Semi-Conductors from the Philippines - CiteSeerX

GLOBAL PRODUCT CHAINS: NORTHERN CONSUMERS,SOUTHERN PRODUCERS, AND SUSTAINABILITY

DRAFT

Semi-conductors from the Philippines

byChito Salazar

Prepared forUNITED NATIONS ENVIRONMENT PROGRAMME

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INTRODUCTION

Trade has long been recognized as an engine of growth for countries. As one of the keyingredients of the success of the East Asian tigers, promoting an export-led economy becameeven more important for other developing countries. Through export-oriented growth, nationscould overcome market limitations, take advantage of economies of scale, entice foreigninvestors, and access foreign technology and capital. Thus, as the post-World War II eraprogressed, the movement of the global economy has been towards trade expansion.

Another trend in recent decades is a growing awareness of the environmental dangers ofunlimited growth. Research exemplified by works such as Limits to Growth1 and theBrundtland Report have made us cognizant of the need to impute environmental factors into ourdevelopment models. This eventually led to the formulation of the sustainable developmentmodel -- a paradigm that seeks to integrate economic growth with both equity and environmentalconsiderations. One result of this model was the introduction and increasing use of environmental standards in various aspects of the production process. There is however aseeming contradiction between protecting the environment and expanding trade. First, fordeveloping countries and companies in these countries, resource constraints often limit the abilityto introduce environmentally protective technology. Second, re-engineering productionprocesses can impose more costs on countries and companies faced with an already competitiveglobal environment. Third, environmental standards may also serve as trade barriers todeveloping country products entering industrialized nations. Finally, as the consumer markets inindustrialized nations become more conscious of environmental impacts, the demand for “greenproducts” increases, threatening developing countries’ traditional product lines. Thus, thegrowing concern with preserving the environment, it would seem, may be a danger to developingcountry trade. Since both are vital to sustainable development, developing countries mustunderstand the relationship between trade and the environment.

The purpose, therefore, of this paper is to study how changes in production and consumptionpatterns resulting from a more ecologically sound use of resources have affected trade in thePhilippines. More specifically, this paper looks at production and trade in the semiconductorindustry, an increasingly important developing country export. The primary question thisresearch seeks to answer is: What are the trade and production impacts on the Philippines ofchanging production and consumption patterns in the global semiconductor industry?

Semiconductors in this study represent the trade in manufactured goods in general. There aremainly two reasons why it is important to examine the connection between environmentalstandards and trade in manufactured goods. First, the goal of many developing economies is toshift from the production of primary products to manufactured goods, which are consideredhigher up the value-added chain. Furthermore, for many countries, electronics manufacturing isregarded as an indicator of a nation’s ability to absorb high technology industries and developsophisticated manufacturing skills. Second, the global production of manufactured goods, fromgarments, to automobiles, to semiconductors, is structured very differently from the global

1Donella H. Meadows and others, The Limits to Growth (New York: Universe Books, 1972).

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production of primary products. Production is highly fragmented with various stages ofproduction located in many countries. Thus, since many developing countries are expanding intothe trade of manufactured goods, we must look at how environmental standards interacting with ahighly fragmented global production system might affect their trade.

THE WORLD MARKET FOR ELECTRONICS AND SEMICONDUCTORS

The electronics industry is one of the most dynamic industries in the global economy. Itsproducts are essential elements of today’s world. You find them in computers, televisions,telecommunications equipment, military hardware, automobiles, and in the aerospace industry. Moreover, the growth in demand for electronic products shows no signs of slowing. More thananything, electronics are becoming even more essential to our lives. Included in the electronicsindustry are semiconductors, computer hardware, software, and services, consumer electronics,telecommunications equipment, and various other support industries, like research anddevelopment.

The output of the global electronics industry reached $700 billion in 1990 and is expected to hitabout $1.3 trillion by the year 2000.2 The value added by the electronics industry is growing atabout 6 percent per year, compared with about 3.8 percent for all manufacturing industries and3.1 percent for world gross domestic product. By the year 2000 electronics will account forabout 4 percent of world GDP and 14 percent of value added in manufacturing.3

Since semiconductors are a vital component of almost every electronic product, the growth ofthis industry is tied to the production of electronics in general. In the last decade, the consumermarket for electrical and electronic products has grown from practically zero to rather substantialdimensions. It is expected that in the near future, these products will continue to proliferate,offering new functions and services.4 Underlining this expectation is the rapid growth andincreased accessibility of information and communication technology and the entry into theglobal market of the newly industrializing countries in Eastern Europe and other liberalizingnations in other parts of the world.

There are, however, a few trends that may slow down the growth of the electronics industry. There is a growing number of environmentalists and policy makers who advocate reducedconsumption by pursuing strategies such as leasing, sharing and borrowing, by extending thelifetime of products, or by enhancing repairability and upgradeability. These trends, however,will have only a minor influence in the short term because a real breakthrough requiresfundamental technological and social changes.

2Bjørn Wellenius, Electronics and the Developing Economies: Introduction and Overview, in Developing the

Electronics Industry, eds. Bjrn Wellenius, Arnold Miller, and Carl J. Dahlman (Washington, D.C.: The WorldBank, 1993).

3Ibid.

4John Gertsakis and Chris Ryan, Short Circuiting Electronics Waste in Australia, Warmer Bulletin No. 54(May 1997).

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While U.S. companies pioneered the development of semiconductors in the 1950s, there weresubsequent geographical shifts in production. The first major shift was from North America toJapan. Ensuing waves included Hong Kong, the Republic of Korea, Taiwan, and Singapore;Brazil, India, and Mexico; and more recently China, Indonesia, Malaysia, the Philippines, andThailand.5 Ernst and O’Connor consider the semiconductor industry today as "a quite pervasive,yet highly unstable global oligopoly, with a select group of primarily American and Japanese,and sometimes a few European companies fighting to position themselves into leadingpositions."6 Other actors, in particular from Korea and Taiwan, have entered the globaloligopoly, at least in a few select sectors and technology fields. Ernst and O’Connor alsoconclude that there is "a growing duality of market structures, where large oligopolists coexistwith often fairly small start-up companies, but where the latter are increasingly dependent on thedominant firms, through a growing variety of center network transactions.”7

In 1990, semiconductor consumption in Japan was $22.5 billion, making it the largest market inthe world.8 Consumer electronics accounted for approximately 40 percent of demand, theremaining 60 percent was for industrial electrical equipment. Given growing computer andtelecommunications demand in Japan, the demand for semiconductors in industrial products isprojected to increase faster than demand for semiconductors in consumer products. The fivelargest semiconductor producers in Japan are NEC, Toshiba, Hitachi, Fujitsu, and MitsubishiElectric.

In the U.S., the second largest market in the world, semiconductor consumption in 1990 was$17.4 billion.9 In terms of end use markets, consumer products in the country accounted for 7percent of demand, military markets, 27 percent, the computer market, 27 percent, andtelecommunications, 21 percent. Accounting for the remainder were industrial and automotiveapplications. The five largest semiconductor producers in the US are Motorola, Intel, TexasInstruments, National Semiconductor, and Advanced Micro Devices. In 1990, semiconductorconsumption in Europe was at $10.7 billion or 18.3 percent of world consumption.10 The threelargest European producers are Philips, SGS-Thomson, and Siemens.

In the early years, the major semiconductor manufacturers were concerned primarily withdesigning circuits that could be fabricated in large volumes in order to take advantage of

5Electronics and the Developing Economies: Introduction and Overview, 1993.

6Dieter Ernst and David O’Connor, Competing in the Electronics Industry, (Paris, France: OECD DevelopmentCentre, 1992).

7Ibid.

8David Dahmen, Semiconductors, in Developing the Electronics Industry, eds. Bjørn Wellenius, ArnoldMiller, and Carl J. Dahlman (Washington, D.C.: The World Bank, 1993).

9Ibid.

10Ibid.

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economies of scale and learning economies.11 The industry eventually turned to the productionof "application specific integrated circuits," or ASICs. With the growth of ASICs, the trend inwafer fabrication is toward smaller production runs of specific device types, which limits theadvantages of in-house assembly capacity to wafer fabrication operators.12

Most existing facilities in developing countries are wholly owned subsidiaries of the leadingglobal semiconductor firms focusing on labor-intensive assembly and testing activities. A recentanalysis of 22 high tech companies from five industrialized countries found that over 50 percentof their manufacturing and assembly facilities are located in developing countries.13 However,some local independent subcontractors have entered the business as well. Over time, mostdeveloping countries remained assembly and testing sites; design and wafer fabrication have onlybegun in these countries on a limited scale. Local firms in those countries do not seem topossess the financial and technical resources to undertake investment in sophisticated waferfabrication facilities. According to Ernst and O’Connor, chances are very low that this group ofcountries can substantially improve their position in the world electronics industry.14

THE PHILIPPINE ELECTRONICS INDUSTRIES

In the Philippines, electronics has consistently provided the highest export revenues since 1981. In 1993, its revenues comprised one-third of all export earnings. Just three year later, in 1996,electronics exports accounted for more than half of the country’s export revenues, adding $10.61billion to the nation’s coffers. On the average, from 1985 to 1991, the industry contributed 28percent of the country’s export revenues. Table 1 below tracks the development of theelectronics and semiconductors industries from 1985 to the first quarter of 1997. Besidesrevenues, in 1993 the industry provided employment to 75,000 people.15 Given its performance,the industry has been named by the Philippine Department of Trade and Industry as one of thecountry’s export champions, making the industry eligible for government support and incentives.

11 Competing in the Electronics Industry, 1992.

12Ibid.

13www.corpwatch.org/feature /hitech/global.html, 8/15/97.

14 Competing in the Electronics Industry, 1992.

15The statistics on the Philippine electronics and semiconductor industry were from the Philippine Departmentof Trade and Industry; Electronics Industry Situationer (Manila, Philippines: Board of Investments, 1996); and,Semiconductor Industry: Pacing Export Growth, PDCP Bank Industry Digest 18, no. 8 (August 1994).

