(FORTUNE Magazine) – IN THE COLD VACUUM OF space, on a gleaming metal surface inside the Galaxy 4 communications satellite, tiny whiskers of tin grew in perfect stealth -- until May 19, 1998, that is. That's when at least one of those whiskers bridged a pair of metal contacts in the satellite's control processor. The short circuit killed the satellite. Some 40 million pagers stopped working all over the country. Millions of dollars' worth of ATM and credit card transactions were interrupted. The $250 million satellite became, in the words of NASA engineer Henning Leidecker, "a doorstop in space."

The loss of Galaxy 4 was just one of the more visible consequences of a little-understood problem with catastrophic potential for electronic and electrical systems: metal that grows whiskers. An F-15's radar system, pacemakers, fuse switches in air-to-air missiles, electronic relays in a nuclear power plant, and global positioning system receivers--not to mention many other satellites--all have fallen victim to the problem. One group of University of Maryland theorists has estimated that tin whiskers have caused losses of billions of dollars to date.

And the problem suddenly could be poised to get worse. The march of miniaturization means that ever smaller metal whiskers can short out the ever smaller distances between leads, solder bumps, and other jam-packed conductive surfaces in electronic systems. Furthermore, the European Union has ordered that by the middle of next year, electronic and electrical products sold in its vast market must be free of lead--and it is lead that best checks the growth of whiskers. "We are more vulnerable now than we used to be," says Ron Gedney, director-turned-consultant for the National Electronic Manufacturing Initiative (NEMI) in Herndon, Va.

The phrase "tin whiskers" is pretty darned descriptive. Under just the right lighting, if you look at a metal surface with whiskers, it sparkles. No one can tell you the specific conditions under which whiskers may or may not grow, but it usually has something to do with surface tension. Just as you might move to the less crowded outside wall of a room packed with people, metal atoms move around and reform into whiskers as a way of easing tension--even the pressing of a bracket or screw.

Until the new millennium the tin-whisker problem actually seemed like a plague of the past. The metallurgical bug first became apparent in the late 1940s to telecommunications engineers who were investigating why relays in telephone switching systems were failing. The research community came up with a whisker-quashing solution: Add 2% to 3% lead to the tin plating used in electronic assemblies, particularly on wires and leads to make them solderable. Lead-tin alloys became standards for the industry, and their use relegated tin whiskers, at least for most of us, to nuisance status.

As often happens, the solution became a problem: Lead became a material non grata and for good reason. It does a nasty number on neural circuitry, especially if you're a kid. To reduce human exposure to lead, governments have regulated it out of paint, gasoline, plumbing, and other sources. The relatively small amount of lead in electronic and electrical systems--about 0.2 gram in an Intel processor and about two to three grams in a motherboard--hadn't attracted much attention, but that changed as the volume of electronic waste showing up in landfills began ballooning.

Although some companies had been anticipating an era of lead-free electronics for more than a decade and already are shipping lead-free products, the get-the-lead-out clock started ticking in earnest for the entire electronics industry in 2002 when the European Union enacted the Restriction of Hazardous Substances (RoHS) and the Waste Electrical and Electronic Equipment (WEEE) directives. Among other things, the directives mandate that by July 1, 2006, only lead-free electronic and electrical products will be legally salable in member countries. Unfortunately, no one knows for sure whether there is a no-lead substitute that will be immune to whisker growth. And that means tin whiskers and the failures they can foment could become as familiar in electronic products as flat tires are in cars.

To those who make electronic products, the no-lead restriction is akin to phasing salt out of food. Lead is a trace ingredient in these products, but its whisker-stopping and other traits have a technical taste that's hard to do without. Even though some companies are claiming to have developed reliable substitutes to lead-tin alloys, a fundamental metallurgical ignorance about why whiskers form on metals--including cadmium, zinc, and silver in addition to tin--means that there is no rock-solid basis for expecting success through any particular fix. That's why military systems are, for the moment, exempt from the lead-free requirements. But because military procurement has relied more and more on off-the-shelf consumer products, even military systems in coming years could end up with more vulnerable components.

"When you have something like lead-tin, and you have 50 years of experience with it, you hate having to change it," says NEMI's Gedney. What's too bad, he and others in the industry argue, is that going after lead in electronics is not a good way of getting a lot of environmental bang for the buck, especially when it includes the risk of bringing down more satellites. Even so, says Gedney, "no company wants to be against progress on the environmental front; every company knows it has to have a solution to this."

Some companies, such as Texas Instruments, developed lead-free technologies even a decade ago, well before the heavy metal made it to the top of regulators' to-do lists. By the late 1990s the likelihood that lead would be excised from the diet of electronics makers and suppliers became more apparent, and in 2002 the European Union made it official. Japan, China, and several American states, including California and New Jersey, also are in various stages of outlawing lead. Denial is not an option.

Almost as out of sight to most people as the tin whiskers themselves is a worldwide network of detail-minded engineers, metallurgists, technology managers, chip manufacturers, government officials, and others who are racing against the clock to make sure that the get-the-lead-out movement does not awaken the tin-whisker dragon. They have until about right now to come up with a solution if they want to make sure that the products that ship in the coming months and years do not collectively harbor a Y2K of sorts--the wide distribution of everything from microwave ovens to missiles that are more prone to whisker-induced failure than most electronic products have been for the past half-century.

"You don't want to go out and buy a brand-new HDTV, only for it to fail before you've finished your payments," says Gedney. Researchers have come up with a variety of potential solutions. Semiconductor maker Agere Systems, for example, announced in September that it will undercoat the leads on the components it uses with nickel before it puts pure tin on top. Engineers also have developed a tin-silver-copper alloy that appears to limit whiskers to a mostly manageable fact of metallic life.

However promising those lead-free solutions might look in laboratory and beta tests, however, the real assessment of their long-term ability to keep whiskering at bay will be taking place over the next few years in the wild as lead-free electronic systems are made and sold throughout the world. It's a done deal for any electronics industry player that wants to remain in the game, but all are moving forward with the nagging anxiety that they might be setting trillions of individual stages for the quiet, stealthy growth of metal whiskers that can do no good.