Electronic Products Forum:

Is the electronics industry prepared for the RoHS directive?

As most engineers are very aware, the European Parliament and the Council of the European Union RoHS directive goes into effect July 1. Are both the component suppliers and the OEMs set to take on this environmental challenge?

We recently spoke with seven industry leaders on this important topic. Below we have excerpted key points from this conversation. For a full transcript, visit electronicproducts.com/rohsforum

Status of component manufacturers
Electronic Products : What can we say about the status of U.S. component manufacturers' RoHS compliance? Is the non-RoHS version still available? . . . Are they going to keep making both of them?

Omar Ahmad (President, Silicon Expert): We recently did a survey of 500 suppliers in the U.S. about how ready they are for RoHS compliance and found that almost 70% feel they are pretty much ready for the July 1st compliance date. And, we found that 71% of the suppliers are changing their part numbers to reflect RoHS compliance . . .

Omar Ahmad, Silicon Expert

The manufacturers are converting their product, but they're having a difficult time supplying the data and the due diligence to prove that they converted the product . . .

Susan Fischer (Senior Vice President, Marketing, Newark InOne): Manufacturers may be in the process of converting or half-converted, but there's a separate issue of the ability to provide information about the conversion . . .

Susan Fischer, Newark InOne

. . .We are finding some discrepancies because there is a lag time between when a manufacturer converts over and when the inventory actually gets run down. . . .

Gerald Waldron (Director of Sales and Marketing, Libra Industries): . . .Contract manufacturers are concerned that there may be a compliant part with a good part number . . . but many manufacturers are lagging in providing data such as peak reflow temperature and tolerance and the moisture handling rating . . .

Gerald Waldron, Libra Industries

Steve Schultz (Director of Strategic Planning, Avnet): We too did a survey and came up with 72% of suppliers are ready . . .But you can have a very large supplier that has multiple factories all over the world, some of which have different approaches on it . . .

Steve Schultz, Avnet

. . .The majority of our suppliers are either ready or preparing to be ready on an aggressive time frame. There are a few out there that are struggling with this issue . . ..

Marshall Hulbert (Engineering Manager., Sullins Electronics): . . .We've found that it's very critical to get the data on out RoHS compliant parts to OEMs and the distributors are often wanting the exact chemical analysis and things like that. It's actually rather tough to keep up with information requests as they come in.

Marshall Hulbert, Sullins Electronics

Ken Farrington (Pb-Free Program Manager, Business Operations, Texas Instruments): TI is pretty much finished with the conversion to compliant parts, and now we're waiting to see what happens at the beginning of the year. . . .

Ken Farrington, Texas Instruments

. . .Most of the manufacturers are finished with conversion, but of course from an OEM's perspective, it only takes one part to hold up a board.

A shortage of noncompliant parts?
Electronic Products : The noncompliant components there seems to be kind of a mixed feeling about those they might be a rare commodity and have higher prices, or . . .they're going to be no good after a while; you will have to throw them all away.

Susan Fischer : We are not planning on doing any price changes . . .. My impression is that right now the industry is so focused on getting the paperwork and the due diligence part right, and that pricing as of yet hasn't become an issue. . . .

Steve Schultz : We're not passing along or adding any premiums to any of the products. We do anticipate that for the leaded product you'll see some prices increased by the manufacturers . . ..

. . .We are spending a disproportionate amount of our time talking to those military and other customers that want to have assurances about the continuous supply of leaded products . . .. It [also] appears that the portion of the marketplace that have exemptions, and thus thought they were immune from the impact of the supply-chain-related issues, have woken up to this problem and are looking for solutions . . ..

They're making both of them now. and they're evaluating it very closely. We are receiving a lot of obsolete notices on part numbers. . . .At some point they'll get to a decision point where it's no longer economically beneficial for them going forward and they'll obsolete that part.

Gino Nanninga ( Vice President of Sales and Marketing, Positronic Industries): [For our connectors] we did change our part numbers and we are going to continue to manufacture products that do not need to meet the RoHS requirements, primarily to use up inventory of components.

Gino Nanninga, Positronic Industries

The status of OEMs
Electronic Products : So it is not just moving to RoHS-compliant parts; it's also what the materials are . . .and what process temperatures you need . . .

What percentage of OEMs do you think are just . . . [saying] they don't have time to worry about it right now?

