Electronics manufacturers have a long way to go before meeting the requirements imposed by regulators for the use and production of conflict minerals, according to a new research report from industry watcher IHS Corp.
The research firm said up to 90 percent of electronic companies "have not produced the data, declarations, or documentation that will help fulfill regulatory requirements detailing the presence of such minerals in their supply chains." IHS added those minerals -- including tantalum, tungsten and gold -- that are used in the production of a wide range of electronic equipment and are heavily mined in war-torn parts of Africa, with proceeds furthering the conflicts (hence the term "conflict minerals").
US regulators have taken steps over the last two years to end the use of minerals produced illegally in places like the Congo and have succeeded in imposing strict rules on both the suppliers and end-customers of the raw materials. OEMs and component suppliers must now certify the sources of such minerals used in their equipment and offer proof that they were not patronizing illegal miners. The rules are enshrined in Section 1502 of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. A final ruling on the implementation of the Dodd-Frank Act was issued by the US Securities and Exchange Commission in August.
While suppliers and their end-equipment maker customers still have almost two years to achieve full compliance, industry organizations like IHS have been busily tracking compliance levels. Since the rules have been in effect for quite a while, it had been expected that manufacturers would be further along in scrubbing their operations of these products. At the very least, they were expected to demonstrate and be able to provide documentary evidence showing a higher level of compliance.
"Large electronic original equipment manufacturers (OEM) 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, in the statement. "The next 19 months really is not very much time to communicate, collect, analyze, and prepare information on mineral sources across a globally diverse, multi-tier value chain, in order to determine conflict minerals content and develop reports that comply with the SEC rule."
The IHS report represents another black eye for the industry. Leading industry associations such as the IPC lobbied the SEC and politicians to grant electronics manufacturers additional time to achieve compliance. The IHS report seems to imply manufacturers are either not too concerned about the implications of the SEC guidelines or believe they still have adequate time to comply with the requirements.
The researcher said its investigations show only 11.3 percent of the companies polled had information available on their use of conflict minerals. The group represented companies that "account for 17.1 percent of active electronic components on the market." IHS said further:
Utilization of conflict minerals is widespread in the electronics market, employed in all kinds of products, from cellphones to hearing aids, to pacemakers and jet engines. For example, IHS estimates that $0.15 worth of tantalum -- a conflict material -- was contained in every smartphone shipped when Dodd-Frank was originally signed in 2010. In 2012, this would amount to $93 million worth of tantalum in smartphones alone.
The number of companies affected by the SEC guideline on conflict minerals is immense. Up to 6,000 companies may be directly affected, with another set of companies (numbering in the hundreds of thousands) indirectly affected either as suppliers to the initial group or as support services providers. This could hurt the electronics supply chain if the SEC starts enforcement when the industry isn't prepared to demonstrate compliance, IHS said.
"IHS has been gathering information on conflict minerals for more than two years," said Greg Wood, director, product management for IHS, in the statement. "Our conflict mineral data is not based on a survey or estimate, but rather was developed using data provided directly from companies, including environmental declarations, part descriptions and compliance documents. IHS has led the way on conflict minerals and has begun to incorporate conflict minerals documents, declarations and descriptions into our innovative solutions."
That's the scary part. If the IHS numbers are not based on estimates and represent actual figures showing the level of industry compliance, all segments of the electronics supply chain could be in for a rough ride over the next 18 months as companies tighten compliance requirements. If OEMs -- waking up to the legal jeopardy they could face from regulators -- suddenly require documentation on conflict minerals from an unprepared supply base, their entire operations could grind to a halt.
While the regulatory deadline may be important, companies could also face challenges from continuing efforts to remain compliant with the conflict minerals guideline. By setting up and testing the processes for compliance now, companies can ensure their system and operations remain in constant compliance with regulatory requirements. Their public image and the bottom line could be hurt if they can't continue to maintain compliance.
"Although the DRC has 60 percent of Africa's hydroelectric potential, only 7 percent of the country's population has access to electricity."
That's a real concern. The leadership is "probably" living in opulence while the majority of the population is living in poverty and want - . What do we call that? I can't help thinking that most of the concolese people problems are caused by bad leadership and the lack of vision. Soun like "the beautiful ones are not yet born".
