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EU law could hurt sales

The nation's electronics industry could lose up to 10 percent of its output value to the EU as many manufacturers have yet to comply with the EU's new environmental regulations, which come into effect in July, according to a recent estimate by the Industrial Development Bureau.

Starting on July 1, the EU will implement its Restriction on Hazardous Substances (RoHS) Directive, which effectively bans six substances, including cadmium, mercury, hexavalent chromium and lead, from electrical and electronics products.

Among the 972 companies listed in Taiwan that export their goods to the region, 164 of them were still unprepared for the new rules, the bureau said, without specifying which companies.

Taiwan exported nearly NT$250 billion (US$7.7 billion) of electrical and electronics goods to the EU last year. Should these companies remain unable to meet the requirement when the directive comes into effect, orders worth about NT$25 billion may disappear each year, the bureau estimated.

To help these manufacturers, in particular small and medium-sized ones with limited financial resources, the Ministry of Economic Affairs has launched two initiatives -- the "Green Project" and the "GP User Group" -- to help establish a management system for electronics makers to build green supply chains in order to comply with the directive.

As the six substances banned by RoHS, especially lead, are widely used in products such as printed circuit boards, motherboards and power cords, companies need to find feasible and affordable replacement substances. But alternative substances, along with new technology and equipment, will significantly increase production costs.

Environmental awareness has also spread outside the EU, so that countries including the US and China are pushing through legislation similar to the RoHS act. Major multinational electronics companies such as Sony Corp, Dell Inc and Hewlett-Packard Co have set up their own green procurement standards.

"We are still working with these companies to help them meet the standard, and hope to complete the process by the end of April," said a bureau official who declined to be named. "To win orders from these big companies, local companies must build their own green supply chains."

Companies devoted to environmentally friendly manufacturing and related businesses have been reaping the benefits as the introduction of the new rules has approached.

Integrated Service Technology Inc (宜特科技), a lead-free reliability verification services provider, reported that pre-tax earnings for the first two months of the year grew by 72 percent to NT$21.34 million from a year ago, or NT$0.55 per share. Its shares were up by the 7 percent limit to NT$61.7 at the close of the market yesterday.

Shenmao Technology Inc (昇貿科技), whose lead-free soldering material has obtained certification from both Dell and HP, saw margins grow up to 25 percent for the first two months from 21.8 percent last year. Shares of Shenmao advanced 3.55 percent to NT$131.5 yesterday.
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