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Table 1. -- Summary of Electronics Trade Statistics

Year Philippines Electronics Semiconductors

Exports(US$ B)

Exports(US$ B)

as a % ofPhilippine

Exports

Exports(US$ B)

as a % ofPhilippine

Exports

as a % ofElectronics

Exports

1985 4.63 1.06 22.88% 1.03 22.24% 97.19%

1986 4.84 0.95 19.64% 0.92 19.01% 96.83%

1987 5.72 1.16 20.23% 1.11 19.47% 96.25%

1988 7.07 1.49 21.07% 1.33 18.87% 89.56%

1989 7.82 1.76 22.51% 1.40 17.92% 79.61%

1990 8.19 1.98 24.13% 1.54 18.77% 77.76%

1991 8.84 2.31 26.17% 1.36 15.39% 58.83%

1992 9.82 2.78 28.27% 2.01 20.50% 72.51%

1993 11.37 3.52 30.93% 2.67 23.52% 76.03%

1994 13.48 4.89 36.24% 3.77 27.95% 77.10%

1995 17.45 7.56 43.31% 6.06 34.73% 80.19%

1996 20.54 10.61 51.65% 8.47 41.22% 79.82%

1997 (Jan-Mar) 5.51 3.20 58.15% 2.44 44.25% 76.09%

Source: Department of Trade and Industry and Board of Investments Statistics

To develop a true picture of the dynamism of the industry, however, we have to look at itsgrowth. The export revenues earned by the industry increased from $1.1 billion to $10.6 billionfrom 1985 to 1996 -- an increase by a factor of ten over 11 years. Therefore, revenues weregrowing geometrically at a yearly average of 24 percent over this period. The growth of theindustry is depicted in the graph below.

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Figure 1. Growth of the Industry in Absolute Amounts

Even more telling is a comparison of the growth rates of aggregate Philippine exports, electronicsand semiconductor exports. Figure 2 below illustrates these growth rates. Their average yearlygrowth rates from 1985 to 1996 were 14, 24, and 23 percent respectively. In addition, while thegrowth of Philippine exports has been relatively stable, the growth rates of both electronics andsemiconductor exports have been increasing through the years. These industries have thereforebeen growing at an increasing rate. This accounts for the expanding share of export revenuesaccounted for by the electronics and semiconductor industries. As mentioned above, the exportrevenues share of electronics in 1996 was already more than fifty percent. In the first quarter of1997 alone, this share was up at fifty-eight percent.

0

2

4

6

8

10

12 E

xpor

ts in

U.S

.$ B

illio

ns

1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996Year

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Figure 2. Comparative Growth Rates

In terms of investments, in 1995, the nation’s investment performance in electronics amounted toapproximately P28 billion. In 1996’s exchange rate, this is roughly US$ 1 billion. Includedamong the top single investments in that same year were investments from Intel TechnologyPhilippines, Fujitsu Computer Products, and Gateway Electronics Corporation. Hence, given allits contributions to the economy, electronics is clearly a vital industry.

The biggest sector of the electronics industry was semiconductors. From 1985 to 1996,semiconductors accounted for an average of 80 percent of the electronics industry’s exportrevenues and 23 percent of the nation’s entire export earnings. In 1996, its share of the nation’sexport revenues jumped to 41 percent, contributing $8.5 billion to the nation’s foreign exchangecoffers. While the growth rates for semiconductors fluctuated within the past 11 years, mostrecently, semiconductors have been growing faster than the electronics industry as a whole.

The impressive performance of semiconductor manufacturing has been due to the growth indemand in major markets such as European Union, Japan, United States, Hongkong, and Taiwan.This in turn can be traced to the growing use of semiconductors in computer, telecommunication,and other consumer products. Table 7 below lists the country’s top seven markets forsemiconductors in 1995 and shows the growth of these markets. Based on a 1994 PrivateDevelopment Corporation of the Philippines Industry Digest on the Semiconductor Industry, theworld market for semiconductors was expected to grow by 20% annually.16 Other estimates

16Private Development Corporation of the Philippines, Semiconductor Industry: Pacing Export Growth,

p. 2.

-0.2

0

0.2

0.4

0.6

0.8

% C

hang

e

1986 1988 1990 1992 1994 1996 Year

Aggregate Electronics Semicon

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predict that the global semiconductor industry will grow from $137 billion in 1995 to $330billion by the year 2000. The United States and Japan are the dominant leaders in the industry,although, Hong Kong, Singapore, Taiwan, and Korea have been increasing their shares of themarket. The basic markets for integrated circuits include: the automotive industry,telecommunications, consumer electronics, computer/business equipment,government/military/aerospace industries, industrial electronics, and the instrumentationindustry.

Table 2.-- Top Seven Markets for Philippine Semiconductors in 1995

Country 1995 1994 %Change

United States 981.25 633.22 55.0%

United Kingdom 303.22 109.55 176.8%

Japan 200.94 79.19 153.7%

Singapore 171.72 145.66 17.9%

Malaysia 120.49 83.50 44.3%

Taiwan 105.00 69.59 50.9%

Hong Kong 67.75 40.02 69.3%

Source: National Statistics Office

The importance of electronics exports, and semiconductor exports in particular, to the Philippineeconomy are therefore obvious. Changes in demand, or shifts in consumption patterns, whetherdue to tariffs, quotas, or environmental standards, will directly affect the economy. Twenty-eight thousand jobs are dependent on the semiconductor industry alone. It is for this reason thatwe must understand how responses to environmental impacts will impact on the industry. Thisanalysis must begin with the structure of semiconductor production in the Philippines and in theworld.

THE PHILIPPINE SEMICONDUCTOR INDUSTRY

Semiconductors are materials that conduct electricity better than insulators but not as well as

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conductors such as copper.17 Semiconductor devices are electronic devices that transformelectrical signals into sound and/or pictures. They are thus vital components in equipment suchas television sets, computer, telephones, and other communication devices -- all of which areimportant elements of life in the late-twentieth century. Their manufacturing process includesthe production of diodes, transistors, and integrated circuits, printed circuit boards using thesecomponents, and final board level assembly.18

The production process of semiconductor devices consists of four main stages: wafer design,wafer fabrication, assembly, and product testing. Wafer design and fabrication, being capitalintensive production processes, occur primarily in industrialized countries. Assembly andproduct testing, the labor intensive segments of the production process, have shifted to offshoreproduction units, mainly in developing countries. The industry is thus characterized by highlycompetitive sourcing with very low profit margins.

The Philippine semiconductor industry is focused mainly on assembly and product testing. Theraw materials, primarily the wafer and lead frames, are imported, assembled, tested, and sentabroad. They are either exported to the mother companies or to the end-users. End users canvary -- from television manufacturers to cellular phone producers. The Philippines, consideredone of the world’s largest assemblers of semiconductors, has slowly moved to back-end waferfabrication, the inclusion of test facilities in operations, printed circuit boards and other sub-assemblies, and finished original equipment manufacture. The local industry is however,mainly an assembly and testing center. A survey in 1990 of 23 firms showed that 21 were intoassembly, 13 were also into testing (a company can be both doing assembly and testing). One ortwo of the firms were into wafer circuit design and wafer processing.

Internationally, there are two classifications for firms in semiconductor manufacturing. The firstkind of firm is the contract-manufacturer. These companies are responsible for the assembly ofintegrated circuits that will be used in the products of various end-user customers. They competein the open market for orders for custom-designed circuits. In contract manufacturing alone,there are approximately 90 firms competing worldwide. Amkor/Anam and Hyundai of Koreaand ASE of Taiwan are examples of the large contract-manufacturers. The second type of firmthe in-house manufacturer. The firms produce integrated circuits for use in their own products. Some of the world’s most famous electronic firms fall under this category: Intel, Motorola, TexasInstruments, and National Semiconductor. Because of the large demand, however, many of thesein-house manufacturers still sub-contract assembling and testing to contract-manufacturers.19 We find both types of firms in the Philippines. In March 1995, 54 firms producingsemiconductor devices were registered with the Board of Investments. The 54 firms operated

17Ibid, p. 2.

18Integrated circuits are a type of semiconductor device that is composed of a printed circuit board (PCB), thephysical structure for mounting and holding electronic components, and electrical components such as diodes andtransistors. This assembly is the basic building block for larger electronic systems.

19These two types of firms are also alternatively called independent or merchant manufacturers and originalequipment manufacturer (OEM).

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about 60 plants. Multinational corporations in the local industry are into both into in-house andcontract-manufacturing.20 On the other hand, the sub-contractors are mainly Filipino-owned. Their activities include assembly and testing, wafer probe and inspection, die bonding, and wirebonding. Nonetheless, the top semiconductor product manufacturers in the country aremultinationals. The table below lists the sales of the top semiconductor firms in 1993.

Table 3. -- 1993 Sales of Top 5 Semiconductor Firms

Firm Sales(in thousand pesos)

% Changefrom 1992

Texas Instruments (Philippines), Inc. 12,828,877 42.00

Uniden Philippines, Inc. 4,408,401 35.40

Temic Telefunken Microelectronics (Philippines) 3,723,496 49.00

Motorola Philippines, Inc. 2,483,646 15.00

Amkor/Anam Philippines, Inc. 1,336,083 121.60

The country has been trying to move beyond simply assembling and testing that have dominateddomestic manufacturing. A study commissioned by the Semiconductor Electronics IndustryFoundation, Inc. (SEIFI) in 1992 estimated the value-added of the local industry at 11.9% ofrevenues. So, despite the huge export revenues, the actual contribution of the nation to the globalvalue-added has been quite low. Among the raw materials and supplies being imported that canbe produced locally are gold and aluminum wires, lead frames, antistatic materials, and highquality packaging products. There has been some movement towards downward integration. Intel Philippines has begun producing the Pentium microprocessor in the country. CypressPhilippines and Gateway Electronics Corporation have included wafer back grinding in itsdomestic production. Dowa Hightech Philippines and Mitsui Hightech Philippines are now intolead frame manufacturing. Finally, Cebu Chip Connections manufacturing gold bonding wire. One must note however, the continued dominance of the multinational corporations in mostaspects of the production process.

Figure 3 below depicts the global production chain for semiconductors.

20A growing number of multinational corporations have set up plants in the Philippines. These include

Goldstar-Collins, Intel, Matsushita, Mitsumi, Motorola, National Semiconductor, Philips, etc.

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Figure 3. The Global Production Chain for Semiconductors

The three main raw materials of the semiconductor industry are wafers, lead frames, and wiring. The wafers used in the Philippines are most likely produced, and more importantly, designed abroad. The end-users of the semiconductor industry are also located abroad. As discussedabove, the Philippines is fundamentally an assembly and testing center. Assembly is performedeither by in-house multinational manufacturing companies and/or sub-contracting firms that areeither multinational or locally owned. Multinationals may also sub-contract some of itsoperations to other domestically located firms. Support industries include chemicals andsolvents used mainly for cleaning and washing and packaging companies. The chemicals usedby semiconductor firms, while sometimes obtained from local companies, may also be imported.

In-house manufacturers are often involved in the entire production chain. Wafer design andfabrication take place in U.S. facilities in Silicon Valley. These are then shipped to subsidiariesin the Philippines for assembly and testing. The fully assembled semiconductor devices maythen be shipped back to the U.S. for use in their own computers or telecommunicationsequipment. These manufacturers may also act as contract-manufacturers supplyingsemiconductors to other companies. In the semiconductor market, the influential end-users arenot the computer or electronic equipment buyers. The end-users are the large companiespurchasing the semiconductors for use in their own equipment.

