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.
The reality is that the more things are delayed the more people are going to die it is that simple.
Do people really agree with the American chamber of commerce and NAM who want to let things continue to go downhill till we are looking at hundreds of thousands deaths again, just because new rules seem burdensome?
Time has already run out....
The latest round of fighting in eastern Congo has been triggered by a new rebellion known as the M23, which is led by indicted alleged war criminal Bosco Ntaganda and backed by theRwandan government.
Bosco Ntaganda, a career warlord, made a fortune trading conflict minerals in the years leading up to his latest insurrection.
According to UN investigators, the M23 has also been receiving financial support from minerals traders in Rwanda. Since April this year the fighting has displaced nearly half a million people.
Rwanda vigorously denies the latest allegations contained in the report of a panel charged with monitoring Congo's arms embargo, which said Kabarebe has armed and given military backing to the M23 rebel movement.
Fighting between M23 and Congo's army has displaced nearly a half million people. The Tutsi-dominated insurgency, which took up arms in April, is expanding its control over parts of North Kivu province with additional financing from Rwandan businessmen trading in smuggled Congolese minerals, the report stated Previous U.N. reports have documented lucrative smuggling rackets ferrying coltan, tin, gold and tungsten ferried across to Rwanda.
At the height of Congo's last war in 1999, profits from eastern Congo's mineral fields contributed some $320 million to Rwanda's defence budget, U.N. experts said.
Congo's Information Minister Lambert Mende says the pattern of war for mineral wealth has resumed, and the latest rebel campaign is an extension of a Kigali-backed "war of pillage".
"The (Rwandan) mafia profit to the maximum from the disorder, not paying anything to the Congolese state," he said.
Noel Twagiramungu, a Rwandan human rights activist who fled his country in 2004 when civil society groups came under pressure, also said money was at the root of the intervention.
"I think we can say that Rwandan involvement in Congo minerals is a state-controlled enterprise," he said.
"Action this day" is the sticker that Winston Churchill would attach to documents in order to strongly communicate that he wanted something done, now.
@R.J.Matthews - Congo leaders shoud take responsibility and cease putting the blame on others. The situation is well over their head and they have shown their inability to protect their people.
If it was not for the conflict mineral angle the DRC could have dealt with the conflict that's the point Hospice. The M23 rebels numbered just a few hundred in April and were surrounded by government forces but they are being sponsored by Rwanda who benefits from the instability through the conflict mineral trade and the rebels are being financed through the conflict mineral trade directly.
The DRC are over their head with dealing with international supply lines funding the conflict which is alone which is why Dodd Frank is so important.
There are programs taking place within the DRC but without Dodd Frank they are likely to be undermined.
Noticed a lot of blame the victim posts as part of the Rwandan disinformation campaign hope you understand why they are advancing those arguments.
Rwanda should not being sponsoring a war and the international trade in conflict minerals should not be financing it, irrespective of the DRC's relative strength or weakness.
What I don't understand is why more companies are not offering evidence of their move towards compliance. The implications are obvious. Either these companies just don't care or believe they still have enough time. Whatever the case may be the impression created by the IHS report is that these companies aren't taking this seriously. Or, don't get how important it is for regulators and the public?
The research is a bit deceptive Bolaji as more progress has been made by the biggest firms.
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."
If you added up the market cap(size) of the firms that are taking action and compared them to the firms that are dragging their feet you would get a different picture so it is not a totally hopeless struggle.
http://www.raisehopeforcongo.org/companyrankings
The bigger firms are probably not anymore ethical than the smaller firms it is just they have a lot more to lose image wise.
Another reason is the whole thing has dragged on so long people will leave it to the last minute. It is a bit like Christmas it seems to start just after Halloween nowadays but you still get masses of people doing their shopping at the last minute.
Do not see the solution as pushing Christmas back to August!
R.J. Matthews, I hope you are right that the companies are just getting a late start. If that's the case (and these are responsible companies) then there shouldn't be any reasons to be worried. If the research is also not accurately showing what's already been done and what is being done, then that's even much better. Your analogy comparing this with Christmas is also great. Hopefully, shopping late will be as rewarding as the bargain early shoppers get.
Bolaji, There's another possible explanation. Perhaps these companies don't just want to talk with IHS. Maybe they are in contact with regulators and believe this is more than enough. I mean, how much value is it to them to talk with analysts.
You brought up a valid point. We know what Western companies should be doing and we have some idea of what exactly they are doing because of information from companies like IHS. What is the govenment of the Congo doing, does it agree it should halt the mining of conflict minerals in the ways the West find disturbing, does it have the means to police its territory and the ability to do it?
There are several other reasons as well Anna some firms will site on the sidelines till any legal challenge is cleared and others might be hoping that Romney (if he gets in) will trash any regulations that can be portrayed as anti business.
This is a bit naive as the issue will not go away unless it is dealt with and if it is not dealt with it will just move more and more into the spotlight as recent events in the DRC demonstrate. Also if activists cannot get enough action at a national level they are more likely to switch their focus onto individual companies that are dragging their feet on the issue.
The reason this has largely not happened before is that NGO would rather work with the electronic manufacturers and anyone else who can help unlike the American Chamber of commerce and some others who just try to block any progress.
I do not care personally who leads the way small companies, big companies, democrats, republicans, the tech industry or the jewellery industry. It would be nice to see a bit more leadership though.
Think you will see a lot more action in the DRC itself, as the longer present conflict goes on, the more political fallout there will be, especially if the conflict gets worse threatening to bring the DRC government down or a wider war.
"Rwanda should not being sponsoring a war and the international trade in conflict minerals should not be financing it, irrespective of the DRC's relative strength or weakness."
That`s right. If Dodd Frank can help prevent financing the warmongers in the DRC, it is fine. But I have the impression that the country's problems have more to do with bad governance than the failure to police the trade of the minerals.
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.
EBN Dialogue enables and encourages you to participate in live chats with notable leaders and luminaries. Not only editors and journalists, but the entire EBN community is able to comment and ask questions. Listed below are upcoming and archived chats.
Archived Dialogues
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.
Euro-Crisis: What It Means for High-Tech Firms Join EBN Editor in Chief Bolaji Ojo and Contributing Editor Jennifer Baljko on Thursday, July 12, at 10:00 a.m. EDT for a Live Chat on high-tech and Europe's economic difficulties.
Microsoft Surface: Potential Winners & Losers What are the implications for the electronics industry supply chain of Microsoft Corp.'s decision to launch its own tablet PC? Join industry veteran and EE Times' systems and OEM expert Rick Merritt on Tuesday, July 3, at 12:00 pm EDT for a Live Chat on this subject.
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.
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.
To save this item to your list of favorite EBN content so you can find it later in your Profile page, click the "Save It" button next to the item.
If you found this interesting or useful, please use the links to the services below to share it with other readers. You will need a free account with each service to share an item via that service.
Tweet This