RoHS is a challenge and an opportunity for FlexOne Technologies
James Carbone -- Purchasing, 9/7/2006 2:00:00 AM
Key products: medical diagnostic products, control systems for oil pipe lines, GPS systems, various defense systems assemblies
For FlexOne Technologies, a small but growing electronics manufacturing services (EMS) provider, the European Union's Restriction of Hazardous Substances (RoHS) law, has been both a challenge and an opportunity.
RoHS is a European law that bans the use of lead, mercury, chromium and several other substances in electronics equipment sold in the European Union. FlexOne specializes in prototype and low-volume, high-mix builds and has seen an uptick in demand from OEMs seeking RoHS-compliant services. However, RoHS has also been challenging for FlexOne because it had to invest in new equipment to handle RoHS-compliant parts and soldering processes.
FlexOne, based in San Jose, Calif., builds printed circuit boards, parts and subsystems for OEMs in a variety of industries including medical, defense, industrial control and communication. It builds medical camera interface assemblies, global positioning satellite (GPS) systems for golf carts, control systems for oil pipelines and various products for the U.S. armed forces. Its annual sales revenue is less than $5 million, but is growing due in part to RoHS.
“There's no question that RoHS has generated new business for us,” says Allan Knox, the program manager at FlexOne who is in charge of purchasing at FlexOne. “Customers find themselves forced to change their products for the worldwide market to make them RoHS-compliant. They ask us to give them a hand or to build a new product for them.”
Knox says OEM customers often are not clear about the requirements of RoHS and look for advice from EMS partners with more experience. “Often customers ask us to do a bill of material (BOM) analysis. We go component by component and verify whether they are compliant. If parts are not compliant, we look at the specs of part and find the equivalent parts that are RoHS compliant,” says Knox.
He says FlexOne gets help with analyzing BOMs from electronics distributors. Because of its high-mix, low-volume business model, FlexOne buys the bulk of the components it needs from distributors, including Digi-Key, Arrow, Future, Mouser and Allied among others.
Sheik Ahmed, CEO of FlexOne, says while RoHS has generated some new business opportunities, the European law has proven to be expensive to his company and other EMS providers. He says companies have had to purchase new equipment to build printed circuit boards that use lead-free solder and RoHS-compliant components. New equipment is needed to place and solder parts on boards because lead-free solder has a different melting temperature than tin lead solder. The melting temperature for lead solder is 183 degrees Celsius compared to 217 degrees for lead-free. Such equipment costs about $100,000. In addition, the price of the lead-free solder is also higher.
RoHS has also required FlexOne to train its employees on lead-free processes. For instance, employees need to know when a solder joint is robust or not by looking at it. A good tin-lead solder joint looks bright and shiny, but a lead-free solder has a more dull appearance.
While it has invested in new equipment and trained employees about RoHS-compliant materials and processes, FlexOne must also continue to build systems that contain lead because many of FlexOne's OEM customers don't sell into Europe.
“Right now 25% of our business is for RoHS-compliant products,” says Ahmed. While that percentage will increase over the next several years, Ahmed says FlexOne will have to build noncompliant products for years for its customers in the U.S. selling only in North America. In addition, some of its customers—like medical equipment makers—are exempt from RoHS.
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