Thus, the global production for semiconductors is really composed of a network of firms andproduction facilities located in different national locations. The location is determined mainly bycost consideration and resource constraints. Capital intensive segments remain in theindustrialized countries, while the labor-intensive segments have moved offshore to developing

Domestic Support Industries

ASSEMBLY & TESTING

IN HOUSE MANUFACTURING e.g., Intel and Texas

Instruments

CONTRACT-MANUFACTURINGe.g., Amkor/Anam

Computer & RelatedEquipement

Consumer Elecronics

TelecommunicationEquipment

Wafer Design &Fabrication

Leadframes

Gold & Aluminum Wiring

Chemical & Solvents Packaging

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countries. The growing demand for semiconductors ensures the expansion and growth of thischain. The question therefore is how will environmental considerations affect this chain, andmore importantly, affect production located in developing countries. Before we can do this, wemust first draw a picture of the environmental impacts of the industry.

ENVIRONMENTAL ISSUES IN SEMICONDUCTOR MANUFACTURING

The electronics industry was initially seen as relatively clean and environmentally friendlyindustry. According to Steven Pederson, the manufacture of computers and electronics industryaccounted for only 1.6 percent of the total hazardous waste stream on an annual basis in theUnited States.21 But, because the industry has grown in significance, we have become moreaware of the environmental impacts of its production process.

The semiconductor industry exhibits two types of environmental impacts. The first involves theproduct itself, what materials and substances go into semiconductors. Included under the firsttype are possible impacts resulting from the disposal of used semiconductors and electronicsequipment. The second impact concerns the process of manufacturing semiconductors, includingmaterials that are used in this process.22 Also under process impacts are potentially hazardouswaste emission.

In terms of the first type of impact, semiconductors contain a large variety of heavy metals andhalogens in non-negligible amounts. To illustrate, Appendix 1 provides the composition ofprinted wiring boards used in televisions and computers. In the past, there was widespread use ofchlorofluorocarbons by the electronics industry. However, with the Montreal Protocol, theindustry has worked together to eliminate the use of CFC’s and to develop alternatives. Anotherconcern in terms of materials used is the use of lead as a bonding agent or solder. While theelectronics industry is one of the lowest consumers of lead, only 0.5 percent of the total leadconsumed by product is used in electronic solders, there is still concern that the continued use ofit in manufacturing may cause further releases into the environment.23

Besides the use of hazardous materials in the product, there is a growing concern over thedisposal of electronics and semiconductor products, which are treated as solid waste after theiruseful life.24 Disposing of these used products carelessly would just release the hazards into theenvironment. To further aggravate the situation, speedy advances in the industry result in therapid obsolescence of its products. That is, computers and televisions are almost immediately

21Steven W. Pederson, Electronics Industry Environmental Roadmap.

22These types mirror the two stages in the process of environmental awareness discussed in the frameworkpaper.

23National Center for Manufacturing Science, Lead and the Electronics Industry: A Proactive Approach, May1995.

24Another sub-industry under electronics is displays. Displays, which are generally based on the cathode raytube, are of potential environmental impact especially in terms of disposal. See Pederson, Electronics IndustryEnvironmental Roadmap, p. 287.

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replaced as new lines are introduced into the market at a fast pace. Thus, the disposal problem isimmense and is expected only to grow. Consequently, a ban on the disposal of obsoleteelectronic products in landfills is being considered by several European countries.

Most of the environmental issues in semiconductors revolve around the production process andmethod. This is part of the second stage of environmental awareness. The manufacture ofsemiconductor devices involves a large number of process steps and chemicals. The technologyis based mainly on the ability of certain materials, such as silicon, to change its conductivity bythe controlled introduction of impurities called dopants. This involves processing the main rawmaterial, silica wafers, through different stages. Because of the large number of chemical used inthe process, their use, control, and disposal are a principal environmental concern.25

The use of chemicals result in different types of effluent waste. Potential pollutants in wastewater from assembly operations include acids and alkalis, organics and solvents, and heavymetal. Many of these substances are toxic and cause severe effects on the environment andhuman health without treatment. Moreover, organic compounds released into water cancontribute to oxygen deficiency in the waters. Emissions to the air originate from the use ofgaseous agents in the process and from chemicals. The pollutants are mainly fumes from leadsoldering and tin plating and the organic vapors from cleaning processes. Volatile organiccompounds are also used for cleaning and degreasing. Some of these compounds havecarcinogenic effects on humans.

Beyond emission, another environmental impact of the industry revolves around waste disposal. Typical hazardous wastes generated from the assembly operations such as wire bounding andencapsulation are flammable solvent waste, halogenated solvent waste, and other lab waste,adhesives, and links. Appendix 2 describes some of the wastes generated in the differentmanufacturing processes. One concern is the solder dross (waste product formed on the surfaceof molten metal). This is formed during the fabrication and assembly of PCBs. Solder-dross cangenerate lead-bearing dust, therefore releasing more lead into the air.26 Another concern issludge. While local regulations require the treatment of sludge, there are no waste watertreatment facilities in the country. In addition, a growing proportion of the industry’s clients isrequiring environmental management systems. The industry is therefore receiving pressure onboth ends, from the government and from the market.

Water conservation is another environmental concern for many computer and electronicscompanies. There are two reasons for this: first, an increasing number of manufacturing facilitiesare being installed in arid environments; and second, as circuit densities get higher, processesmust be cleaner, and cleaner processes mean the greater consumption of water.27 To limit theimpact on the surrounding communities and environment, companies must reduce the amount ofwater needed, to reuse and recycle water, and treat it sufficiently before releasing it into the

25Much of the following is drawn from Lennart Karlsson, Environmental Management Plan for theSemiconductor Industry (Manila: AF-IPK and Development Bank of the Philippines, June 28, 1996).

26National Center for Manufacturing Science, Lead and the Electronics Industry: A Proactive Approach, p. 2.

27Citizen’s Trust, 1995.

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municipal system. Some US companies have already implemented effective measures to reducetheir impact on the water resources of the communities in which their facilities are located.

In 1993, UNEP and UNIDO published a report on environmental management in the electronicsindustry.28 The report focused especially on semiconductor manufacture and assembly. Itspurpose was to raise the awareness of the environmental issues inherent in the electronicsindustry and to highlight the approaches that industry and government may take to avoid orminimize the associated impacts.

The report summarized the environmental impacts of the semiconductor industry as following:

As the electronics industry has expanded it has become evident that the pervasiveness of theindustry and its products has the potential to cause considerable environmental damage if notwell managed. The discharge of liquid wastes has caused groundwater and soil contaminationwith solvents and heavy metals. The disposal, in landfills, of hazardous solid and semi-solidwastes containing heavy metals has caused deterioration of water supplies in the surroundingareas as toxic components have been leached out. Gaseous emissions for electronic componentmanufacturing facilities have been shown to have effects on the health of the population in thevicinity of the factories: cases of respiratory problems, cancers and sterility have been reported.

Furthermore, the report states that "to achieve environmentally satisfactory operations a companynow needs to develop a systematic, integrated approach to environmental management". Effective environmental management should depend on several factors: rethinking the design ofthe products themselves in order to meet demanding environmental standards; the incorporationof cleaner production concepts and the design of cleaner production technologies; minimizingwaste and improving efficiency; the substitution of hazardous raw materials and solvents; and,appropriate waste treatment technologies.

To summarize, the environmental issues in the semiconductor industry are the following(arranged from input to final product):1. The use of potentially hazardous materials in the product itself.2. The use of toxic chemicals in assembly and cleaning processes. These result in potentially

harmful waste and emission.3. The disposal of used electronics products and semiconductors.

GLOBAL ENVIRONMENTAL INITIATIVES

As the electronics industry has become more aware of its impacts on the environment, it hasmade efforts to develop cost-effective, long-term solutions for the environmental consequencesof its production. For example, in response to the Montreal deadlines, most major companies inthe United States have committed themselves to eliminating ozone-depleting substances before

28United Nations Environmental Programme and United Nations Industrial Development Organization,

Environmental Management in the Electronics Industry: Semiconductor Manufacture and Assembly, UNEPIndustry and Development Technical Report No. 23 (Paris, France: UNEP, 1993).

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the deadlines.29 One solution to the use of these substances in the cleaning of components andassemblies has been the adoption of “no-clean” fluxes. A U.S. Industry Cooperative for OzoneLayer Protection, has worked for this and has even developed an on-line database called Ozonetfor alternative technologies.

Realizing the complexity of the problem, however, the U.S. industry as a whole has workedtowards a more systematic integrated approach to the issue. In 1992, over 40 organizations fromvarious electronics industry segments, coordinated by the Microelectronics and ComputerTechnology Corporation (MCC), identified the principal sources of waste in electronicsproduction, possible solutions, and further research needs.30 To expand these efforts, inNovember 1993, the MCC launched the Electronics Industry Environmental Roadmap effort. Inthis project, the key stakeholders were brought together to set priorities, determine future needs,and leverage resources devoted to environmental challenges.31 This roadmap was a strategic,industry-wide approach to the issue that demonstrated the industry’s commitment to cleanerproduction. It utilizes a consensus-based approach that brings together industry players, theacademe, and government.32 This effort received the support of the U.S. Department of Energy,the Advanced Research Projects Agency (ARPA), and the Environmental Protection Agency. Appendix 3 presents the general conclusions that have emerged from the effort.

Other industry and professional groups have made similar efforts in this direction. For example,the Institute for Interconnecting and Packaging Electronics Circuits (IPC) has developed atechnology roadmap for the electronic interconnect and assembly industry. The National Centerfor Manufacturing Sciences (NCMS) in 1993 established a multi-year effort entitled the Lead-Free Solder Project to develop lead-free alternatives to lead based solders used for electronicassembly. In 1992, the Semiconductor Industry Association (SIA) and SEMATECH facilitatedthe development of a 15-year Environment, Safety and Health Roadmap for the semiconductorindustry. Furthermore, SEMATECH was awarded $10 million by the Department of Defense todevelop a pollution preventing, environmentally safe microchip manufacturing process.33 According to MCC, since the initial Semiconductor Roadmap hazardous chemical use has been

29According to Citizen’s Trust (1995), several US companies have greatly reduced their emissions of volatile

organic compounds. Many companies have completed the phase-out of the worst of the Ozone-depleting substances(Class I) far ahead of the deadline. Some have also made progress in eliminating the somewhat less harmful Class IIODSs.

30The priority concern identified was the generation and disposal of waste. See Steven W. Pederson,Electronics Industry Environmental Roadmap, p. 288.

