OUTLOOK 2005

Europe has caught "green fever," and the global nature of the electronics industry means the movement cannot be contained within the EU nations.

The Restriction on the Use of Certain Hazardous Substances in Electrical and Electronic Equipment Directive (RoHS) will carry the force of law on July 1, 2006. The Waste Electrical and Electronic Equipment Directive (WEEE) takes effect Aug. 13 of this year.

Meanwhile, Europe is preparing new legislation that is potentially more explosive than RoHS. The draft Registration, Evaluation and Authorization of Chemicals (Reach) directive "is a very big piece of regulation for all the semiconductor companies," said Philippe Levavasseur, engineering manager for corporate environmental safety standards at STMicroelectronics.

The proposed legislation would mandate that companies register some 30,000 chemicals to ensure the substances do not pose a health threat.

"Reach could create special disadvantages" to semiconductor companies, said Bruno Despujol, a Paris-based consultant for Mercer Management Consulting. Despujol noted that chip fabrication involves some 400 steps and requires 150 to 250 chemicals, many of them specialty substances. Substitutions are not easy to come by.

The worst nightmare for European semiconductor manufacturers is that their manufacturing base may have to move outside Europe, where Reach won't affect the availability of certain vital substances. ST's Levavasseur acknowledged the risk but quickly added, "We are doing everything we can to avoid that." Europe has made the "precautionary principle" the guiding force for chemicals review. In sum, decision-making must be based on the Hippocratic dictum, "First, do no harm." The belief is that such prudence prevents damage as more information on the substance is amassed.

George Auguste, corporate vice president for total quality and the environment at STMicroelectronics, acknowledged that ST has intensified its focus on the issue of chemical usage in recent years. "We aren't waiting" for legislation or legal decisions, he said. By creating a matrix that shows toxicity on one axis and exposure on the other, ST has developed its own definition of safety. ST had evaluated 90 percent of its production stations throughout the world, eliminating those it regarded as high risk.

When it comes to RoHS compliance, a number of chip vendors have begun announcing their readiness for lead-free solders and semiconductor packaging. IDT and Actel both recently stated that they are now offering 99 to 100 percent of their currently available devices in lead-free packaging. STMicroelectronics promises to be ready for full RoHS compliance for all products by the second quarter. Production and delivery of RoHS-compliant products has also begun at Japanese giant NEC Electronics.

In Europe, Philips, ST and Infineon have been RoHS leaders since 2001. They have formed a team called E3 (Environmental 3) to develop standards and definitions for lead-free products. Lead-free, as defined by the companies, means the product contains less than 1,000 parts per million of lead by weight. With the addition of Freescale Semiconductor, E3 became E4 last summer. The group's goal is to provide a high-quality drop-in solution for lead-free applications to all E4 customers. Member companies will share databases and methodologies, collaborate on standards and develop a common strategy for conversion to lead-free processes, according to the companies.

But a dearth of volume orders for green-produced chips suggests that system vendors are lagging in their switchover to environmentally friendly products. "We are in a waiting mode," said Anne Katz, vice president of worldwide assembly and test operations at IDT. She suspects that this is because system vendors are reluctant to carry double inventories. NEC Electronics said it is actively encouraging all customers to prepare for end-product compliance with the WEEE and RoHS directives.

Meanwhile, Actel tactical marketing manager Cindy Newell reported that Japanese customers have already initiated a requirement that RoHS-complaint products be available to meet the European directive's July 1, 2006, deadline.

NEC, Actel and IDT are among the majority of chip makers that say they plan to charge no premium for RoHS-compliant devices. Although the green chip will generally cost more to produce, IDT's Katz said the company will not pass on the extra cost to customers. "We expect the cost of green materials to come down within the next year or so," Katz said.

PERSON TO WATCH
A key framer of the European Union's environmental policy going forward will be Starvros Dimas, the European Commission's new commissioner for the environment. Europe's environmental advocates are always on the alert for attempts by EC commissioners and European Parliament reps to subordinate the green agenda to "competitiveness." Thus the frequent utterance of that word in recent speeches by Dimas and other commissioners has environmentalists on edge.

Dimas, a native of Greece, studied law and economics in that country as well as the United States. He has worked as a lawyer for the World Bank and Sullivan & Cromwell, a Wall Street law firm. Since 1977, he has served 10 consecutive terms in the Greek Parliament.

When asked about his priorities as environmental commissioner, Dimas said that they are "to combat climate change, protect biodiversity, deal with the environmental factors that are harming human health and find the path to more sustainable patters of production and consumption." He also intends to see "a successful outcome" negotiated for the EC's Reach proposal on chemical policy.

"We do need a new regulatory framework for chemicals," Dimas said. "Such a framework should be workable and should reconcile health and environmental issues with competitiveness."

There's that word again.

COMPANY TO WATCH
Nokia's practice of pushing an activist environmental agenda is not just a cultural reflection of its corporate origins in Finland, one of Europe's "greenest" nations. It is a policy that makes "better business sense," said Kirsi Sormunen, vice president for environmental affairs at the company.

Nokia looks to anticipate regulations rather than resist them. It recently volunteered to cooperate with the European Commission in a pilot project, called the Integrated Product Policy (IPP), that seeks to encourage greener consumption in Europe throughout the life cycle of products and services. While life cycle management remains high on the agenda for many electronics companies, Nokia regards its participation in the IPP as an opportunity to strengthen its connection with the European Commission and the European Parliament.

By actively engaging in the dialogue, Sormunen said,"we would like to have the voice of our industry heard better. "

AT A GLANCE
Population (2002): 379 million
GDP (2002): $9,566 billion
GDP growth rate (2002): 1.1 percent
Major exports (2002): agricultural
Forecast share of world semiconductor market (2004): 18 percent
Leading technology: 90-nm CMOS process from partners STMicroelectronics, Philips and Freescale
Top semiconductor companies: Infineon, STMicroelectronics, Philips Semiconductors
Favorite pastime: soccer
Best local dish: chateaubriand
Sources: Global Insights and World Bank, WSTS, IC Insights, EE Times