Conflict Metal Reporting in the Semiconductor Industry

MILLER, TRAVIS; WANG, EDWARD; FRASER, JAMES
(Foresite Systems, Ltd, Campbell, CA and TowerJazz, Newport Beach, CA)

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On July 21, 2010, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act. Section 1502 of the legislation mandates that the Securities and Exchange Commission (SEC) publish rules requiring all publically traded companies appearing on the United States Stock Exchanges to disclose if products contain select derivative metals originating from the Democratic Republic of Congo (DRC) or adjoining countries. The regulated ores are cassiterite, coltan, wolframite, and gold, which, respectively, are the core ores required for the smelted metals Tin (Sn), Tantalum (Ta), Tungsten (W) and Gold (Au). Some leading companies believe Cobalt (Co) will also be a regulated metal under the SEC’s final rulings. The new law will dramatically impact the semiconductor industry over the next year as these metals are used prolifically in semiconductor products. Pragmatically, this legislation will require companies to exercise due diligence on the source and chain of custody of such minerals and make publically available disclosures in financial statements. This paper provides an overview of topics related to this new legislation including: conflict minerals background and why are they being regulated, legislative highlights, financial implications of conflict minerals on industry, declaring and tracking substances, impact to the supply chain, EICC methodology versus part level declarations, corporate finance and legal obligations, and competitive advantages to compliance.

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