31Ibid, p. 285.

32It is important to note that the objectives of these efforts include improving not only environmental protectionbut also the competitive posture of the U.S. industry. This is partly due to the fact that the environmental activitiesof Europe and Japan are included as a basis of competitive bench marking. Thus, being able to offerenvironmentally friendly electronic products is considered a competitive advantage. This only emphasizes theconcern of this research over the effects of all these moves on the developing nation trade.

33Ibid, p. 288.

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significantly reduced; ozone-depleting substances and ethyl glycol ethers are rapidly disappearingfrom use in semiconductor wafer and assembly manufacturing processes; alternative chemicalsand safer delivery methods are being sought for silane, dopants, and the hazardous solvents anddegreasers used in equipment cleaners and assembly processes; and, emission abatementtechnology, process optimization, and replacement chemicals are being sought foratmospherically long-live process gases such as perfluoro compounds.

Since many of the environmental concerns are best addressed at the design strategy, where thereis the most freedom to consider all issues, much emphasis has been placed on designmethodologies. Cleaner production must after all consider the process, the components beingmanufactured, and the final product. One example, towards the recyclability of products, is theconcept of design for recyclability (DFR). This suggests that in order to enhance recyclability,designs should consider: ease of disassembly; material identification; simplification and partsconsideration; material selection and compatibility. In many cases, disassembling andsegregating various parts of the products increase the scrap value and promote recycling, hencethe similar need for design for disassembly to maximize this value.

Beyond this, a number of assessment methodologies are presently available to allow designers toselect the most appropriate options. Traditional environmental impact assessment is now beingaugmented by product and life-cycle assessment methodologies such as the Design forEnvironmental Information Systems (DEFEIS) C a program carried out by the U.S. EPA. incooperation with selected industry sectors. According to the MCC, a “design for theenvironment”34 paradigm shift is beginning to occur throughout the electronics industry.

There has likewise been concern regarding the industry’s energy efficiency. One program thatprovides guidelines for energy efficient products is the EPA's Energy Star program. In the secondhalf of 1993 and first half of 1994, 40 percent of the computers sold in the U.S. were EnergyStar-compliant.35

In Europe and Japan, environmentally conscious manufacturing, equipment and materialsdisposition, recycling, and related topics have also become a major consideration for electronicscompanies. Examples of activities there include efforts to replace lead-based solders withconductive adhesives and finding the best alternative to CFCs for cleaning boards. The industryis likewise investigating recycling activities. For example, Philips uses a lead smelter inHoboken, Belgium to recover metals from PWBs.

The different initiatives can been organized in either along issue lines or according to campaigns.

34MCC defines this as the systemic consideration during new product and process development of design issues

associated with environment safety and health over the full product life cycle. This is line with EnvironmentallyConscious Manufacturing (ECM) which refers to those processes that reduce the harmful environmental impacts ofmanufacturing, including minimization of hazardous waste, reduction of energy consumption, improvement ofmaterials utilization efficiency, and enhancement of operational safety. Approaches include, but are not limited to,substitution of non-hazardous materials, development of waste-free processes, and increased use of recycling.

35Citizen’s Trust, 1995.

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Since both of these are important, the paper looks at the two, beginning with global issues.

Global IssuesThere are several initiatives of global nature C meaning they cut across geographic or sectorallines. While different stakeholders may implement these initiatives differently, it is important tolook at them first as a global issue. This research has grouped the global initiatives along twolines: international standards and disposal of electronic products.

International Standards

The International Organization for Standardization Technical Committee (ISO) represents themost significant collection of standards activities. The technical committee is divided into sixsub-committees, each working on a separate element for environmental management standards.36

The ISO standards provide an important benchmark for corporate environmental practices. Insome cases, they also provide a set of baseline requirements for participation in certain industryactivities or access to markets. Hence, it is to be expected that adherence to ISO 14001 may wellbecome a prerequisite to suppliers as adherence to ISO 9000 Quality Standards was.

In the semiconductor industry, several stakeholders expect precisely this, that in a few years ISO14001 certification will be a prerequisite for semiconductor suppliers. For example, a majorpurchaser of semiconductors, Germany’s Siemens (AG), stated:

We are convinced that this new standard will become the international benchmark by whichcompetitive companies will conduct business in the global marketplace. Furthermore, as holdersof this certificate ourselves we are committed to the activities therein. It is therefore, in ourinterest that our suppliers share in our commitment to protect the environment and attain ISO14001 qualification.37

Beyond international standards, as electronics products become more common in households andbusinesses, their disposal becomes a more immense problem. This is further aggravated by theincreasing rate of product turnover. For these reasons, we must examine the initiatives of nationsand governments to address this issue in particular.

Disposal of Electronic ProductsDue to the diversity of electronics products, from small and simple appliances to large complexitems, it has been difficult to arrive at any general rules on their disposal or recycling, handling,transport, or storage. But, these products incorporate a number of characteristics that forces us tolook more closely at their waste disposal measures and search for alternatives to incineration ordumping at a landfill. First of all, they are composed of a variety of materials, some of which aretoxic. Second, they may contain valuable and scarce raw materials. Third, when dumped, they

36These committees are: environmental management systems, auditing, labeling, performance evaluation, life

cycle assessment, and, environmental aspects of product standards.

37Business Wire, 18/11/1996.

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occupy space at landfills for a number of years. The short-term objective of any initiatives alongthese lines should be to keep electrical and electronic products out of the waste stream. On theother hand, the long-term objectives are to develop low-waste electrical and electronic products;develop products that are easy to disassemble or dismantle; reduce the use of toxic substances;and, enhance durability and repairability.

For electronics, there are at least three different recycling stages. The first is the collection ofdiscarded electronics. At the end of their product life, there must be some kind of system fordisposal and collection; the most common example of such is a take back scheme. A prerequisitefor a cost-efficient recycling system is the regular supply of material for disposal. The secondstage is the processing of collected electronic waste. Because electronic products are usuallyvery complex, preprocessing, or dismantling, usually done by hand, may be required. The resultof preprocessing and processing will be that waste materials are turned into secondary materialsand waste residues.38 The third stage concerns the use of secondary materials as input for newproduction processes, the so-called utilization stage. In this stage the quality and characteristicsof the secondary materials are a determining factor for their application possibilities. Recently,governments and manufacturers have taken several initiatives to reduce electrical and electronicwaste streams. These initiatives include a more appropriate design of electronic products and thedevelopment of recycling techniques and the implementation of collection and take backschemes.

Another concern along this line is that obligations to recycle discarded electronics may result inthe international trading of electronics waste for disposal or recovery purposes. Eventually, thismay lead to environmental problems in importing countries when they lack the facilities orknowledge to handle the waste. Recent international conventions and regulations have limitedthe trade of hazardous waste, reflecting the growing consensus that trade of waste for disposalshould be banned. At the global level, the Basel Convention is of prime importance with respectto this issue. However, the issue to allow trade of waste for recovery is still under debate. Adifficult topic in this debate is that recyclable waste may be just as hazardous as non-recyclablewaste and that the recycling process itself is often a dangerous activity. In addition, the definitionof hazardous waste has not been determined yet (see Appendix 4). The Basel Convention mayhave future implications for the collection and recycling of obsolete electronic equipment.However, since the definition of hazardous waste and the acceptability of waste trade forrecovery purposes are still under discussion, it is, as yet, too early to give any firm statementswhether trade of electronics waste will be allowed in the future and under which rules.

Stakeholder Analysis

Another way to organize global initiatives is according to stakeholder efforts. The primarystakeholders in global environmental management are governments, corporations, and variouscivil society organizations. In terms of national efforts, different countries exhibit varyingdominant approaches to the environmental management of the semiconductor industry. In theUS, the emphasis is on initiatives relating to design and production processes (design for

38In literature, these first two stages of the recycling process are often called "recovery".

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environment, roadmapping) which are initiated by companies and their business associations; thegovernment has at best a facilitating role. In addition to government and corporations, interestgroups and the ethical investment movement play a rather active role. In Europe, obligationsinitiated by governments to implement take back schemes and to recycle are at the foreground.The same can be said for Asia. In Australia, as of this time, there are few, if any, initiatives.

Government Approaches

A number of countries in Europe is preparing legislation or negotiating voluntary agreementswhich will require manufacturers, being seen as responsible for the ultimate disposition of theirproducts, to take back discarded electrical and electronic equipment, or electro-scrap.39 Amongthe countries that have adopted, or are considering adopting legislation, are Sweden, Norway,Austria, Denmark, the Netherlands, France, and Switzerland.

In Germany for example, the proposed law, Elektronikschrottverordnung, is far-reaching andstrict, affecting manufacturers and retailers, including mail-order houses, and targeting a broadrange of equipment for take back and recycling.40 The law requires the following actions:• products must be manufactured from environmentally compatible and recyclable materials;• products must be designed and manufactured for easy disassembly and repair;• used-equipment collection centers must easily be accessible to the end-user; and,• parts deemed non-recyclable must be disposed of safely.

Dutch legislation, as another example, is similar to its German counterpart, but functions more asa framework for subsequent environmental legislation in the electronics sector. The Dutchenvironment ministry has categorized the electronics industry depending on the product use andsize, providing several quantitative targets for product and material reuse.

The approach chosen by these countries these countries is not always identical. Points ofdifference include:

i. Who carries responsibility for recovery and its costs: the manufacturer/importer,retailer, consumer or the local authorities;

ii. Whether the regulation apply to "old" equipment (bought before the regulation wentinto force) as well as new equipment; and,

iii. Whether the regulation includes all electrical and electronic waste or only specificitems.

In response to the legislative initiatives of various EU Member States, the European Commissionhas proposed a directive providing for the separate collection of hazardous municipal waste

39A complete overview is given in the report "Adopted and Proposed Electro-Scrap Legislation in Europe"

which is available from Cutter Information Corporation in the U.S. There are a number of existing schemes that canbe implemented, including reverse distribution (product take-back), third-party product collection and disposition(public or private) and outright disposal restrictions. See MCC, 1994.

40MCC, 1994.

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before the end of 1997.41 This proposal will include a modification of Directive 91/689 onhazardous waste. According to an initial draft prepared by the Directorate-General for theEnvironment (DG XI), selected categories of products will have to bear a special label so thatconsumers can separate them from other waste. At the present stage, printed circuit boards andother electronic components are among the selected categories. The proposal will requirehazardous municipal waste to be collected separately by professionals; or, delivered separately tospecial collection centers. Collection systems must also be established and waste be treated inappropriate facilities. In addition, in 1998 or 1999, the Commission is likely to prepare a draftdirective on the electrical and electronic waste stream.42

The ecolabelling of electronic products may also have a stimulating effect on the recycling rate. At present, the EU is considering launching an ecolabel for personal computers. Germanyintroduced a scheme for personal computers in 1994. The Netherlands followed in 1996. Therequirements for both ecolabels are similar and include take back obligations for manufacturersand additional requirements to enhance the recyclability of discarded computers. SiemensNixdorff was the first manufacturer to be awarded the German ecolabel, the Blue Angel, for acomputer that is specifically designed to be re-used or recycled. As yet, there are nomanufacturers who have applied for the similar Dutch Milieukeur.

