SAN FRANCISCO—The U.S. electronics supply chain is unprepared to comply with federal conflict mineral disclosure requirement that goes into effect in less than two years, according to market research firm IHS iSuppli.
Roughly 90 percent publicly-traded U.S. component manufacturers have thus far not produced the data or documentation to fulfill the new regulatory requirement to detail the presence of so-called conflict minerals in their supply chains, according to IHS. The rule requires firms to file their first disclosure reports by May 31, 2014.
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Conflict minerals—those mined in conditions or armed conflict and human rights abuses—include tin, tantalum, tungsten and gold. These minerals are used in a wide range of components across the electronics supply chain, according to IHS.
In August, the Securities and Exchange Commission (SEC) approved a final rule that implementing conflict mineral requirements mandated by the 2010 Dodd-Frank Act. Under the terms of the SEC ruling, publicly traded electronics companies must disclose whether they use conflict minerals in their products and must state what efforts they have undertaken to ensure that their use of the raw materials does not contribute to human atrocities in the Democratic Republic of the Congo and adjoining countries in Africa.
According to IHS, conflict minerals are employed in all kinds of electronics products, from cellphones to hearing aids, to pacemakers and jet engines. For example, the firm estimates that 15 cents worth of tantalum was contained in every smartphone shipped when Dodd-Frank was signed in 2010. In 2012, this would amount to $93 million worth of tantalum in smartphones alone, the firm said.
"Large electronic original equipment manufacturers use tens of thousands of parts that must be examined to determine their conflict mineral content," said Rory King, director, supply chain product marketing at IHS.
Given the size and complexity of the task, King said the roughly 19 months remaining until the rule goes into effect is not a great deal of time for firms to communicate, collect, analyze and prepare information on mineral sources across a globally diverse, multi-tier supply chain.
According to IHS, the SEC rule directly applies to an estimated 5,994 companies that file reports to the SEC and to hundreds of thousands of their suppliers.