Parts shortages expected as worldwide markets get ready for more legislation
Electronic equipment and computer manufacturers need to invest in research and development to align their products with future ‘green’ regulations, not just those in force today, according to Gartner, as more governments around the world impose regulations on substances that may harm the environment.
On 1 July 2006, the European Union’s Restriction of Hazardous Substances (RoHS) directive came into effect, which stipulates that manufacturers whose products contain certain hazardous substances will face removal from the market and potential heavy fines. In January 2007, the Waste of Electrical and Electronic Equipment (WEEE) directive comes into effect, imposing strict regulations on the way electrical equipment can be disposed.
The European regulations are just the first of many. China has passed its own, more stringent version of RoHS which comes into effect on 1 March 2007. Japan has had a law in place since 2000 and recently passed amendments that came into effect on 1 July 2006. Gartner expects South Korea, Australia, China and California to be among the first to implement further ‘green’ legislation.
Meike Escherich, principal research analyst at Gartner, says manufacturers should standardise on the most-stringent legislation and anticipate ‘green’ concerns to avoid production problems, as more countries move to adopt such directives.
“Failure to transition products on time can lead to high inventories and dramatic price cuts, similar to the effect we saw in Western Europe as the RoHS came into effect,” said Ms Escherich. “Non-compliant components will be gradually removed from the global supply chain and force manufacturers to discontinue products that contain them.”
Currently, only 43 percent of the PC installed base worldwide is affected by RoHS regulations, leading some manufacturers who ship only into the United States, the Middle-East and some other non-European countries to feel they need not concern themselves with it. However, Gartner believes such legislation will have a worldwide impact as component manufacturers can no longer justify separate production lines for ‘green’ and ‘non-green’ parts.
“Not far from now, ‘non-green’ parts will be assigned end of life status and green legislation will come to impact every single PC manufacturer,” said Ms Escherich. “The worldwide market should expect to see longer lead times, part shortages and rising prices for non-compliant parts over the next two years.”
As a result, Ms Escherich advised enterprises to ensure they have an adequate supply of required parts and systems during the transition period.
“European organisations should be prepared to specify products free of lead and other hazardous substances in requests for proposals now, and we recommend that global and multi-regional companies plan for an orderly transition to compliant products in 2007,” said Ms Escherich. “Good record-keeping is important to demonstrate compliance to enforcement agencies if required.”
Equipment manufacturers must look for ways to go beyond the requirements of ‘green’ legislation, according to Gartner. For example, the added cost of recycling is driving designers to allow for the most effective means of recycling their products, and increasing consumer awareness will allow for market differentiation based on ‘green’ features.
Hazardous substance restrictions form just one part of the legislative response to environmental concerns. Disposal and recycling of electronics and computer products is another primary focus. Worldwide, 23 countries currently have take-back laws for electronics, each a little different from the other. Within five years, Gartner expects at least 30 countries will have such laws.
Additional information is available in the Gartner Dataquest Insight "Facing the Challenge of Worldwide ‘Green’ Legislation" which can be found in the Computing Hardware section of Gartner's Web site at http://www.gartner.com/it/products/research/asset_129157_2395.jsp
Gartner, Inc. (NYSE: IT) is the world's leading research and advisory company. The company helps business leaders across all major functions in every industry and enterprise size with the objective insights they need to make the right decisions. Gartner's comprehensive suite of services delivers strategic advice and proven best practices to help clients succeed in their mission-critical priorities. Gartner is headquartered in Stamford, Connecticut, U.S.A., and has more than 13,000 associates serving clients in 11,000 enterprises in 100 countries. For more information, visit www.gartner.com.
Comments or opinions expressed on this blog are those of the individual contributors only, and do not necessarily represent the views of Gartner, Inc. or its management. Readers may copy and redistribute blog postings on other blogs, or otherwise for private, non-commercial or journalistic purposes. This content may not be used for any other purposes in any other formats or media. The content on this blog is provided on an "as-is" basis. Gartner shall not be liable for any damages whatsoever arising out of the content or use of this blog.