In the United States product take back and mandatory recycling is less of an issue than in Europeand Japan. The U.S. EPA has no statutory role to regulate household hazardous waste.Collection, transport, and disposal are state and local community issues. Recently, however,there seems to be a changing attitude at government level. The Environmental Health Centre andthe EPA have set up a body, the US Electronic Product Recovery and Recycling Roundtable, todevelop new strategies for dealing with electronic waste.43 The roundtable will meet for the firsttime in autumn 1997, and will include representatives from industry, government and consumergroups. One of its main goals will be to establish an information clearing house on recovery andrecycling issues.

Moving to Asia, the Japanese Ministry of International Trade and Industry is consideringintroducing legislation that deals with the recycling of large consumer electronic products such astelevisions.44 The scope of the recycling will in the future expand to include personal computersand word processors. At present, however, local governments are the principal gatherers ofunwanted consumer electronic items, charging fees to users. But their recycling rate is presentlyat a low level. Under the proposed system, consumers can bring unwanted home electricappliances to stores where they will be accepted for recycling. The recycling costs will beshouldered by users of the products. Since customers will be paying less for products that areeasy to recycle, ease of recyclability will factor into their purchasing decisions. This willencourage producers to develop ecologically friendly products.

41European Report, 22/3/1997.

42Warner Bulletin, 1997.

43Cottrill, 1997.

44Japan Economic Newsgirl, 17/6/1997.

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In Taiwan, dealers of electronic products are obliged to take back used goods.45 Furthermore, theTaiwanese Environmental Protection Agency announced in 1996 the implementation of themandatory recovery of waste electrical home appliances. During the initial period, the recoveryproject covers televisions, air conditioners, washing machines, refrigerators, computers, printers,monitors and heaters. But the Taiwanese EPA is expected to soon include other recoverableelectronic items. To cover the costs of recovery, it is expected that the electrical home applianceindustry is going to raise prices.

Corporate Approaches

In addition to these policy developments, manufacturers have also undertaken several greenprojects. The impetus for the corporate initiatives depends on a mixture of various factors,including:i. impending legislation;ii. competition for the lead in technology development;iii. the availability of economically viable recycling opportunities;iv. pressures on a business-to-business level;v. corporate environmental consciousness;vi. the formation of industry associations with environmental objectives;vii. a desire to improve their public image;viii. in response to consumer demand.

Some manufacturers are focusing especially on the technological aspects, such as product designand the development of recycling technologies. Others, mainly industry associations, areemphasizing organizational aspects. Below are some cases of corporate efforts:

• The Japanese company NEC has launched a cost-effective recycling technology, theEcoseparation System that recovers useful materials from printed wiring boards andgenerates no waste from them.46

− In German, Daimler-Benz has developed a process to recover metals from printedcircuit boards. The process involves deep-freezing PCBs to allow the effective removalof the plastic and improve the recovery of copper and other metals, including gold, silverand platinum.− Result AG in Switzerland uses a mechanical-physical approach to recover metalsfrom printed circuit boards.47 The material is shredded and separated ultrasonically; nouse is made of thermal, chemical, or wet processes. According to a German researchinstitute, this recycling process is currently the best in the market.

• In Canada, the recycling technology did not originates from the electronic industry. Noranda Incorporated, one of the world’s largest copper and precious metals recycling plants,

45Business Taiwan, 14/10/1997

46M2 Presswire, 14/1/1997.

47Warmer Bulletin no.51, 1996

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has developed a continuous smelting technology that is applicable to the recycling ofelectronic products.48 Since 1976, its copper smelter in Rouyn-Noranda, Quebec, has treatedincreasing quantities of various recyclables mixed with copper concentrates. In 1993,electronics and telecommunication equipment represented approximately a quarter ofNoranda’s recyclables tonnage of 100,000 tons. According to Veldhuizen and Sippel (1994),electronic discards are a valuable source for metals, such as gold, copper, silver and platinumgroup metals. These may contain ten times more copper and 50 times more gold per tonnethan the average mined ores. This so-called Noranda Process Reactor is now marketedworldwide.

Other Organizational Initiatives A prerequisite to the recycling systems is the source of recyclable material. One possibleinitiative to address this is the take-back scheme. In Europe, a group of cellular phonecompanies including Alcatel, Ericsson, Motorola, Nokia, Panasonic and Philips, have joinedtogether under the umbrella of the European Telecommunications and Professional ElectronicsIndustries Trade Association (ECTEL) to pilot an environmental project that includes a take backscheme and a recycling program.49 This group has been formed in response to pending Europeanlegislation regarding recycling electronic products at their “end of life.” ECTEL decided tospearhead the initiative in the UK and Sweden in 1997. Its objective is to encourage customersto return their old mobile phones, for dismantling and recycling. Ecological responsibility is theonly incentive for the cellular phone companies or consumers. The pilot project seeks todetermine the environmental impact posed by the disposal of old phones and the economic andsocial feasibility of recycling these. Once the results of the project have been interpreted, thefindings will be communicated to the EU and the European Government.50

In Germany, Daimler-Benz has established a nationwide collection network using a number ofindependent companies for electrical and electronic goods. The company has set up a pilotdismantling operations where workers dismantle electronics items. New products are alsodismantled in order to test procedures and provide information on components. Similarly, Siemens Nixdorff has set up a joint venture to manage industrial waste flows via the Internet.51

The new company Waris GmbH plans to bring the manufacturers together with the recyclers,waste disposers, and transport companies. The new company's aim is to increase the recyclingrations and help ensure that recycling and waste disposal companies are working at full capacity. Across the Atlantic, U.S. manufacturers are less attracted to the notions of "producer

48Veldhuizen & Sippel, 1994

49M2 Presswire, 4/7/1997.

50A conference is planned to present the findings and feasibility of extending the project to other industrysectors.

51Handelsblatt, 25/6/1996.

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responsibility" and "product stewardship" in general. Consequently, U.S. manufacturers havereacted critically to the proposed European legislation on electronics waste. They consider thisas a barrier to trade; and, they fear that this will hamper their ability to sell products in theEuropean market.52 This general disapproving attitude, however, does not impede US companiesfrom developing recycling initiatives. An example of such is the recycling business plan thatMCC in cooperation with the University of Texas is likely to develop. They aim to launch a fullyintegrated electronic products recycling center in the central Texas region.53 The project willinvestigate energy-conserving, cost-effective ways to build the infrastructure, includingcollection, sorting, materials recycling, and disposition centers; and, develop the technologyneeded to recover and recycle commercial and consumer electronics equipment. In Asia, three Korean electronic giants, LG Electronics, Samsung Electronics and DaewooElectronics, reached in 1996 a basic agreement to set up five recycling centers in metropolitanareas by the year 2000. These will process used home electronics appliances. Citizen/Customer Initiatives An activist group, the Silicon Valley Toxics Coalition (SVTC) was formed in 1982 in SiliconValley, California, the birthplace of the high-tech electronics industry, in direct response to thediscovery of substantial groundwater contamination in Silicon Valley. This was caused by aleaking underground tank at a semiconductor plant. Since then, SVTC has worked to documentand expose the hazards of this high-tech industry and promote environmental and economicsustainability and accountability in the electronics industry.54

The scope of SVTC’s work is not limited to the US. One of its projects is to pursue corporateresponsibility with global electronics companies. The "Campaign for Responsible Technology"was established in 1991 to increase grassroots participation in national and internationaltechnology policy development. The campaign consists of over 80 representatives fromorganizations throughout the US, and about 20 representatives from organizations in 11 othercountries including the Philippines, Japan, Greece, Poland, Hong Kong, Malaysia, Sri Lanka,Germany, Scotland, Australia, and South Korea. In June 1996, SVTC published its draft SiliconPrinciples to support the campaign. The Silicon Principles, dealing with environment, health andsafety issues, are a set of guidelines which SVTC believes should be endorsed by the high-techelectronics industry.55 The principles of most interest are the following: Establish a comprehensive toxics use reduction program• Phase out the use of CFCs and other chlorinated solvents• Phase out all carcinogens, reproductive toxics and neuro-toxins• Phase out the use of acutely toxic gases

52Shanoff, 1996.

53Business Wire, 22/7/1996.

54www.igc.apc.org/svtc/, 8/15/1997.

55www.igc.apc.org/svtc/siprinc.htm, 8/15/97.

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• Implement in-process acid recycling• Develop Toxics Use Reduction plans, materials and waste audits, plus mass balancematerials accounting.

• Establish corporate policies requiring equal standards for sub-contractors & suppliers• Establish technical assistance and technology transfer to encourage pollution preventionat all stages of production, rather than shift the pollution down the production chain tosmaller contractors.• Hire contractors who adhere to good labor and environmental policies, and in particular,hire union contractors where they exist.

• Establish corporate standards that are enforced equally, domestically, and internationally• Establish corporate policies that assure full compliance worldwide that meet the stricteststandards.• Require all facilities worldwide to make full disclosure of toxics reporting.• Establish a life-cycle approach to all manufacturing, from R & D to final disposal• Design new products from life-cycle perspective.• Internalize costs of disposal and guarantee return and safe disposal of all used products.

It is important to note that the principles above are meant to apply not only to U.S.manufacturers, but to manufacturers in other countries as well. More significantly, they aremeant to apply to suppliers and sub-contractors.

Besides the efforts of non-governmental organizations, shareholder actions in the pursuit ofenvironmental interest has become increasingly common, particularly in the U.S.56 An exampleof a U.S. environmental group using of shareholder action is the SouthWest Organizing Project(SWOP) founded in 1981.57 In recent years, SWOP has been working on the environmental andeconomic aspects of Intel’s expansion in New Mexico. SWOP’s strategy is to go to shareholdermeetings and raise critical questions about the company’s policies. At one point, SWOPorganized a coalition of shareholders, investment houses, churches and foundations that held 1million of shares of Intel stock. As a result, Intel was forced to accept them as a legitimate force.