Susan Fischer : We're seeing a very large variation in …some large OEMs that are exempt, who are saying “we're going to convert anyway because the parts are going to go away.”

. . .Not just some customers requiring the RoHS compliance, but some customers saying I want you to guarantee me it is noncompliant product.

I would say that we're finding that most everybody is at least somewhat aware, but whether they've started the process or not is another question . . ..

We're seeing some smaller OEMs, who have some products that need to be compliant and some products that do not, saying we're going to convert because we don't want to deal with two [production] lines. And, we see others that are kind of doing the head-in-the-sand thing, saying they don't have to deal with it yet. So it's really hard to see trends.

And we do think there's going to be a huge waking up in January.

Gerald Waldron : And it's kind of interesting, we as an organization do a limited amount in military and the comments I've heard are very true there with the absolute requirement to remain with eutectic solder technologies and finishes.

But what's very interesting in our business where roughly about one-third of our clients are in the medical devices market, another third roughly are in the, what I'll call, high reliability and machine control systems, both of which, depending on your interpretation, could be considered to be exempt applications.

They are actually the most active that we have in working toward compliance. They have such long product life cycles that they're taking the approach to be proactive as opposed to reactive. So we actually have in our experience, more of the customers that are exempt doing full due diligence . . ..

. . . For those companies that know that they are going to transition to full compliance at some point in the year, I am seeing those OEMs manage their open-order backlog with us much more tightly, which limits the visibility that we pass into our supply chain.

Gino Nanninga : . . .We do quite a bit of business in areas of the industry that do not want anything changed. They do not want us to switch everything over to RoHS compliant, discontinue or change the recipe of the product that they've been getting . . . There's long-term reliability issues whiskering, all these things have been mentioned in this discussion. And until they get to the place where they thoroughly check this out, they would prefer nothing change.

A lot of the larger companies that we deal with have been working on this for a year because they've got resources and they tend to stay ahead of the game. But some large companies are not following through well on RoHS programs they have set up; and some medium and small companies we're getting calls . . .asking us “what's this RoHS thing all about?”

. . . We have to shift our component inventory . . . to be RoHS compliant. . . . We already have RoHS in the pipeline. But we do not have a clear forecast from our customers as to what their usage is going to be for certain going forward. But as these customers start waking up and really start deciding they need to order RoHS compliant, there could be some shortages coming up as the industry moves production in that direction.

Steve Schultz : When we did a study a few months back . . . about 8% of our customer base . . . are ready and have made the changes, as opposed to being in the process of migrating over. And I don't think it's increased much beyond that. I've also heard discussions from the people that manufacture the lead-free solders that they are concerned that the marketplace is still asking predominantly for the leaded solders.

. . .We still see customers who are just waking up to this issue, but that's a rarity for us right now.

. . .We're overwhelmed with request for component data, that sort of stuff. It's a small percentage of those customers though that are actually only ordering lead-free or RoHS parts.

Omar Ahmad : . . . most of the OEMs are converting their products as we speak . . ..

. . .[And one problem area] the mechanical parts, the screws, the labels, they all have to be compliant, and . . . they sometimes don't have a part number, they order per description, and most of the times they order through a distributor who has their own labels on them, and a lot of OEMs are having a difficult time getting data and compliance on these parts.

Because it's not only the ICs and passives that have to comply, but also even the labels, the ink everything else must comply . . ..

Marshall Hulbert : We switched over, and we've been educating people as they order that we have switched over to lead-free. The problem is we have with supplying the company that wants the nonconforming leaded part is the lead time that they're requesting. It's basically switched over and we have trouble getting leaded parts.

. . . A couple of the telecommunications companies just don't want to change. They would need to do a lot of testing they say one to two years. And because they feel they're exempt, they want to keep the leaded parts.

Are Pb-free BGA-packaged ICs backward compatible?
Electronic Products : Are ball-grid-type ICs devices backward compatible?

Ken Farrington : No. And that's pretty widely accepted in the industry that you don't want to mix and match BGAs. . . . OEMs have to be very careful about their BOM planning, supply chain, and managing lead times because in some cases they'll find that the lead-free BGA versions have longer lead times . . ..

Gerald Waldron : Absolutely. We've even had several instances . . . that the ball-array package devices are the what I'll call the “gotcha.”

All other components are backward compatible?
Electronic Products : So, excluding the BGAs for a minute, the rest of the parts are backward compatible. So, if you have an old line you can put lead-free parts into the standard process?

