November 16,
2006
After
RoHS Deadline – Glut or Shortages?
Now
that last summer’s deadline has come and gone for the European Union’s RoHS
directive, what’s the impact on components? Many industry experts predicted
parts suppliers would not be able to keep up with demand for lead-free
components, while others worried that there wouldn’t be a sufficient supply of
leaded parts for the exempt industries such as aerospace and defense.
As
it turns out, not much has really happened to the components supply chain.
“Things are pretty darn boring right now,” says Steve Schultz, director of
strategic planning and communications for Avnet Logistics, a division of
Phoenix-based Avnet Inc. “From what I can see and from what I hear from
suppliers and other distributors, the supply chain spent a lot of blood, sweat
and tears getting ready for RoHS, but the demand for compliant product is not
anywhere near what people thought it would be.”
Schultz
notes that many manufacturers have still not switched over to RoHS-compliant
parts. “A lot of our customers have yet to go compliant. They are still in the
process of moving over,” says Schultz. “Those that are RoHS compliant are only
about one in five.” He explains there is much more demand for compliant product
in Europe, while only about 20 percent of North American manufacturers are
asking for RoHS-only components.
Schultz
points out that about half of Avnet’s components are now compliant even though
few customers are demanding lead-free parts. “We’re shipping about 50 percent
RoHS-compliant product, since many of our suppliers converted to RoHS parts
without changing their part numbers.” He notes that the lead-free parts that
have replaced earlier leaded versions are backward compatible, so the change to
lead-free parts has had little impact on customers.
While
the European RoHS has not had an enormous impact on the component supply chain,
Schultz believes that will change when China’s RoHS laws come into affect in
March 2007. “China RoHS is the 800-pound gorilla,” says Schultz. “Once that gets
implemented, there is going to be more and more pressure – very real financial
pressure – for component suppliers to shift to RoHS-compliant parts.” Since
China is a larger and faster-growing market than Europe, the China RoHS
directive is likely to have a greater impact on the supply chain.
Schultz
believes the impact of next year’s China RoHS deadline will shake up the
component supply chain. “When China RoHS takes place, we are predicting another
wave of product obsolescence,” says Schultz. “I think it will take a full year
for it to have impact on the supply chain. So I don’t think there will be an
issue about whether there will be a sufficient amount of compliant product for
about a year.”
According
to Schultz, companies are starting to pay attention to the impending deadline
for China RoHS. “Companies are getting nervous about it because they know it’s
going to happen,” says Schultz. “We look at our position and we still have a
lot of product that needs to transition over to RoHS compliant. But we purposely
put the brakes on some of the conversion because we were watching the demand
numbers.”
In
the defense and aerospace industries, which are exempt from RoHS, manufacturers
have recently been asserting their need for non-compliant parts. At first these
manufacturers thought the environmental laws would have no affect on their
business since they were exempt. Soon enough, though, they noticed that their
suppliers were switching over to lead-free components and discontinuing the
leaded versions. “We’re still getting a lot of military customers asking for
the old part numbers, but those parts are going to dry up on them,” says
Schultz. “Those military customers were in a state of profound denial.”
He
notes that the military customers now realize they have to let the component
suppliers know they still want to buy leaded parts. “They are now being
effective at going back to the component suppliers and saying, ‘We’re still
going to be buying those non-compliant parts,’” says Schultz. “The military
customers realize that the non-compliant parts are going to be more expensive.”
The increased expense is due to the fact that the high volume versions will be
lead-free, so the leaded versions will be produced in smaller quantities which
means they will be more expensive to produce.
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