56Shareholder action describes efforts by individuals, small and large campaigning groups, and institutional

investors in industrialized countries to influence corporate decision-making through the shareholder process, usuallyat the company’s annual general meeting. See www.corpwatch.org/trac/resrch/shareholder.html, 8/12/1997. Forindividuals and groups which do not already own shares of a firm’s stock, this has usually meant one of thefollowing: buying stock in the corporation and becoming a shareholder; lobbying existing shareholders of thecompany to exert influence, notably those involved with "socially responsible" investing; or, staging demonstrationsor other activities during the annual general meeting. The point of these is to generate awareness within thecorporation and among the general public of vital issues. The conflict in such activities is between campaigninggroups and investor groups. Campaigning groups are interested primarily in changing the social policies ofcompanies and have little or no explicit interest in the financial performance of the business. Investors, on the otherhand, are concerned about the long-term financial performance and see social responsibility issues as importantsubsidiary questions.

57www.corpwatch.org/feature/hitech/swop.html, 8/15/97.

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Related to shareholder action is the ethical investment movement.58 On example vis-a-vis theelectronics industry is Citizen’s Trust, a U.S. investment company belonging to the ethicalinvestment movement. Citizen’s Trust has conducted research on the performance of nineteencompanies in the computer and electronics industry. The report from 1995 describes the majorenvironmental issues related to the industry and some of the more effective approaches thatcompanies have taken to address them. The purpose of the report is both to share informationwith the hope of stimulating changes in the business community and to continue an ongoingdialogue on environmental issues between companies and their shareholders. Significantly,Citizen’s Trust has also reviewed the overseas operations of U.S. companies.

According to Citizen’s Trust, there have been significant innovations and efforts from within theindustry to address environmental problems. However, the Trust asserts that to truly improveenvironmental performance in a meaningful way, it is necessary to take a preventative approachand examine all aspects of a company’s activities and all stages of a product’s life-cycle. Theexperience of various companies in the US has shown that in many ways, reducing toxic releasesis a win-win situation. Several companies have reduced their toxic releases by more than 50percent since 1988, and in so doing, lowered their materials costs, prevented health risks toworkers and surrounding communities, and reduced future liability.59

From the above, we realize that pressures for environment friendly production go beyond thegovernment and corporations. Forces among the citizen’s and customers likewise demand moreecologically sound practices. These forces could potentially reverberate through the businesscommunity creating changes and improvements.

Philippine Initiatives

In 1996, the Development Bank of the Philippines (DBP), together with AF-IPK, theEnvironmental Management Bureau of the Department of Environment and Natural Resources,and the Semiconductor Electronics Industries Foundation Inc. (SEIFI), developed andEnvironmental Management Plan for the Semiconductor Industry.60 The objectives of the planwere:

58In the past, the movement has been based on the principle of "negative screening", where prospectiveinvestments are screened against involvement in a range of ethically controversial issues. Seewww.batn.ac.uk/Centres/Ethical/Share, xxx. Many large institutions have adopted an informal negative screeningapproach, selling their shares in the more "questionable" companies. Lately there are the beginnings of a change inthe movement. The reliance on negative screening is now being accompanied by positive investments in"alternative" projects that have social benefits but fail to attract the necessary capital. An alternative type of ethicalinvestment fund is a fund which, instead of disinvesting in "bad" companies, intentionally invests in the worstcompanies in order to wage shareholder action campaigns for reform. Another significant change is the realizationthat even companies that survive the screening process can benefit from shareholder action, by way of constructive

59One approach to reducing toxic emissions that many computer and electronics companies have taken isjoining the EPA’s "33/50" toxic reductions program. Another related approach is the Design for the Environment(DFE) principle for products and processes to make them less chemical and energy intensive and make them safer todispose of and easier to recycle.

60Most of the discussion on the Philippine initiatives is taken from the said plan.

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i. The minimization of the environmental impact of said industry, based on the awareness of environmental needs and knowledge of the present technical performance.

ii. To develop a tool for the industry to narrow the present gap in technical performance in order to gain a sustained production, as common in the industrialized countries, from an environmental point of view.

This plan is part of the second phase of the Industrial Restructuring Program of the DBP. One ofthe components of this phase was the development of Environmental Management Plans forseven industrial subsectors of which semiconductors was one.

In the Philippines there already exists a complex legal framework for environmental protection. There is an environmental permitting system based on an Environmental Impact Assessment. Water bodies are classified according to their designated use. Ambient air quality standards areestablished. Regulations are issued regarding also the handling of solid and hazardous waste. Moreover, in 1987, the DENR was established to oversee and direct the environmental protectionin the country.

However, despite the existing legal framework, their is a apparent disparity between governmentpolicies and actual implementation. The Environmental Management Plan cites the followingreasons for this:i. Too wide gap between regulatory ambitions and techno-economical realities of the

industry;ii. Lack of human and material resources; and central and particularly regional authorities to

enforce regulations;iii. An inefficient control mechanism of the performance of the specific industry based on

governmental site control;iv. Low environmental awareness among public as well as industrial decision makers;v. Conflicts of interests in the enforcement of governmental policies between environmental

requirements and other vital factors of public interest, such as employment, industrial development, regional interests, etc.

In comparing domestic environmental standards with international ones, the plan recognizes thelack of international standards for the manufacturing of semiconductors. However, despite thislack, these efforts illustrate the Philippine government’s and industry’s concern over the potentialimpacts of semiconductor manufacturing. A brief summary of the environmental plan ispresented in Appendix 5.

Based on this examination of global initiatives in addressing the environmental issues ofelectronics and semiconductor manufacturing, there an obvious trend towards a change in theconsumption and production patterns in these industries. The ultimate concern of this paper ishow these governments, corporations, and citizen initiatives, meant to address environmentalissues, might affect Philippines production.

IMPACTS ON PHILIPPINE PRODUCTION

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As noted above, electronics in general, and semiconductors in particular, are an importantcomponent of the Philippine’s trade. These products make up the largest portion of the nation’sexports. Any impacts on trade in these products would therefore affect a wide range ofmacroeconomic variables, from foreign exchange earnings to employment. However, the globalindustry’s consciousness of its environmental impacts is only beginning to grow. Most of theimpact studies and analysis and the strategic plans have emerged only this decade. Legislation inmany areas including recycling is still pending in most countries. The analysis of the consequences of a growing demand for green electronics can therefore be based only potentialeffects and an examination of the global production chain. There are no statistics on tradeimpacts on this particular industry as of yet since the industry is just beginning to change.

Two important factors must first be considered in this analysis. First, the manufacture ofcomputers and electronics now takes place in a “widely diverse and dispersed collection oforganizations that span not only company boundaries, but geographical and political boundariesas well.”61 Production is fragmented and dispersed yet integrated. In other words, whilesemiconductor production involves different companies and production units across nations, it isan integrated system resulting finally in a complete electronic product. Second, in theirmanagement of environmental impacts, governments are now taking a more holistic approach. This means an increasing concern not only with the impacts of domestic manufacturing but alsowith the entire life cycle of a product (i.e., including parts from foreign suppliers and thedisposition of the product).62 Consequently, while production is fragmented, governments arelooking at the whole chain and not only the components of the chain located within theirboundaries.

Given these factors, the first thing we must address in analyzing changing consumer patterns iswho is the consumer. It becomes apparent that for the semiconductor production chain, thecustomer of Philippine industry is not the user of cellular telephones, fax machines, orcomputers, but it is the company that includes these semiconductors in its products. Ergo, thecustomers of Amkor/Anam Philippines is not the mass consumer, but Motorola who mightinclude semiconductors in its telephones. However, pressure to manufacture green products isnot exerted on the semiconductor producers (i.e., Amkor/Anam), but on the producer of the endproduct (i.e., Motorola). Nonetheless, such pressures do eventually echo down the productionchain to Philippine producers. Below is a diagram of the pressures for change the primarystakeholders.

61Sara Beckman and others, Environmentally-Conscious Supply Chain Management, IEEE 1995.

62Cliff Bast and others, Globalization of and Guiding Principles for Environmental Legislation and PublicPolicy Development, IEEE 1995.

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Figure 4. Pressures for Change through the Global Chain.

The pressure for green products is coming from mainly two sources, the government andconsumer groups.63 In terms of government pressures, a number of policies regarding emission,hazardous materials, and waste disposal already exist. In addition, many governments are alsolegislating or considering legislating other standards and requirements. On the other hand,consumer groups such as SVTC and Citizen’s Trust continue to clamor for more environmentallyfriendly electronics production. But, these pressures are being exerted mainly on the producerslocated in the industrialized markets. Proof of this is the character of legislation in Europe,which places the ultimate responsibility for disposal on the manufacturer. However, because ofthis, and the holistic life-cycle approach, Philippine producers will eventually feel this pressure. However, these demands, as illustrated above, will travel through the chain. In other words, end-product manufacturers, because of pressures on them, will require more ecologically soundproduction of all its suppliers.

Therefore, in the global electronics industry, rather than being a trade issue, this is more supplymanagement issue. As pressures on mother companies to produce “green products” grow, how

63The arrows indicate the pressures for environment friendly production and the direction of the pressures.

IN-HOUSE MANUFACTURING

CONTRACT MANUFACTURING

IN-HOUSE MANUFACTURING

OTHER MANUFACTURERS(end product producers)

GOVERNMENT

CONSUMERGROUPS

PHILIPPINESINDUSTRIALIZED

MARKETS

29

will these pressures affect production of sub-components in other countries. The sub-contractorscannot ignore environmental developments in end-use countries. Even in this industry, greenmanufacturing is seen as a potential competitive advantage as countries start implementinglegislation on standards and as consumer groups expand advocacy campaigns.

The Philippine semiconductors sector, like the global industry, as discussed, is divided betweenin-house manufacturers and contract-manufacturers. How changes in consumption andproduction patterns might affect Philippine producers would differ for each type of manufacturer. However, the pressures on each are similar and come from the same sources. These are exertedat the very end of the production chain, on the end product manufacturers that usesemiconductors.

In-House Manufacturers

The largest semiconductor manufacturers in the Philippines are in-house manufacturers such asIntel and Texas Instruments.64 Hence, how environmental demands may affect their productionis a vital consideration for the country. In the above diagram, a dotted line connects the in-housemanufacturers in the Philippines to the manufacturers in the industrialized markets. This ismeant to illustrate that despite the geographic separation and the separate manufacturing units,the policies of the mother company apply to Philippine subsidiaries. Because of the life-cycleapproach, any and all components of end-products, even components manufactures in othercountries, must pass environmental standards. Therefore, any changes in policies or productionin the mother company resulting from environmental or social legislation automatically applies toits subsidiaries.

An example of such a response is Hewlett-Packard which has business operations in 110countries. To address emerging environmental trends, the company launched the productstewardship program. This is “a philosophy and practice of designing products and theirassociated accessories and processes to prevent and/or minimize adverse health, safety andecological impacts throughout their life cycle (i.e., design, manufacture, distribution, use, take-back, disassembly, reuse, recycle and ultimate disposition of constituent parts and materials.”65 Thus, HP coordinates the activities of its entire global network including its subsidiaries.

