Legislation Impact on the EMS Industry
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MANUFACTURING
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© 2006 Sanmina-SCI Corporation. Sanmina-SCI is a trademark of Sanmina-SCI Corporation.
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Agenda
 Legislation Evolution
 Key Focal Points
 Challenges
 Asset Management
 Supply Chain
 Manufacturing Capacity
 Exemptions
 Due Diligence Considerations
 Engineering Concerns
 Cost
 Key Actions
 OEM
 Supply Base
 EMS Partners
 WEEE
 Summary
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RoHS and WEEE Legislation
China
 Has a draft in place which is projected to be put into law by the end of calendar
year 2006
USA – Maine
 Has put a WEEE process into law
 Manufacturers of computer monitors and televisions only
USA – California
 Projected to put RoHS into place in the next 12 to 24 months
 Currently has a WEEE law (SB20)
USA – Maryland
 Has a WEEE law in place: Beginning January 1, 2006, the pilot program requires
computer manufacturers to register with the state of Maryland before they are
allowed to sell new computers in the state.
Japan has been removing lead from EEE since 1998
Japan – WEEE Laws - Established June 2000/2001
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Use of recyclable resources and reusable parts
Design for product longevity
Design for disassembly
Home Appliance Recycling law
Europe is the prime focus today but many other countries are following suit.
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Geographic Evolution
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Legislation Focus
Why is focus on compliance critical?
 Penalties and fines are planned for those corporations and individuals that
do not comply.
 An EMS firm has to protect its customer base and itself.
 A customer subjected to “stop ships” will drive mutually unsatisfactory
distribution efforts.
- The “Sony Playstation event”
 An EMS provider is exceptionally well-positioned to assist the customer in
compliance.
- The EMS provider resides in the “center of the supply chain.”
 Compliance-related processes must be put in place that demonstrate due
diligence.
- Customer base
- EMS organization
- Supply base
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Challenges and Opportunities
Legislation volatility
 Geographic variability
 Implementation timing/strategies
 Interpretation
Supply chain readiness
 Data acquisition
 Component availability
Customer direction
 Exemption uncertainty
 Component availability
 Product design capability
Resource availability
Capacity balancing
Business opportunities
 Component alignment/design rationalization
 First out-of-the-gate
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Challenges – Asset Management
Risk
 Supply transition
- Drives duplicity
 Error potential is significant
 Excess and obsolete inventory a concern
 Customer relationship
 Cost
Mitigation strategy
 Intimate customer coupling ASAP
- Transition timing
- EOL strategy
- Portfolio attributes
 Automation of information database
- Spreadsheets cannot do the job
 Source real-time legislative insight
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Act NOW
Challenges – Supply Chain
Areas of focus
 Some suppliers are not changing part numbers
 Cost
 Integrity of supply
Mitigation strategy
 Customers
- Understand strategies today
- Drive release of RoHS-compliant BOMs
- Need to drive customers to release RoHS-compliant
BOM/AVLs with enough time to drive suppliers
- Product redesign lengthy alternative
 Materials management
- Prepare transitional plans and determine segregation
strategy
 Suppliers
- Understand capability NOW
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Challenges – Manufacturing Capacity
Capacity constraints during the 2006 transition
year will be challenging
 Lead-free manufacturing
- SMT and T/H equipment deployment
- Expected lead time of up to six (6) months
 Hex-chrome free manufacturing
- Plating lines retrofit
 Surge of demand for both RoHS-compliant and
non-compliant products considering current limited
visibility for demand
 Unknown process or technology-related capacity
constraint issues
- Line down
- Increase in set-up time
- New technical issues
 The tin whiskering debate
 Capital equipment lead time
 Demand mix volatility
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Challenges – RoHS Exemption Considerations
Component availability
 Component availability – Most vendors have indicated there will be a short
overlap of lead-based and lead-free components before switching to lead-free
only.
 We do not see this as a major issue for most components.
BGAs
 All lead-free BGAs are using a SAC alloy ball [Tin(Sn)-Silver(Ag)-Copper(Cu)
 BGAs cannot use a mixed process – lead-free BGAs in a lead-free process and
lead-based BGAs in a lead-based process only.
 Some new BGAs are being released in lead-free only packages.
 Can become a bottleneck to maintaining the exemption.
Many companies are choosing not to use their exemptions. Why?
 Component reasons – key components no longer available in a leaded format.
 Market strategy – customers want to be viewed as a “green company.”
 Many are unwilling to qualify products twice, first in a lead-free assembly stage,
and then subsequently in the lead-free assembly stage, plus lead-free
components.
