended specifically for national security or military purposes
- Certain types of medical equipment
- Certain uses of lead, such as network infrastructure equipment, which is exempt from the RoHS-mandated limitations until 2010
- The use of mercury in lamps and some types of lighting fixtures
Regardless of whether or not their products are exempt, or whether or not they sell into the EU, electronics and telecom product companies are bound to feel the effects of RoHS. Suppliers are now taking it upon themselves to obsolete non RoHS-compliant parts, meaning that even companies not subject to the directive’s restrictions will be forced to change their bills of materials and manufacturing processes.
Searching for a Solution
Despite the directive’s upcoming deadline, a number of companies are still just beginning to gather the data they need to ensure compliance with RoHS. Many are hampered by the lack of direction provided by the EU on how they are supposed to report on their compliance. Surprisingly, few industry associations have attempted to bridge this gap by offering their own guidelines. One of the few to provide guidance was the Japan Electronics and Information Technology Industry Association, which issued its “Guidelines for Standardization of Material Declaration” in June 2004 through its Japan Green Procurement Survey Standardization Initiative.
Those companies that have started gathering information about their parts are finding their suppliers are just as overwhelmed by RoHS as they are. While large suppliers have responded to the directive by posting information on RoHS compliance for their parts on their websites, the data is often inconsistent from supplier to supplier and can be difficult to find. On the other hand, smaller companies don’t always publish this information, and are therefore finding themselves inundated with requests for RoHS data. Also, since nearly every request is unique because manufacturers are often looking for different types of information, it has become increasingly difficult for suppliers to respond to their customers’ requests for parts data quickly.
Even though the effort to comply with RoHS can be overwhelming, the implications of non-compliance are significant. Along with the RoHS directive’s mandated penalties, companies can also face a significant loss of revenue and market share due to sales and export restrictions, or marketing and public relations problems associated with safety concerns and product recalls. They may also have to deal with design and manufacturability issues associated with converting products to those that are perceived to be more environmentally friendly. As the deadline for RoHS moves ever closer, it is these possible consequences that companies will have to keep in mind as they consider the costs of ensuring compliance.