A:

Many electronics sector companies are tightly regulated. Environmental and product quality regulations are common around the world. Compliance with export laws requires additional resources. For many companies, these regulations incur substantial supply chain costs. Complying with government regulations may require the use of specialized inspections, software and equipment. The impact on electronics companies is significant. Businesses must factor these costs into expenses and pay significant fines for non-compliance with regulations. Other countries regulate the industry at varying levels. Some countries have little or no electronics industry regulation, although some regulate pollution and environmental impact.

Supply chain expenses for electronics sector companies are typically very high and increase whenever new regulations place a higher strain on production. Regulations contribute to higher supply chain costs by increasing expenses associated with production, packaging, distribution and electronic equipment disposal. Environmental regulations often specify how raw materials are obtained and purified for use. Some laws restrict acquiring materials from conflict zones. These regulations are intended to reduce funds that support terrorism and funding for restrictive regimes. Other guidelines dictate how toxic substances should be used to protect consumer and employee safety. While often necessary, these guidelines increase expense and often cause higher product prices.

To maintain compliance with government regulations, many companies must evaluate their supply chains using outside resources and consultants. This process may be expensive, and changes to the supply chain may require using different production methods and materials. Some of these changes introduce inefficiencies and increase production costs for the business. The higher costs may reduce the company's profitability and competitiveness. Typical large American companies with 500 employees or more paid around $7,775 per employee in regulatory costs during 2008. In total, regulation across the electronic sector and other American industries amounted to at least $1.75 trillion in 2008. After accounting for inflation, this total increased 3% between 2004 and 2008.

Many of these regulations are stronger in the United States and European countries. The European Union adopted substantially increased environmental regulations in 2003, and California quickly followed with a law similar to the EU version. These laws restrict the use of certain substances known to be toxic. Restrictions apply to consumer goods and their disposal.

Outside the United States, many countries lightly regulate environmental impact but increasingly regulate pollution occurring during production. As electronic manufacturing grows within these countries, additional regulations are passed to reduce any negative environmental impact associated with production. Electronic waste is regulated in China, South Korea and India, and these countries increasingly regulate toxic materials. Japan requires labels with detailed ingredients and a list of toxic substances in electronics products. Latin American countries generally have limited laws that regulate electronic waste and waste disposal.

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