RoHS has cost the electronics industry more than $32 billion

The average cost for a company to meet RoHS requirements was $2.6 million.

By James Carbone -- Purchasing, 4/18/2008 8:41:00 AM

A survey of OEMs, electronics manufacturing services (EMS) providers and component manufacturers finds that initial compliance to the Restriction of Hazardous Substances (RoHS) initiative cost the electronics industry $32 billion.

The study by Technology Forecasters for the Consumer Electronics Association (CEA) says the average cost per company was $2,640,000 to achieve initial compliance and another $482,000 for annual maintenance. Total compliance cost for the industry totals 1.1% of industry revenue, according to the study.

RoHS went into effect July 1, 2006. It restricts the use of lead and five other substances from being used in electronics equipment sold into the European Union.

TFI, based in Alameda, Calif., sent the online survey to more than 1,000 companies including OEMs, EMS providers and component manufacturers. More than 200 companies completed the survey.

The survey also finds that RoHS resulted in higher inventory and product costs.

Fifty-seven percent of the companies surveyed reported a rise in inventory. The average increase in inventory was 21% and the average reported cost for carrying the inventory was $688,000, according to the TFI study.

Seventy-seven percent reported an increased component, module costs and manufacturing costs because of RoHS. The average cost increase was 11.6%.

To comply with RoHS, companies dedicated 5-10 full-time equivalent employees. Those employees were drawn from existing internal resources. Few companies hired addition employees for RoHS compliance, says TFI.

About 29% of companies surveyed reported lost sales due to RoHS with the average loss being $1.84 million. Sales losses were due to delay in new product sales and discontinued business in the EU. The cost of compliance was higher for large companies than small ones. The average cost of compliance for companies with greater than $1 billion in sales was $6.5 million. For companies with annual revenue of between $100 million and $1 billion, the initial cost of compliance averaged $2.9 million, according to the study. 

Almost half of companies surveyed said there was at least one advantage to RoHS. Nearly 25% said an advantage was the company improved its supply chain process. About 20% said an advantage was that the company reduced its number of products. About 15% said an advantage was the company gained market share because of RoHS.

Also see: Supply of RoHS parts tightens