Are you ready for supply chain conflict?

aspenNew legislation from the USA regarding ‘conflict minerals’ is set to impact the global electronics industry. Aspen Electronics‘ Howard Venning asks how the ruling will affect the supply chain

The US Securities and Exchange Commission (SEC) has adopted a rule that requires companies to publicly disclose their use of ‘conflict minerals’ that originated in the Democratic Republic of the Congo (DRC), or an adjoining country. This legislation will have a major impact on the world electronics industry, with distributors of electronic components particularly hard hit.

Fundamentally, ‘conflict minerals’ are those mined in conditions of armed conflict and human rights abuses, most notably in the eastern DRC. Any company that reports its results to the SEC, must file a ‘conflict minerals disclosure.’ They must work through the supply chain asking: whether products contain any ‘conflict minerals’ and if so, is it possible to guarantee they have not come from the DRC or adjoining country?

Inevitably this task is far reaching and time consuming. It could mean going through many suppliers, some of whom may be private companies located in third-world countries, and if the metal has been recycled, as gold often is, it could get even trickier to track.

Which minerals?

So which minerals are in question and where are they used?

Gold is the biggest source of conflict mineral trade in Congo and is primarily responsible for the ongoing conflicts. Corruption is rife and thousands of small-scale unofficial mines scatter the country. Gold is used to plate contacts to ensure they are corrosion resistant and therefore reliable. In RF/microwave components, gold is used to plate circuits and housings, while any microcircuits that use wire bonded contacts, use gold plating to ensure a good base onto which leads are soldered.

Columbite-tantalite, or coltan, is a black tar-like mineral, which when refined, becomes a heat resistant powder, called tantalum, that can hold a high electric charge. When used in capacitors, tantalum characteristics include high capacitance to mass, low equivalent series resistance (ESR), low leakage and high temperature. As such tantalum capacitors are found in a range of products spanning commercial, professional and high-reliability circuits.

Cassiterite is a tin oxide mined extensively in Congo. The electronics industry has been lead-free for a number of years and tin has replaced lead in the vast majority of solders. As such, any component and/or circuit that has been soldered as part of its production process will contain tin.

Tungsten is a dense metal used in light bulbs, TVs and mobile phones.

Who is affected?

For a distributor that supplies a range of components from different manufacturers, their portfolio is bound to contain some, or all, of the above conflict minerals. They then have to get written confirmation from all suppliers confirming that the minerals used do not come from the DRC.

At this point the electronics industry grinds to a halt due to administration. There is no ‘de minimis’ rule within the legislation. In fact, congress stated that such a ruling “would have created an over generous loop hole.” So no matter how small the quantity of any of these conflict minerals, all suppliers will have to comply with the legislation.

In short, the legislation has been written to ensure that literally everyone in the supply chain must comply. Hopefully this will be a short term problem as major suppliers will publish a conformance statement to which everyone in the supply chain can refer. Even so, it’s wise to be prepared for some serious compliance work.