Intel Philippines is likewise subject to the environmental policies of its mother company. Itfollows U.S. standards for packaging and has substituted solvents used for cleaning for de-ionized water. It has likewise stopped the use of Freon in its production processes. Accordingto Jake Pena, the General Manager of Intel, Philippines, the Philippine government has set upstringent environmental standards. But the implementation of these standards is weak. On theother hand, all of the above efforts at reducing the environmental impacts are part of Intel’s

64These semiconductor manufacturers also produce for other companies. Also, they may sub-contract some of

their orders to other suppliers.

65Cliff Bast and others, Globalization of and Guiding Principles for Environmental Legislation and PublicPolicy Development, p. 221.

30

overall corporate policy.66

Texas Instruments, the number one semiconductor exporter in the country, is likewise subject tothe corporate environmental guidelines of its mother company. Examples of TI initiativesinclude the use of palladium frames instead of lead-frames and efforts to lessen the use ofchemicals. In terms of processes, corporate guidelines call for zero waste. TI Philippines islikewise applying Total Quality Management principles to reduce the consumption of chemicals,waster, and energy. Appendix 6 illustrates some corporate principles and strategies. Theysimilarly note the strict nature of Philippine regulation and the weak implementation andmonitoring.67

Thus for in-house manufacturers, or specifically, subsidiaries of industrialized countrycompanies, environmental policies apply even when located in other countries. Thisdemonstrates the effects of a life-cycle approach on production in the Philippines. As a matter offact, based on these interviews, these type of forces have had more effect on changing productionthan domestic government environmental regulation has. Bureaucratic constraints limit theability of the government to implement and monitor compliance with strict environmentalregulations.

Contract-Manufacturers

Since contract manufacturing involves at least two different entities, suppliers and users, theabove process does not apply. Corporate policies do not automatically apply across companies. This is a more direct case of supply management. If orders are contracted to large multinationalssuch as Intel, the above process for in-house manufacturers apply. Differences arise only when itcomes to pure contract manufacturers and domestic firms.

Historically, supply management began with quality and timeliness standards. Emphasis wasfirst placed on cost improvement. Then, attention was given to quality performance. Finally,time became the important factor. Efforts to address these standards involved a close workingrelationship between product designers and manufacturers or suppliers. The same principlesapplied to these standards can now be used to manage environmentally - conscious performancestandards.68

The most direct influence of buyers is to demand from suppliers’ environmental standards. Forexample, Philippine contract-manufacturers have already encountered European customersrequiring ISO 14001 certification. It is important to note that these customers are willing to pay

66Jacob Pena, General Manager, Interview by author, 13 May 1997, notes, Intel Philippines, Makati,

Philippines.

67Rose M. Gonzales, Facilities Chemical/Environmental Engineer, and Paul E. Fronda, Manager,Environmental, Safety, Health & Security, Interview by author, 30 June 1997, notes, Texas Instruments, Philippines,Baguio City, Philippines.

68Sara Beckman and others, Environmentally-Conscious Supply Chain Management, pp. 235-236.

31

the premium of imposing performance and environmental standards on the suppliers. Inaddition, they have also offered to assist companies achieve certification. Certification howevercan be expensive. Thus, for large multinational contractors, certification, necessary for survival,is within reach. On the other hand, small local contractors find certification and environmentalstandards as burdensome. For example, according to Julius Labrador, of PacificElectromagnetics Corporation, for companies with 30 workers or less, the equipment required forenvironmental standards are simply too expensive.69

For end-product manufacturers, changing suppliers is not an easy task. Relationships have beenbuilt and understandings made. The challenge therefore is not necessarily good sourcing, buthow to assist existing suppliers achieve environmental standards. These producers must bewilling to invest in the training, education, and equipment supply of its suppliers. For example,in the U.S., Motorola invested in universities precisely for the education of its suppliers and theirown employees.70 In the Philippines, TI works closely with its chemical and solvent suppliers. TI Philippines acts almost like a government agency, monitoring the processes of its suppliers ona regular basis and meeting with them to assist their compliance with TI standards. In theirexperience, their suppliers have not been resistant to these changes. Furthermore, contractmanufacturers are mere implementers of designs coming from the end-product manufacturers. As noted above, a greater emphasis is being placed on the design stages of semiconductors andelectronics when it comes to environment friendly production. Therefore, even in this scenario,responsibility lies on both the contract manufacturer who must adjust production processes andthe client who provides the design.

Therefore for Philippine contract-manufacturers, the pressures for green production come fromits immediate client, the company that will use the semiconductors. Since the designs come fromthese companies, they must share in the responsibility of the manufacturers improving itsenvironmental quality. Such help can come in the form of technical and financial assistance, ortraining and education programs.

There are two dangers for the Philippines in this regard. Newer players in other nations mightcome in already capable of meeting global environmental and performance standards. Suchdevelopment would force clients to switch to these suppliers. The other danger is mainly tosmall companies. Most, if not all, of these companies shall be unable to meet the financialburdens of buying new equipment and changing production processes. The end result might be alocal industry composed only of large, and mostly multinational companies.

To summarize, the effects of changing consumption and production patterns are more a supplymanagement rather than trade issue. The particular dynamics would depend on whether we arestudying an in-house manufacturer or a contract manufacturer. For the former, policiesdeveloped in the mother companies would almost automatically apply to its subsidiaries. For the

69Minutes of the Roundtable of Environmental Regulations and the Semiconductor Industry, 9 July 1997, New

World Hotel, Makati, Philippines.

70Sara Beckman and others, Environmentally-Conscious Supply Chain Management, pp. 236.

32

latter, demands made by clients faced with environmental pressures are forcing contractmanufacturers to adjust production. The possible consequence of this however is the shutting--down of small companies unable to meet environmental standards.

CONCLUSION AND RECOMMENDATIONS

In the global semiconductor industry, movements toward a more environmentally consciousindustry is a supply management issue. The issue is therefore not the use of environmentalstandards as a possible trade barrier to semiconductors coming in from developing countries. Instead, the issue is how do mother companies or end-product manufacturers, found mostly inindustrialized markets, ensure that the components entering its products meet all environmentaland performance standards and benchmarks. It is in their interest to manage this chain and notsimply look for alternative suppliers. Because of this, these companies must be willing to helpsupplying Philippine companies meet global standards. Within this system therefore, toencourage green production, the best levers to push is the mother companies located inindustrialized nations.71 Such pressures reverberate down to semiconductor suppliers through theproduction chain, and, as seen in the example of TI Philippines, even chemical and solventsuppliers.

However, for the Philippine government, there are a number of implications. The broad learningshould be that environmental friendly production is fast become a requirement even in as youngan industry as electronics and semiconductors. Rather than there being a conflict between tradeand environmental protection, green electronics are quickly becoming a competitive advantagefor companies and nations. Therefore, if the government wants electronics to continue being amajor export, it must begin moving the local industry towards ecologically sound productionimmediately. Otherwise, production and orders might simply move to other nations with existingcapabilities to meet global environmental standards.

Hence, in terms of environmental protection, the government must do the following:1. Encourage the use of alternatives to toxic chemicals and other hazardous materials. A

number of models already exist within the country (e.g., Intel Philippines’ use of deionizedwater). The government should therefore encourage the sharing of technology among localindustry players.

2. Facilitate ISO 14001 Certification. More and more companies will soon require thiscertification. It is up to the government to facilitate the process making it more accessible tomore companies.

3. Provide financial incentives (e.g., tax breaks, subsidized loans, etc.) for small to mediumsized companies seeking ISO certification and/or installing environmental processes orequipment. This will ease the burden of these companies now faced with these additionalburdens.

4. Encourage the use of Design for the Environment Principles. While design is mostly in thehand of the mother companies, domestic players must already adapt these principles and

71Furthermore, in the Philippines, we see these companies taking the place of government agencies and doing

the environmental monitoring themselves.

33

adjust processes when necessary in anticipation of the growing application of DFE.5. While there are many more possible actions, the above, I believe are the most immediate,

given the expected legislation in Europe and the U.S.. The global barriers to entry in thesemiconductor assembly industry are low. In lieu of increasing competition, the nation mustbe prepared promptly and even unilaterally to raise domestic environmental standards. Furthermore, to deal with the issue, it must address the problems across the board, fromdesign, to inputs, to manufacturing processes, and disposal. In the long run, environmentalshould be seen not as a burden, but a vital component of the nation’s competition policy.

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APPENDIX 1COMPOSITION OF PWBS IN TELEVISIONS AND COMPUTERS

Substance %

Substrate material 70.0000Of which Bromine (Br) 2.0000

Copper (Cu) 12.0000

Tin (Sn) 3.0000

Iron (Fe) 7.5000

Lead (Pb) 2.5000

Nickel (Ni) 2.0000

Zinc (Zn) 1.5000

Aluminum (Al) 0.5000

Chromium (Cr) 0.0500

Gold (Au) 0.0150

Silver (Ag) 0.0200

Antimony (Sb) 0.3000

Platinum (Pt) 0.0040

Palladium (Pd) 0.0230

Cadmium (Cd) 0.0100

Arsenic (As) 0.0100

Mercury (Hg) 0.0020

Chlorine (Cl) 1.0000

Fluorine (F) 0.0300

Gallium (Ga) 0.0006

Germanium (Ge) 0.0016

Source: Blonk & Starreveld, 1993

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APPENDIX 2WASTE GENERATED DURING ELECTRONICS MANUFACTURING PROCESSES

Semiconductor Pollution Outputs

Process AirEmissions

Process Wastes(Liquids/Waste Waters)

Other Wastes(Solids/RCRA)

CrystalPreparation

Acid fumes,VOCs,dopantgases

Spent deionized water, spent solvents, spentalkaline cleaning solutions, spent acids,spent resist material.

Silicon

WaferFabrication

VOCs anddopantgases

Spent solvents, spent acids, aqueous metals,spent etchant solution, and spent aqueousdeveloping solutions.

F003

FinalLayeringAnd Cleaning

Acid fumesand VOCs

Spent deionized water, spent solvents, spentacids, spent etchants, spent aqueousdeveloping solutions, spent cleaningsolutions, aqueous metals, and D007(chromium).

Spent solvents

Assembly VOCs Spent cleaning solutions, spent solvents,aqueous developing solutions, and P&Uwastes.

