Served Up

The trend toward “do it yourself” servers among the major Internet and social media companies reinforces the end-customer’s position at the top of the electronics supply chain.

Google, Facebook and other major dot.com companies are migrating away from off-the-shelf equipment in favor of custom-designed and built machines that better meet their specific needs. While the trend — custom-built servers now make up 20% of the US server market, according to a recent report by research firm Gartner — isn’t completely new, it is now affecting the bottom lines of H-P, Dell and other OEMs that live in that space.

Moreover, Google and Facebook are employing large numbers of hardware designers, once again taking the top talent away from the manufacturing floor (the companies then outsource the actual product build). It could also change the services model: Will repair be performed by the major EMS companies, or by local or even internal specialists?

I suspect the major server makers will try to adapt their product lines, but the question remains whether the Googles of the world will let them far enough through the door to get a good feel for the technology needs, or whether the major dot.coms become mini-Apples in which paranoia trumps partnering.

Just What is ‘Core Competency,’ Anyway?

I want to call attention to this long overdue piece by Forbes’ columnist Steve Denning.

Under the tantalizing headline, “Why Amazon Can’t Make a Kindle in the USA,” Denning makes the case that management, not manufacturing, is to blame, for its rather thoughtless, follow-the-herd mentality (my words, not his).

Case in point: Dell, which little by little gave more and more of its PC manufacturing and  design to Asustek, until the day came when Asustek had developed all the in-house expertise it needed to become an OEM. It no longer needed Dell. And while one could say Dell (whom I am using as a proxy here, as this scenario applies to scores of Western businesses) would have been eaten up by competition sooner or later anyway, the fact is one of its major suppliers — Foxconn — practically prints money, while Dell and fellow PC outsourcer HP look for ways to escape that low-margin business.

For nearly two decades, the EMS industry has sold the OEMs on the idea that they should outsource their lower-margin activities, while simultaneously refuting any suggestion that by doing so OEMs were setting themselves up to be replaced by their own suppliers. “We’re not in the business of ____,” was the EMS refrain. Well, they weren’t until they were. And then it was too late for OEMs to do anything about it.

Unlike populists like Lou Dobbs who shout that the loss of manufacturing must have a political solution, yet fail to consider the intricacies of what they propose, Denning takes a more nuanced approach. (I’ll add my two cents: If Wall Street could manage your business, why aren’t they?)

It’s worth your time to read.

EPA, Dell, Sprint and Sony Have New E-Waste Policy

The US Environmental Protection Agency made a Big Announcement this week in Austin, TX, regarding e-waste and product stewardship — the announcement came as EPA head Lisa Jackson stood beside leaders from Sprint, Dell and Sony.

In Austin, EPA Administrator Jackson signed a voluntary commitment agreement with Dell CEO Michael Dell and Sprint CEO Dan Hesse to promote a US-based electronics recycling market. Sony Electronics Inc. representatives were apparently present and “also committed to improving the safe management of used electronics,” but it wasn’t clear whether they signed anything. But their presence indicates good intentions.

“Americans generate nearly 2.5 million tons of used electronics each year,” said Chris Nowak of Actio Corp., the New England-based company that tracks manufacturing regulations worldwide and bundles these findings into product stewardship compliance software.*

“This is a key commitment made today by Dell, Sony and Sprint,” Nowak said. “Evolving end-of-life policies such as these force designers, quality assurance personnel and manufacturers to think differently about their products and their product quality.”

Michael Dell, chairman and CEO, Dell Inc. said, regarding the stewardship initiative, “Last fiscal year, we diverted more than 150 million pounds of end-of-life electronics globally from landfills, and we are well on our way to meeting our goal of recycling 1 billion pounds by 2014. We encourage everyone in our industry to commit to easier, more responsible recycling as we all work to protect our planet.”

E-waste not, want not. Under the strategy announced today, the US General Services Administration (GSA) says if products do not comply with comprehensive and robust energy efficiency or environmental performance standards, those products will be removed from the information technology purchase contracts used by federal agencies.  GSA also says it will ensure that all electronics used by the Federal government are reused or recycled properly.

Key components of today’s announced strategy include:

  1. using certified recyclers
  2. increasing safe and effective management and handling of used electronics in the US
  3. working with industry in a collaborative manner to achieve that goal.

For more information on the EPA and industry collaboration, click here.

Electronics stew:  wardship and US policy. It’s not the first time we’ve heard rumblings of this sort. Last October, Lisa Jackson visited China — including a site visit to Guiyu, home of perhaps the most famous e-waste dump but certainly not the only one.   And just a few weeks ago a new e-waste bill was proposed by US Representatives Gene Green and Mike Thompson, with a focus on the exports of used electronics. It’s called the Responsible Electronics Recycling Act. It establishes a new category of “restricted electronic waste” — that is — waste that cannot be exported from the US to developing nations.