Ken Farrington : Yes. And it gets back to the discussion earlier, you may run across some OEMs that are very specific and that they don't want a matt tin, Pb-free, finish accidentally getting into their old products. So, they're sensitive to that. They do not want to change what is working.

Steve Schultz : We get that question a lot and my answer to customers is; the manufacturer represents it as backward compatible, but . . . we believe that the customer's engineering department has to evaluate the part . . . and you can't get away from that engineering responsibility. . . .

Will OEMs obsolete some products?
Electronic Products : Are OEMs that have products that they've been making for 10 years, and now this RoHS comes along and now they are talking about discontinuing it because they don't want to spend the effort to convert it?

Susan Fischer : I haven't heard any OEM say that, but I've heard some of the engineers assume that. It is as if they're not far enough along to know what they're going to discontinue, but start with the products that have to be converted and go on a priority list.

Steve Schultz : It's a classic supply demand issue out there and the cost of making the conversion. The volume isn't there, the economics won't permit them to continue with it.

Omar Ahmad : But it depends where they ship the product. If they ship it to the U.S., then they're largely not a concern today, but if they ship to Europe, they're probably in a hurry to switch.

So, the big OEMs are switching all their products because that's the most economically cost-effective way to do it, because they don't want to have two lines. But the smaller ones … are figuring out if they ship most of their products to the U.S. and they are not too concerned; if they ship to Europe, they are switching. If they are in between, they're making an assessment . . ..

Ken Farrington : You have to remember they're not only considering the RoHS challenge, but it's WEEE also . . . It creates a huge logistics burden and for some small companies that may make that product life decision very easy . . ..

WEEE is a whole infrastructure issue or logistics issue. You have to register products. In some cases, you have to pay registration fees. You have to identify recycling programs . . . You really have to look at RoHS as a subset of WEEE. . . .

Are some companies changing their minds about converting?
Electronic Products : . . .A lot of OEMs . . . are saying, they're going to … convert all products over to lead-free . . . And then when they see the realities of this old product that they have to redesign and they may end up with both compliant and noncompliant products.

Susan Fischer : . . . as we get into next year, a lot of companies are going to find [RoHS compliance] takes a lot longer than they think. So, whatever plans and schedules have been laid out as those get revised, you're going to have to kind of do triage on which products you want to focus on and have to.

Gerald Waldron : I can clearly see this in some of our smaller OEMs as they try to tackle the problem that's where our design group is getting significant interest in sustaining engineering contracts . . ..

Fear of reliability problems
Electronic Products : There is a fear about reliability of the new components, but I don't think that we've really heard much in the way of actual problems.

Steve Schultz : We heard a few small customers of ours that had issues early on, but they were able to resolve those problems once they understood the issue better.

It had to do with their own temperature profiles or they're running products through and perhaps misunderstanding what they were doing with the parts as a result.

Ken Farrington : I think most people have the recipes figured out. There's going to be the typical learning curve, lower yield on the board in the beginning, that might drive their cost structure up a little bit, but it looks like all the board guys are getting that under control.

What does an OEM have to do to be compliant with RoHS?
Electronic Products : . . .What's going to happen on July 1? If I'm an OEM and I'm making this product and it goes to Europe, what do I have to do to be ready and what's going to happen? . . .

Steve Schultz : The surveillance is a country-by-country responsibility. And there won't be uniformity across the entire EU . . ..

At Avnet, we think the biggest issue will be competitors of those OEMs making complaints that their product isn't compliant on that, that will trigger the surveillance. And we think that will be the first issue out the gate.

Ken Farrington : I agree. I don't think there's going to be a big set of news headlines on July 1st. It's probably going to be pretty anticlimactic that people will continue to ship their products into Europe because it is the foundation of the directive that you're assumed to be compliant . . ..

July 1st paperwork requirement
Electronic Products : So on July 1st, I don't have to add any paperwork to the box that I'm shipping into Europe?

Ken Farrington : Nope. It's just business as usual. The paperwork comes into play if you get audited, basically. If there's a reason for concern, then one of those countries can request your documentation where you have to prove that that product is 100% RoHS compliant . . ..

Steve Schultz : And they allow you a certain amount of time to pull that information together roughly a month.

What if they audit us?
Electronic Products : So we make a product and we have it RoHS compliant, and we have a soft copy single sheet . . . every component. I ship it into Europe and they pick on me to do an audit. So, what they're going to ask for is, send us copies of those sheets of paper?