Spent epoxy materialand spent solvents

Printed Wiring Board Pollution OutputsBoard Pollution OutputsPollution Outputs

Process AirEmissions

Process Wastes(Liquids/Waste Waters)

Other Wastes(Solids/RCRA)

BoardPreparation

Particulates,acid fumes,and VOCs

Spent acids and spent alkaline solutions Sludge and scrap boardmaterial

Electroless Plating Spent electroless copper baths, spentcatalyst solutions, spent acid solutions

Waste rinse water andsludge from waste watertreatment

Imaging Organicvapors andacid fumes

Spent developing solutions, spent resistmaterial, spent etchants, spent acidsolutions, and aqueous metals

F001-5, depending onconcentration andmixture of solvents. Sludge from waste watertreatment

Electroplating Acid fumes,ammoniafumes, andVOCs

D008 (lead), D002, D003, spent etchants,spent acid solutions, spent developingsolutions, spent plating baths

F006, F007, and F008

Solder Coating VOCs andCFCs

PWB Assembly andSoldering

VOCs andCFCs

Metals (nickel, silver, and copper), D008(lead), flux residue, spent deionized water,spent solvents

Solder dross, scrapboards, filters, gloves,rags, waste watertreatment sludge

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APPENDIX 2 (con’t)

Cathode Ray Tubes Pollution Outputs

Process AirEmissions

Process Wastes(Liquid/Waste Waters)

Other Wastes(Solids/RCRA)

Preparation of thePanel and ShadowMask

Solventvapors

Spent solvents Glass (lead) frombreakage

Application ofCoating to PanelInterior

Vapors fromlacquer area

Spent photoresists, deionized water, acids,oxidizers, carbon slurry, surfactants,chromate, phosphor solutions, chelatingagents, caustics, solvents, alcohol, coatings,ammonia, aluminum, and process coolingwaters

Lacquer wastes

Installation ofElectron Shield

Electron shield degrease and metals

Preparation of Funneland Joining to Panel-Mask Assembly

Funnel wash, seal surface cleaning, and fritapplication wastewaters

Frit contaminatedclothing, instruments,utensils, unusable fritglass (lead), glass (lead)from breakage

Installation ofElectron Gun

Spent solvents and caustic cleaners Glass from breakage

Finishing VOCs Spent solvents

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APPENDIX 3GENERAL CONCLUSIONS OF THE ELECTRONICS INDUSTRY

Information and access to information is lacking. The knowledge necessary to make soundenvironmental/business decisions frequently does not exist or is not readily accessible. Thedevelopment of a comprehensive information network and network services offers the potentialto significantly impact this area. Software design and analysis tools are needed to transform thegrowing volumes of data and databases into new design approaches, enabling product andprocess engineers to design for the environment at all product development and manufacturingstages. The electronics and computer industry is uniquely positioned to develop and use thesoftware and hardware products to address these issues.

Disposition is a business concern. There is increasing recognition that used products have avalue which needs to be recovered. The rapidly changing market makes valuable products andcomponents obsolete long before their useful reliability life is reached. Many in the industry areactively seeking mechanisms that will allow their products to find either a second home, a newlife in an upgraded product or be recovered for the materials they contain. At present, there is aneed to establish an infrastructure and the technology for capturing and directing used productstoward the most useful economic and environmentally sound alternative.

Manufacturing requires a focus on efficiency and an understanding of new technologies. New data on hazards and risk is effectively directing research efforts toward more efficientprocesses that generate less waste and therefore cost less, and toward less hazardous materialswhere substitutes are available or can be developed. There is a strong desire to be proactive inevaluating and working collaboratively with other stakeholders to minimize the impact ofemerging technologies (such as flat panel display technologies) before they are broadlyimplemented in large-scale manufacturing.

Voluntary programs augment and surpass command and control approaches. As a result ofthe previous life cycle study, the EPA initiated a voluntary collaborative project with the printedwiring board industry (PWB) and public stakeholders to identify, prioritize, and evaluate severalalternative technologies to reduce environmental impact and maintain or improve performance,while reducing costs. A broader initiative within EPA, known as the Common Sense Initiative,is being launched to use common sense, innovation, and flexibility in order to achieve a cleanerenvironment at less cost. The voluntary 33/50 program has received pledges from industry toreduce releases of the 17 high priority targeted toxic chemicals by 355 million pounds by 1995. All of these efforts are examples of a more collaborative, voluntary approach between industry,government, and the public sector to accomplish real, positive change. The electronics andcomputer industry has encouraged and embraced these more flexible and effective approaches.

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APPENDIX 4THE BASEL CONVENTION AND THE TRADE OF HAZARDOUS WASTE

The regulatory framework for the trading of hazardous waste consists of the Basel Convention,the LomJ Convention, the Bamako Convention, an OECD Decision (C(92)39 of 30th March1992) and an EU Regulation (259/93, OJ 1993 L 30/1). Among these regulations the BaselConvention is of preeminent importance with regard to the process of defining hazardous waste.The Basel Convention on the control of transboundary movements of hazardous wastes and theirdisposal was the first global attempt to address the issue of hazardous waste. It was adopted in1989 and entered into force on 5 May 1992. As of 22 July 1997, the Basel Convention wasratified by 113 countries, plus the EU. Among the ratifiers are many developing countries,including the Philippines. The US has signed but not ratified the Convention.

Based on the list of hazardous substances that is included in Annex 1 to the Convention, it couldbe concluded that electronics waste is hazardous waste within the meaning of the convention.However, since the convention entered into force the definition of hazardous waste has beenunder debate. In 1995, the Basel Convention was amended by the Conference of the Parties(CoP) at its third meeting. The decision was taken to introduce a new article that will obligateParties and other States which are member of the OECD or the EU to prohibit immediately alltransboundary movements of hazardous wastes destined for final disposal to other States. It alsoobligates these States to phase out by 31 December 1997, and prohibit as of that date, alltransboundary movements of hazardous wastes that are destined for recovery or recycling.Support for the amendment was based on the need to protect developing countries fromunwanted imports, because the often lack the financial, technical, legal, and institutional capacityfor monitoring the transboundary movement of hazardous wastes and preventing illegal imports.However, the amendment needs to be ratified by two thirds of the signatories before it will enterinto force. As yet, this has not happened.

The amendment decision also called for a classification of wastes. Since then, the TechnicalWorking Group of the CoP has been preparing two lists, referring to specific wastescharacterized as hazardous under the Basel Convention (list A) and to those which would not fallunder the scope of the Convention (list B), unless they are contaminated by constituentsrendering them hazardous or are regulated by national legislation as hazardous wastes. The listsA and B will be submitted to the fourth meeting of the CoP for considerations and eventualadoption. This meeting was to be held from 6-10 October 1997 in Malaysia, but has beenpostponed because of the forest fires in Southeast Asia.

The lists to be submitted to the CoP have been published by UNEP, the secretariat of the BaselConvention. Electrical and electronic waste are mentioned in the draft version of both lists A andB. The formulations of these entries, A1180 and B1110, are each other’s mirror image. Accordingto B1110, waste from electrical and electronic assemblies will not be covered by the BaselConvention, if (UNEP, 1997):

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APPENDIX 4 (con’t)

− electronic assemblies consist only of metals and alloys;− waste electrical and electronic assemblies or scrap (including printed circuit boards)

do not contain components such as accumulators and other batteries included on listA, mercury-switches, glass from cathode-ray tubes and other activated glass and PCB-capacitors, or not contaminated with Annex I constituents (e.g. cadmium, mercury,lead, polychlorinated biphenyl) or from which these have been removed, to an extentthat they do not possess any of the characteristics contained in Annex III;

− electrical and electronic assemblies (including printed circuit boards, electroniccomponents and wires) destined for direct re-use and not for recycling or finaldisposal. Re-use can include repair, refurbishment or upgrading, but not majorreassembly.

The practical effect intended by the Basel Convention and other regulatory measures is to putmore pressure on local disposal facilities and ultimately to force increased waste minimization bythe generator. Therefore, they might have implications for the collection and recycling ofobsolete electronic equipment. However, since the definition of hazardous waste and theacceptability of waste trade for recovery purposes are still under discussion, it is, as yet, too earlyto give any firm statements whether trade of electronics waste will be allowed in the future andunder which rules.

40

APPENDIX 5 STEPWISE ENVIRONMENTAL MANAGEMENT PLAN FOR PHILIPPINESEMICONDUCTOR INDUSTRY ACTION AND TIME Short term In two years:

• Conducting an environmental review comprising− Examination of discharges to water, air and land− Examination of routines and systems for waste segregation− Inventory of used chemicals/raw material

• Establishment of a program for self monitoring

• Development of a plan for implementation of waste segregation

• Initiation of a waste minimization program and identification of at least three priority areasfor action such as:

− Program for housekeeping and maintenance to reduce waste− Substitutions of chlorinated or aromatic cleaning by aqueous cleaning or non-

cleaning options− Change of method/technology to reduce waste

• Substitution of CFC-113 and 1,1,1-trichloroethane

• Improvement of the efficiency of existing environmental abatement equipment

• Training of environmental operators

• Conducting an independent review of the achievements for the short-term objectives

41

APPENDIX 5 (con’t)

Long-term Within five years:

• Implementation of an environmental management system, including the adoption of anenvironmental policy and an environmental program

• Implementation of the waste minimization program, objectives among others:− Program for good operational practice comprising preventive maintenance programs,

monitoring programs, material storage and handling and waste segregation− Phasing out CFC=s− Substitution of chlorinated solvents− Change to technology which generates less waste, for example

∗ on-cleaning options instead of use of solvents∗ replacement of lead-based solder with one less harmful∗ laser marking

• Installation and proper operation of effluent treatment plant

• Installation of equipment for treatment of toxic gases

• Compliance with national effluent standards expressed as monthly averages, appendix 1

• Conducting an independent review of the achievements for the long-term objectives

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APPENDIX 6TEXAS INSTRUMENTS PHILIPPINES ENVIRONMENTAL POLICIES

43

APPENDIX 7PARTICIPANTS OF ASIAN INSTITUTE OF MANAGEMENT CONSULTATION ON THEENVIRONMENT AND THE PHILIPPINES SEMICONDUCTOR INDUSTRY SPONSOREDBY UNITED NATIONS ENVIRONMENTAL PROGRAMME

Government Representatives: Amelia SupetranEnvironmental Management BureauDepartment of Environment and Natural Resources

Gina CumpasBoard of InvestmentsDepartment of Trade and Industry

Private Sector Representatives: Jun LoretoAmok/Anam Philippines

Cecil CorloncitoAmkor/Anam Philippines

Federico FernandezTeam Pacific Corporation

Julius LabradorPacific Electromagnetics Corp.

Dindo TiponAESSEP, SEIFI

Lawrence QuaIonics Circuits, Inc.

Emily ChuPyrotech Enterprises

Mark DomingcoPyrotech Enterprises

Arjay OlanoPyrotech Enterprises

Eugene TanTemic Telefunken Microelectronic (Phils.), Inc.

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