Exemptions from the bill include:

  1. used equipment can still be exported for reuse as long as it’s been tested and is fully functional
  2. nonhazardous parts or materials are also not restricted
  3. crushed cathode ray tube (CRT) glass cullet that is cleaned and fully prepared as feedstock into CRT glass manufacturing facilities.

WEEE WEEE WEEE. In other responsible product end-of-life news: in February 2011, members of the European Parliament (MEPs) passed new WEEE guidelines for electronic waste.  Key points are as follows:

  1. manufacturers would help pay for goods disposal
  2. EU governments would implement more stringent penalties for breaching, e.g, for falsely identifying shipments as “reusable”
  3. authorities would be able to target all WEEE categories
  4. current ambition levels for collection rates would be maintained
  5. European standards would be set for collection, recycling and treatment for WEEE management.

For full details, see article on the top 5 WEEE bits.

Europe accepts a RoHS. In related RoHS news, the Council of the European Union (“the Council”) officially revised the RoHS directive earlier this summer. In the Big Picture, this critical recast attempts to harmonize the directive across the European Union.

In the smaller picture, RoHS affects hazardous substances in electrical and electronic equipment.  The chemical restrictions will now apply to all electrical and electronic equipment, as well as to cables and spare parts, and to medical devices, medical equipment, control and monitoring equipment – which were previously exempt from RoHS compliance but are not exempt now.

Blowing Smoke

The deadly explosion Friday at Foxconn’s Chengdu site killed three workers and injured 15 others. Will the company, at long last, feel its workers pain?

It says here, no.

Apple, one of the larger customers for the site, released a statement that was at once nonjudgmental and noncommittal. In it, the iPad maker had this to say: “We are deeply saddened by the tragedy at Foxconn’s plant in Chengdu, and our hearts go out to the victims and their families. We are working closely with Foxconn to understand what caused this terrible event.”

Whoopee.

For a company that takes incredible umbrage at the slightest hint of disclosure, I suppose it would be asking too much for it to reveal any hint of emotion now. But Apple has long shown itself to be disinterested in the ugly goings-on at its largest supplier. Report after report has ripped Foxconn for worker abuses ranging from environmental conditions to overtime and penalties for mistakes generally associated with penal colonies.

Reportedly as much as 30% of the highly profitable iPad 2 tablets are built in Chengdu. If that’s the case, there is absolutely no reason Apple should not have an employee on site, 24/7, ensuring operations are running smoothly. This begs the question, where was that employee? Did he or she not know about the conditions in the polishing department where the explosion reportedly took place, and how workers complained “the department is full of aluminum dust” and “(e)ven though they have worn gloves, their hands are still covered by dust and so (is) their face and clothes?

Other major Foxconn customers, such as H-P, Dell and Motorola, generally have avoided the scrutiny that Apple gets, but that doesn’t — or shouldn’t — make them any less culpable. It’s a convenient excuse to hide behind the veil of outsourcing as a means to ignore what goes on inside your supplier’s factories.

To me, it’s corporate-sanctioned cannibalism. We are supposed to be better than that.

Red Over Greenpeace

Another day, another whine from Greenpeace.

This time, the would-be environmental group complains that several large PC makers are “backtracking” on promises to eliminate certain chemicals from their computers.

In a press release issued today, Greenpeace cites Hewlett Packard, Dell and Lenovo – for “failing to improve their low scores.”

Dell and Lenovo are called out for delaying their migraton to non-PVC and BFR materials, while HP is cited for “[postponing] its 2007 commitment to phase out PVC and BFRs from its computer products from 2009 to 2011. [I]t is not even putting PVC and BFR-reduced products on the market.”

“Greenpeace takes voluntary commitments very seriously and holds companies accountable for their promises. There are no excuses for backtracking, and no reason for these companies not to have PCs free of PVC and BFRs now,” said Greenpeace International Toxics Campaigner Tom Dowdall in the statement.

Which is great, except it’s also wrong.

Keep in mind those scores are set and tabulated by Greenpeace. And note that those targets are constantly moving. Greenpeace exists only to wag its finger at large corporations. It needs enemies in order to survive, even if that means conjuring up ghosts and bogeymen.

Meanwhile, Greenpeace also ignores that the science does not yet support the elimination of BFRs, and in fact, may suggest otherwise. As Dr. Arlene Blum, executive director of the Green Science Policy Institute and a member of Chemists Without Borders noted in her blog in May, “it is difficult to make a causal connection between chemical exposure and health impacts.”

And it ignores that all the major PC vendors now have significant takeback programs in place, providing some level of protection against these chemicals entering the waste stream.

While it pats Apple on the back, claiming its new PC lines “virtually free of PVC and completely BFR-free,” Greenpeace misses that Apple is perhaps the worst of the bunch when it comes to auditing and ensuring its vendors — which include Foxconn — follow acceptable labor practices.

BFRs may be bad, but what’s the alternative? Remind me: Does fire cause pollution?