EMS Plays Green Card

EMS companies can't just ditch lead altogether, as some companies and sectors are exempt from the law and still require leaded parts, while products shipped to other parts of the world don't have lead-free restrictions (such as the U.S.). "Basically what you have is twice the number of parts," says Walker. "You have the new parts and the old parts."

In general, EMS companies such as Celestica assemble printed circuit boards and other materials that make up the guts of brand-name consumer electronics products like cell phones, gaming consoles or computers and high-end telecommunications equipment.

The EMS companies sometimes work with their customers, companies including Apple(AAPL Quote) or Hewlett-Packard(HPQ Quote), both considered OEMs, to design the product itself, or handle product repair.

With the new regulations boosting the amount of work necessary to transition to RoHS compliance, some of these OEMs, especially the mid-size or smaller companies, may turn to outsourcing work to EMS firms to ensure that they are RoHS-compliant. Celestica's "green services" unit, for instance, provides consulting, a product-conversion service and specialized lab equipment to help OEMs meet compliance requirements.

"These guys are the subject-matter experts," says Richard Stice, an equity analyst with Standard and Poor's. "It's more efficient for the OEMs [to use the EMS companies]. The RoHS compliance adds another catalyst for more outsourcing."

"I think it will definitely be a net positive in terms of the EMS industry overall," Stice says. He and his firm have no affiliation with any of the companies mentioned and do not do any investment banking.

"When they are producing the products now, there may be higher costs, but a lot of the infrastructure is already built in," Stice says. "So there may be costs that they can pass on to the OEM or the consumer."