Taiwan tackles RoHS compliance

Expectations have run high for RoHS readiness in Asia. A recent Global Sources survey estimated that 93% of electronics manufacturers in China, Taiwan, Hong Kong and South Korea would be ready for the European Union's Restriction of Hazardous Substances (RoHS) July deadline. In Taiwan, the government undertook a major effort to ensure the island lived up to these expectations.

The driving force behind Taiwan's drive to ensure compliance is in the numbers. Taiwan's direct electronics exports to Europe are $7.2 billion annually, according to government statistics. The figure does not include re-exports: Nearly 40% of Taiwan's electronics are assembled in China, and then exported from the country. Additionally, the European Union is Taiwan's fourth largest trading partner, accounting for 11 percent of all foreign trade. Therefore, a poor RoHS compliance record would put a pillar of the economy at risk.

As a result, authorities scrambled to draw up plans for spreading green processes across the island. Beginning in mid-2005, the government dispatched engineers to help every listed domestic company that exports to the EU transition their production lines over to RoHS-compliant processes. The massive effort involved more than 4,000 companies at a cost $6.2 million, according to Fennyue Lin, who is responsible for research in the sustainable development division of Taiwan's Industrial Development Bureau in Taipei.

Compliance was also framed in competitive terms. The thousands of small and medium-sized companies that make up the bulk of Taiwan's industry were given a clear choice: Either meet RoHS requirements or be cut out of future business. (See related article: RoHS deadline leaves no room for 99% RoHS compliant.)

Despite limited cash and manpower, the bulk of SMEs are believed to have met RoHS requirements before the July 1 deadline. "We can say that almost all companies [the government] targeted are now compliant," Lin said.

Signing on the big guns

At the heart of the effort was the RoHS Service Corps, a special unit formed in May 2005 with members from government, industry organizations and representatives from green pioneers such as Sony Corp. and Hewlett-Packard. Under the Ministry of Economic Affairs (MOEA), the RoHS Service Corps' first move was to enlist the help of Taiwan's 60 top electronics exporters to Europe. Known as "Central Brand" companies, they account for 80% of the $7.2 billion in EU exports, Lin said.

Many of these Central Brand OEMs were well-prepared for RoHS due to foreign partner requirements and were in a strong position to assist the government. ASUSTeK Computer Inc., for example, which exports $1.1 billion to Europe including PC components and ASUS-branded desktops and notebooks, was 100% compliant for EU exports before the deadline, according to Angel Yu, ASTUSTek's corporate quality assurance specialist.

Readiness grew from customers such as Sony and Samsung, which required suppliers to adopt green manufacturing lines and processes two years ago, Yu added. "Lead-free processes began in 2002 and we produced the first lead-free motherboard a year later," she said.

Taiwan's booming display industry, which analysts expect to surpass Korea this year as the largest in the world by market share, likewise moved early on RoHS. Kuang Lang Chen, vice president of research & development at ChungHwa Picture Tubes Ltd. in Taoyan, Taiwan, explained the RoHS target area was the printed-circuit-board (PCB) used in the display module to regulate timing. In 2004, the company began designing its own lead-free PCBs, driven by requirements from Philips, a major customer, he said.

These Central Brand companies were key to government RoHS assistance because they would push compliance upstream and downstream. "Suppliers to Central Brand companies will listen to them," Lin explained.

The RoHS Corps and the Central Brand companies together devised a compliance checklist for auditing suppliers' manufacturing lines. Then they approached key suppliers to the Central Brand companies and evaluated their production lines. In an 18-month period, the Corps assessed roughly 3,800 suppliers, Lin said.

"If the supplier did not meet the standards, we provided technical help but not financial," Lin said. "The company had to convert to RoHS and pay for conversion, or be dropped from the Central Brand suppliers' list."

Focus on SMEs

The next phase went deeper. The government targeted 972 small and medium-sized companies from the Taipei stock exchange that exported to the EU for RoHS compliance. The combined production value of these companies represents close to 90% of Taiwan's total IT production, Lin said.

The compliance representative for each of these companies was summoned and asked to submit a RoHS conversion plan, which was evaluated by the RoHS Services Corps. Lin said the Corps used ISO 9000 and ISO 14000 as guidance to establish standards for a green supply chain and to maintain production processes in line with the RoHS directive.

The review consisted of checking each line for compliance, setting targets (as specifiedby ISO 9000 and ISO 14000), consultation and establishing a RoHS compliance plan.

By the end of 2005, nearly 800 out of the 972 companies had passed inspection for RoHS-compatible manufacturing. The final 200 were inspected and approved in June 2006. The RoHS Service Corps assisted in the greening of 4,280 factories, Lin said, adding that the biggest hurdles for SME's were higher temperature lead-free solder processes and modifying PCB designs.

Another challenge was dealing with re-exports. Many Taiwan manufacturers split manufacturing functions between the island and China. PCs, for example, may be designed in Taiwan but nearly all are built in China. To ensure RoHS compliance, Taiwan OEMs had to audit their Chinese suppliers as well.

ASUSTeK sent its engineers to audit Chinese suppliers' factories and required documentation when the products were qualified. Because most suppliers are branches of Taiwan companies in China, cooperation went smoothly, Yu said.

Prince Yun, managing director of Avnet Taiwan, said another RoHS challenge has been the distributor's backlog. In the run up to July 1, distributors had to ensure that suppliers of leaded parts, which had probably already converted to lead free, would deliver the non-RoHS-compliant orders. "After the compliance deadline, we had to figure out if we had enough inventory to support the customer," Yun said. "Distributors have a lot of backlog in the system and it's a complicated issue."

Another area of confusion has been the assortment of symbols used to designate RoHS-compliant products. Yun pointed out that Sony, Ericsson and Samsung have different marking standards, and mainland China has its own mark. Some markings are green, some use a "x", while others use a "+" symbol. "Previously, it was a Pb-free part, now it's a RoHS part, but the two are actually very different," he said.

Nonetheless, Avnet Taiwan's compliance estimates appear to track with the government's numbers. Yun said 80% of the parts Avnet Taiwan handles are now compliant; 100% compliance is elusive because some products will ship to other regions in Asia. (See related articles: RoHS: the next six months and To the rescue.)

The next task for the Taiwan government is adopting the island's own version of RoHS. Initially, a RoHS proposal had momentum but now it's questionable. The government recently underwent a re-organization and it is not clear under which department RoHS legislation would fall, Lin said. He added that the responsibility for drafting RoHS will probably be established in 2008.

Meanwhile, China's RoHS is expected next year, putting some pressure on RoHS-less countries to avoid becoming a magnet for all undesirable products. Korea also issued its RoHS-like legislation earlier this year. "We are concerned that other countries will ship non-compliant products to Taiwan and dump them here," said Yu.

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