Ken Farrington : Yes, and they're probably going to highlight where they're suspicious. . . . They might actually be very specific and say, we need the paperwork on the case . . .

Susan Fischer : Now we're seeing, at least in the U.K., requiring due diligence, “reasonable steps” and you could interpret whether just getting a C of C is a reasonable step, or . . .

We're assessing the manufacturers by risk. And then, for the high-risk manufacturers, we may be doing some additional testing . . ..

. . .It is taking a lot of time and a lot of coordination with the manufacturers to make sure, particularly for those that aren't changing their part number, that what we're being shipped is compliant . . ..

Omar Ahmad : Exactly. The date code will be the key. And that's the forecasted date. But then when the actual change-over happens, nobody knows . . ..

. . .It is a nightmare that those suppliers who do not change their part number are creating in the industry . . ..

Do we need more than just C of C documentation?
Electronic Products : Should the OEM go to that trouble to get full material break down, or should they just have their conformance sheet and not worry about it?

Omar Ahmad : OEMs should get full material disclosure for a few reasons.

Number 1, they can catch any errors with a “yes, no.” It's easy to make a mistake with a part. But if you have the full material declaration and the content the homogenous material declaration then you would know exactly.

Number 2, as the regulations are evolving and the exemptions are not permanent, if anything changes with the exemptions status, let's say in 2009, 2010, or a new material has been added or deleted, then if they don't have the full material declaration, then they have to go back to the suppliers and ask for the data again.

Ken Farrington : And that's the key requirement in the WEEE directive you have to be able to educate these recyclers what your products actually contain. Because if they contain anything hazardous, then they have to use special handling procedures to recycle that material.

And that's why you see them asking for that larger list it's because the WEEE directive is broader. It requires them to report.

Gino Nanninga : What we do is supply a compliance certificate, but upon request we will supply a full material breakdown.

Marshall Hulbert : I've seen a list from [a company] where they have the requirements listing all the materials that they want to know the grams of x in the part. . . . a list of maybe 30 or 40 different materials . . .. and they're talking about a jumper that weighs half a gram and they want to know how many grams of all these materials are in there.

It's a 2 cent jumper, they buy 100 a year. We get the information for them, but it becomes a nightmare . . .

What happens if there is a compliance problem?
Electronic Products : If I have a product, they audit it, and one of the parts say one of the screws actually had some lead in it and I have a C of C that it says that it doesn't, but it still does. Are they going to stop me from shipping my product in or are they're going to give me a pass because I did due diligence?

Steve Schultz : We think that if that product is identified as a problem and you've gone through due diligence you'll be asked to put some kind of corrective action program together to address that and fix that problem, and you would be given time to do that.

However, what that would probably also do is flag you for additional surveillance. But you could still ship your product into the EU.

. . .It is possible they could require a recall of product you have shipped in after 1 July that has this problem. They probably would not do that for a small infraction.

Susan Fischer : I don't know that we know the answer to that. Certainly the due diligence would apply to afterward, any lawsuits or messy stuff after work. I don't think it's clear how quickly you'd be prevented from selling things.

Well as we said even within the EU nations that due diligence requirement there – it's not uniform.

Omar Ahmad : But you would receive bad publicity, also.

Other reasons to RoHS-certify your products?
Ken Farrington : I've heard it being said with-in companies that have exempt products like the telecom guys, who don't really need to do anything until 2010, that if a competitor developed a RoHS-compliant product and got comfortable with the reliability and released it in 2007 or 8, they can get a jump on everybody and create significant market advantage.

Susan Fischer : We've heard that from some of the medical equipment manufacturers, that we in the healthcare industry should be the ones providing green products.

Ken Farrington : You know, the key thing that I always have to bring up is that reliability piece. If you have the data to just overwhelm a customer that your new lead-free telecom switch won't have whiskering problems, then they can take that marketing strategy.

Gerald Waldron : I mentioned earlier that in a couple of segments in our higher reliability client base, that's exactly what they're doing. One case in particular I could cite is in the medical arena and in fact they believe that there is the potential for marketing advantage.

Steve Schultz : We're all environmentally aware, but in European nations there is a tremendous amount of public awareness about environmental pollution and concerns, much more so than we see in the Americas today.

And that is a driving force that's very real and there's a marketing advantage by saying you have green products that is the differentiator there and a very real one.