Supply Chain Outlook 2007: Bracing for China RoHS

By Suzanne Deffree -- Electronic News, 12/20/2006

Brought to popularity by Malcolm Gladwell's book The Tipping Point: How Little Things Can Make a Big Difference, the term “tipping point” has taken on the meaning of a process in which, beyond a certain point, the rate at which the process proceeds increases dramatically.

In 2006, the semiconductor supply chain saw a tipping point of sorts as environmental regulations began to take affect and the July deadline for the European Union’s Restriction of Hazardous Substances (RoHS) directive came and went – although certainly not quietly. Labeling issues, exemption questions, materials declaration, part number changes and compliance processes were all roadblocks on industry’s first major step toward better environmental procedures.

“The general awareness of contaminants in products and general environmental concerns are raising and that doesn’t turn around,” said Steve Schultz, director of strategic planning and communications for Avnet Logistics.

While the industry has yet to completely catch up with the EU directive – a recent Newark InOne survey found that 45 percent of U.S. respondents had not converted to RoHS compliant parts (including those that are exempt) and that 30 percent believe RoHS does not affect them – the environmental compliance ball keeps rolling.

“There’s still a ways to go and RoHS will go into 2007. Initially we thought it would be done and we’d be in that 80 to 85 percentile at the end of this year. We don’t see that happening,” Jeff Shafer, a Newark InOne senior VP, said.

And as 2007 approaches, the supply chain will face more challenges, including WEEE, REACH and state laws here in the United States, making some executives see EU RoHS as the tipping point when it comes to environmental procedures.

Without doubt, the biggest environmental regulation challenge that will come in 2007 will be the Chinese law “Management Methods for Controlling Pollution by Electronic Information Products,” better known as China RoHS, which comes into effect on March 1, 2007. While similar to EU RoHS in that it aims to limit the same six hazardous substances in electronics – lead, mercury, hexavalent chromium, cadmium, polybrominated biphenyl flame retardants and polybrominated diphenyl ether flame retardants – semiconductor organizations have warned that China RoHS will vary greatly from the European directive.

“This law is unlike the European Union’s Restriction on Hazardous Substances directive in numerous key details – do not assume your compliance with, or exclusion from, EU RoHS will result in compliance with or exclusion from China RoHS,” Semiconductor Equipment and Materials International (SEMI) cautioned its members in a November note.

China RoHS will be implemented in two phase. The first phase will see administrative requirements put in place that necessitate environmental labels and supporting self-declared information in Chinese relating to the presence of the six hazardous substances in all “electronic information products” (EIP). For that, China’s Ministry of Information Industry (MII) in March listed more than 1,800 specific parts, components and materials that it considers EIPs.

China RoHS’ second phase will see a growing subset of products drawn from the MII’s EIP list included in a catalog. Drafting of the catalog has recently commenced, but, to the frustration of many in the industry, specifics on this phase are still being determined.

“China is taking a radically different approach than did the EU. The EU had a date and time and said all products are covered by this except the ones that are out of the scope, like military. In China, they will publish a catalog that will say what will be covered the first year. Right now, you don’t know if you are going to be covered yet,” Schultz said.

“It’s looming next year, but people don’t know if they are impacted yet and should spend the money on it. If they are waiting and are impacted, they are going to have to scramble.
As soon as [the catalog] is available people will latch on to that and there will be a lot of misinterpretations,” he said, noting that all of China’s information on its RoHS is currently only officially available in Mandarin. “Most of these documents are just a few pages long and everyone interprets these differently. There’s this crescendo of misunderstandings before everyone figures this out.”

What is known is that the products listed in the catalog will be faced with the same restrictions on substances as outlined by EU RoHS and that these products will require pre-market certification labels that differ from the crossed out rubbish bins elected by the EU. Unlike EU RoHS, however, materials compliance may not be done internally and will need to be tested for in one of 18 specified China labs.

“Today it’s all self declaration. Now the China government is making those decisions. This is an issue that many suppliers had with the IPC-1752 declaration, because they didn’t want to expose that information. First of all they didn’t have the resources to provide that, but they also didn’t want to expose that to their competitors who now know all of the details of their product is made. If China test houses have all of that information, there could be more counterfeiting or products that go against patents as far as product being manufactured in the future. That’s something to think about,” Shafer said.

Meanwhile, the MII has said not to expect exemptions like those included in EU RoHS. And no date has been set for implementation of China RoHS’ phase two.

“It’s one of those ‘the nightmare begins’ at different levels and tolerances for everyone,” Shafer commented.

What To Do as March Approaches

Unfortunately, because China RoHS is still in the works and information on final law is still scarce, the path to proper compliance is unclear. Proactive steps, while not a guarantee, are advised.

SEMI’s suggested first course of action is to explore a translated EIP list to see what parts, products and materials the MII will consider under its administrative measure. Avnet’s Schultz also advises staying aware of the evolving changes to China RoHS. And Newark InOne’s Shafer reminds the industry not to take short cuts and to keep an audit trail, just in case.

“Some companies might take a short cut, based on resources or time,” he said. “If they do, they need to go back and review that because all it’s going to take is that first company to get fined -- a competitor, a company you know -- and it will be a wake up call.”

Avnet’s green initiative can be found here.
Newark InOne information on environmental compliance can be found here.
SEMI information on China RoHS can be found here.