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Due Diligence Considerations
 Documentation from the Supply Base
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Certification to ensure constituent substances
Upstream considerations
Analysis and verification
Supply base integrity assessment
 Customer Direction
 Documented direction (business as usual)
 ECN = Fundamental basis of change control
 Customer variability
 Geographic dependencies
 Divisional dependencies
 Portfolio centric
 EMS Certification
 Downstream customer requirements
 Verification procedures
 Integrity of full cycle due diligence
 Legislation Evolution
 Geographic centric (WEEE)
 Regional dependencies
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Engineering: Why Do We Care About Tin
Whiskers Growth?
These whiskers can become large enough to short across two lands
and can carry sufficient current to cause equipment malfunction.
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Engineering: Process Control
Quick Test: Which BGA is lead-free?
The inside structure of the solder joints
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Lead-Free Solder Joints
BGA
BGA
BGA
PTH
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Cost Considerations
Equipment
 75% of reflow ovens, 100% wave soldering equipment, over 65% of rework
equipment need to be replaced
 Estimated cost of equipment, support software and hardware upgrade and
replacement can be as high as $4M/manufacturing site
 Deployment of control instruments and tools for hazardous material
detection and monitoring will require sizable investment (as high as $100K
per site)
Manufacturing Process Qualification
 Manufacturing capabilities Gap Analysis including equipment, process,
material and skill
 Test vehicle design
 Process development, validation and audit
 Manufacturing system deployment, verification and audit
 Skill curriculum development, training and certification
 Qualification run, result analysis and reporting
 Certification
 Average cost of qualification per site is about $350K
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Cost
Compliance is not free
 Industry will incur costs complying with legislation
Supply base
 Incremental effort expended on conversion
Manufacturers will see increased costs
 Transitional incremental resource allocation
 Training
 Process development/upgrades
- Capital
- Engineering resource allocation
 Documentation software and programming
 Incremental audit and reporting activity
Mitigation strategy
 Work with suppliers and customers NOW to create
transition plans
 Optimize use of exemptions
- Product or geographic-based
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Key Actions: OEM
Assign the resources
 Empower the resources
Strategy and planning
 Are you going to be compliant?
 If so, how?
Will you exercise your exemptions?
 Build two versions of your products?
Determine outsourcing partner
 AVL alignment
 Product design alignment
 Navigation of the choppy waters
Supplier selection – RoHS-capable
 Qualify new components/suppliers
Determine and implement audit strategy
Closely follow legislation evolution
Start NOW
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Key Actions: Supply Base
RoHS-complaint products in production by Q2-05
Continued availability of pre-RoHS parts
Full traceability of compliant components
 Component part number (MPN) changes
 Component and packaging identification per JESD97
Warranted compatibility of pre-RoHS and RoHS-compliant
components
Quality and reliability equal to or better than pre-RoHS
Supplier process integrity to prevent contamination
“Certificates of RoHS Compliance” with each product shipment
Continued communication regarding:
 RoHS-compliant part number (P/N) alternatives
 Supplier roadmaps, schedules and sample availability
 Product transition notifications (ECN/PCN)
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Key Actions: EMS Provider
The EMS supplier will play a different role to every customer.
 The EMS role can either be the Brain, the Brawn, the Voice to the
Supplier or a complete Turnkey Approach.
 Sanmina-SCI Green Services
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 Planning
- RoHS Planning
- WEEE Planning
- End-of-Life Planning
 Products and Components
 Manufacturing
- Lead-free Soldering
- Dual-processing/inventory
- Process qualification
 Component Engineering
- BOM Analysis
- Supplier Selection
 Reverse Logistics
- WEEE Processing
- Take Back and Analysis
- Repair and Refurbish
- Disassembly and Tear Down
- Recycling
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- Viking memory modules
- Optical modules
- Cables
- PCB Fab
- Backplanes
- Newisys products
- Enclosures
 Design
- Design for RoHS
- Design for WEEE
- Design Assessment and Cost
Reduction
- Marking and Documentation
- Product Qualification
Impact of WEEE
Recycling efforts to be demonstrated
 Aug 13, 2005
 Jan 1, 2006
WEEE affects the “producer”
 The product brander
 The importer/exporter of record
 The distributor
 The manufacturer in Europe
Requirements
 Label products advising WEEE recycling
capable
 Demonstrate capability to recycle 75% by
weight of EOL product
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Summary
RoHS / WEEE and variants are here to stay
worldwide
RoHS compliance is not a mathematically taxing
issue
 Make a product out of compliant components
 Ensure the assembly process is compliant
 Be able to prove the above
WEEE will be challenging for the industry
 Partner with a trusted organization
Legislation tomorrow will not be what it is today
 Monitor legislative needs in real time
Assign the resources
Do it NOW
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Remember …
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Thank You
ELECTRONICS
MANUFACTURING
SERVICES
© 2006 Sanmina-SCI Corporation. Sanmina-SCI is a trademark of Sanmina-SCI Corporation.
All trademarks and registered trademarks are the property of their respective owners.