As of July 2016, over a billion iPhones have been sold worldwide. Whether it’s the latest model or an earlier version, smartphones can be found across the globe, even in developing countries that still lack access to necessities such as clean water. While the iPhone itself may be plentiful it also faces a potential scarcity problem, specifically scarcity when it comes to critical inputs. Of the 83 stable, non-radioactive elements found on the periodic table, 62 are necessary to create an iPhone. Of the 62 necessary, many are considered “critical materials.” What makes them critical has less to do with their abundance in the earth’s crust and more to do with how concentrated they occur naturally. This doesn’t necessarily mean they are scarce in the economic sense of the word; however, there are a variety of factors, concentration in the earth’s crust and otherwise, that influence the supply of these metals. While there are different forms of supply risk, what researchers have discovered is that many of these elements face some form of potential limitation when it comes to production and availability. Whether it’s an issue of how readily available a material exists as a natural resource, how easy it is to mine and refine, or how open the country with access to said resource is to trading with other countries, the stability of supply for these materials have serious long-term implications for the future of not only iPhones but technological products built for consumption everywhere.
One example of a material that poses a potential threat to the future production of iPhones and other consumer products with LCD flat screens is the element indium. Indium is an important component of LCD screens because of its unique property as a transparent electrical conductor. This property is what allows your smartphone screen to have touch capabilities and can be found in a thin layer on the glass. Indium as a natural resource is the 68th most abundant element but does not occur in very concentrated deposits naturally. What this means is that while there may be plenty of indium in the earth to meet the demand for years and years to come, it’s very spread out, making it difficult for a company to find a deposit that is profitable to mine. While it is a necessary material for manufacturing the screens on many popular electronic devices, the price of indium alone does not justify the amount of work it would take to mine it on its own. Instead, it ends up being manufactured as a byproduct of other elements, most commonly zinc. Indium is one of several elements that occurs commonly in zinc deposits. Because consumers of zinc don’t want those other elements, they must be separated out. In the process of purifying zinc, producers consequently end up with indium as a byproduct that can then be sold to indium purifiers. What this means is that the production of indium isn’t actually linked to the demand for indium; it’s linked to the demand for zinc.
A second issue faced by electronic producers is a geopolitical one: neodymium and dysprosium, other elements critical to the production of iPhones, are mined almost exclusively in China. Currently, this is not a problem as the U.S., and consequently, electronic producers based in the U.S. have a positive relationship with China and considerably easy access to the elements sold there. If, however, the U.S. found themselves at odds with China, U.S. companies could find themselves unable to access a variety of critical materials mined in China. Conversely, there is also the pressure from consumers who are wanting producers to source their products from conflict-free zones. The element cobalt, which is used as an input in lithium batteries, is heavily mined in the Democratic Republic of the Congo where the mining of cobalt is used to fund militias involved in a conflict that has led to forced child labor and the deaths of millions of people. As consumers demand more supply transparency and conflict-free products from electronic producers, companies like Apple will be faced with having to source materials from other places. The result will likely be higher prices for those inputs and thus higher prices for the end-product.
One solution to the supply risks faced by critical elements would be to find alternate sources by mining them from existing waste streams instead of the earth’s crust (e.g. recycling). One of the many problems faced by the recycling industry is how expensive it is to take apart electronics. For some devices, specifically those with LCD screens, a human being is required to disassemble the product in a highly-involved manner (it can’t just be crushed or shredded as is) due to the presence of mercury found in the light sources that light the screens. Because of this, it becomes incredibly expensive to recycle – you have to pay an individual to take apart each retired device by hand. That person is probably only capable of disassembling a few devices every hour. In order for recycling to be feasible, the materials retrieved from the device must have a resale value high enough to justify all the costs of taking the device apart and separating out all of the different parts. If we could discover a better way of recycling these products, we would have another source of obtaining them which would change the nature of supply.
As the demand for critical materials increases so should the price consumers are willing to pay and an increase in price will solve some of the production restrictions faced by certain materials. As the price rises, it should become more economically feasible to mine and refine materials such as indium and cobalt from conflict-free areas. If we assume that markets are operating efficiently, then we can assume that more resources will be allocated to the pursuit of producing these necessary inputs. More research will be done on how to effectively mine them and technological advances will increase the supply available to the global markets. For instance, earlier this year Apple introduced Liam, an iPhone deconstructing robot that can take apart 1.2 million iPhones in a year (you can see a video of Liam's debut here). Further technological innovation has the potential to change the nature of the critical materials markets, ultimately changing the ever-growing market for electronic devices and the way you and I purchase our future smartphones and computers.
“Apple Celebrates One Billion iPhones,” Newsroom, July 27, 2016, http://www.apple.com/newsroom/2016/07/apple-celebrates-one-billion-iphones.html.
Desjardins, Jeff, “The Extraordinary Raw Materials in an iPhone 6s,” Visual Capitalist. March 8, 2016, http://www.visualcapitalist.com/extraordinary-raw-materials-iphone-6s/.
Graedel, T.E., E.M. Harper, N.T. Nassar, Philip Nuss, and Barbara K. Reck, “ Criticality of metals and metalloids,” PNAS, 2015, https://mail.google.com/mail/u/0/#inbox/158c239743d3dbca?projector=1.
“Indium,” Wikipedia, https://en.wikipedia.org/wiki/Indium.
Bell, Larry, “China’s Rare Earth Metals Monopoly Needn’t Put An Electronics Stranglehold On America,” ForbesI, Apr. 15, 2012, http://www.forbes.com/sites/larrybell/2012/04/15/chinas-rare-earth-metals-monopoly-neednt-put-an-electronics-stranglehold-on-america/#3a8de4c1161b
Simonson, Devin, “3TG is Just the Starting Point for Supply Chain Investigation,” Aug. 10, 2016, https://www.sourceintelligence.com/3tg-just-starting-point-supply-chain-investigation/.
Brumme, A. “Wind Energy Deployment and the Relevance of Rare Earths: An Economic Analysis,” Springer, 2014, file:///C:/Users/CSOperations/Downloads/9783658049126-c1.pdf.
“Environment,” Apple.com, http://www.apple.com/environment/.