Agree Hospice Houngbo the DRC should be a very rich country there is plenty of potential outside the mineral sector, the DRC should be able to feed most of Africa and supply all of it with electricity.
Something that is often missed by critics of a crack down on the mineral trade.
http://www.tradeinvestafrica.com/news/310850.htm "DRC has 120 million hectares of fertile land out of which only 2% are currently cultivated. The agreement is part of the government's efforts to improve food security,"said Prof. Buabua
http://www.anapi.org/en/spip.php?article607 Over 120 million ha of arable and fertile land conducive to agriculture are concentrated in DRC. The weather allows a wide scale spread of agricultural activities throughout the year.
The DRC government requested Namibian farmers to farm on vast swathes of unoccupied arable land available in that country and to engage in both crop production and animal husbandry to benefit both countries and to improve food security.
http://www.mbendi.com/indy/powr/af/zr/p0005.htm
Although the DRC has 60 percent of Africa's hydroelectric potential, only 7 percent of the country's population has access to electricity. Lack of local demand has led the DRC to export to SINELAC, Angola, Burundi, the Congo, Rwanda, Zambia and Zimbabwe.
In 2001, electricity production was 5.243 billion kWh, of which 3.839 billion kWh was consumed and 1.097 billion kWh was exported.
The DRC has the potential to produce 150,000 megawatts of power, approximately three times Africa's present consumption.
The Congo river is the most magnificent wealth of the country. Second only to the Amazon river in terms of water volume, it stretches a distance of almost 4,300 kilometres. For electricity production as well as water, the potential of the Congo river remains largely unused.
Thanks for the article. It is true that many laws need to be revised in the country including the laws governing land ownership. It is sad to hear that "it is difficult for local people to find anywhere to grow their crops" when we know that DRC possesses very vast areas that are yet to be exploited.
Came across an article that might interest you Hospice Houngbo. Some efforts are taking place but the money from the conflict mineral trade seems to make every other problem worse making it too easy to turn to the gun to settle disagreements.
GOMA - Farmers organizations have been meeting in the eastern Democratic Republic of Congo to discuss changes to the country's land law, which is being revised. Experts say the current law, mainly dating from colonial times, is out of date and failing to prevent conflict. The land problems are acute in the country's North Kivu province...
I can see you are a very wise and objective person. You are right when you said that the international community should unite to fight criminal activities, but we should not forget that the task may be much easier if social justice is first enforced in unsable regions.
Anna Young/Hospice Houngo think politicians minds are suddenly concentrated when it is their future at stake so you can certainly bet they care now!
Agree that many DRC institutions are not that strong and certainly they cannot handle the international problem of the conflict mineral trade on their own.
The reality is that reforms in general governance in the DRC are going to take years if not longer and anyway can happen at the same time as reforms elsewhere.
Even if the DRC was a better functioning society it might still struggle, if you look at the drug trade plenty of better governed countries have trouble dealing with it and it takes multinational cooperation to make sure the problem is not even worse.
In the same way people should not buy drugs that will go to finance terrorists and criminal gangs there should be the same concerns about conflict minerals.
Who's going to take the lead in instituting the reform you suggest? The government of the Congo has a civil war on its hands and may not even care about the reforms you suggest.
You are right. The antidote for bad governance is for the international community to get involved but we've seen with the example of Somalia that this doesn't always work out. It would be a nightmare in the case of the Congo. So, we are left with the tinkering of Dodd-Frank.
The new government rules and regulations may prove to be a double-edged sword: achieving some positive goals but costing organizations a great amount of money and work and, perhaps, lost sales as well.
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Thailand Stages a Comeback Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
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Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
While no one really can accurately predict the future, we can take guidance from another Drucker saying which is the best way to predict the future is to create it.
You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
Where are these people? Are universities properly preparing the next generation supply chain professionals? How do train your existing workforce for these new, demanding positions?
Brian Fuller, editor-in-chief of EBN, will lead a 60-minute Avnet Velocity panel discussion that will ask and answer these and other questions swirling around today's supply-chain talent challenges.
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