Original title: Focus Analysis In order for your iPhone to be magnetically charged, Apple spent another 500 million dollars to buy materials Source: 36

　　Author | Yuan Silai

　　Editor | Su Jianxun

　　When the iPhone 12 was first released, the return of MagSafe attracted a lot of interest from users. For the first time, Apple used magnetic charging for a mobile phone, and it looked fresh and futuristic.

　　In this technology, the key component is the permanent magnet hidden in the back cover of the iPhone. A material with limited production, such as a NdFeB magnet, must be used. It is refined and processed from rare earths, and involves a strictly restricted industrial chain behind it.

　　In addition to permanent magnets, the motors and screens inside mobile phones also use rare earth oxides. These ores, known as “national strategic materials,” are becoming key resources contested by all parties. In this competition, Apple faces not only mobile phone manufacturers, but also new energy vehicles and even home appliance manufacturers.

　　On January 11, Huahong Technology, which rerefines rare earth recycling materials, announced that its subsidiary Xintai Technology has reached a cooperation with Apple. They will supply Apple with praseodymium oxide products over the next year, at 50 tons per month. Based on the current highest price of praseodymium oxide, the amount of this transaction is about 540 million yuan.

　　Xintai Technology began communicating with Apple in October 2019, and is only now fully finalizing the cooperation. The neodymium oxide they provide can be used on magnets such as MagSafe.

　　In fact, Apple has been preparing a more secure plan for a long time. At the time of iPhone 11, the linear motor Taptic Engine was made 100% of products extracted from recycled rare earths. This motor accounted for a quarter of the total rare earth usage. Apple was also the first manufacturer to use recycled rare earth materials in the main components of mobile phones.

　　Apple uses parts made from recycled rare earth materials, adding another layer to their image of striving for “environmental protection,” but as Apple itself stated, this is also done to ensure stable supply.

　　In recent years, “environmental protection” has often appeared in Apple's PR and press conferences, and has slowly been incorporated into production and terminals. The actions of this company with a market capitalization of nearly 3 trillion US dollars actually also represent a trend: in a dual-carbon context, companies have to pay attention to the “carbon footprint” and “carbon neutrality” that are unfamiliar to them.

　　To protect the environment or to ensure supply?

　　Apple is always looking for ways to make more use of materials made from recycled rare earths.

　　Mobile phone components are actually already at the bottom of the entire rare earth industry chain. Upstream are the two major rare earth mining and mining groups. The raw materials they mine are smelted into oxides, rare earth metals, etc., and finally processed downstream into rare earth magnetic materials, rare earth light-emitting materials, etc., and finally into products such as new energy vehicles and mobile phones.

　　Rare earths are non-renewable resources. Mining and smelting are strictly controlled by the country. Only Northern Rare Earth and China Rare Earth Group have mining and smelting qualifications; they also only supply contract manufacturers. One of the shareholders of Ganzhou Keli Rare Earth New Materials Co., Ltd., where Apple cooperates, is Zhongke Sanhuan, a manufacturer of permanent magnet materials. They can purchase rare earth materials from the two major rare earth groups.

　　Rare earths were originally an industry that implemented index control. The amount increased each year was limited, yet demand was exploding. In addition to mobile phones, new energy vehicles, home appliances, elevators, etc. all need to use rare earth metals. In particular, new energy vehicles with high delivery volumes also need to use NdFeB magnets. Demand is increasing by double digits every year, but the supply side is clearly unable to meet demand.

　　Apple, which is experiencing the biggest wave of changeovers in recent years, has also seen a steady rise in demand for rare earth materials. The iPhone 12 sold 100 million units 2 months earlier than the iPhone 11. According to Counterpoint forecasts, iPhone 13 sales will surpass iPhone 12.

　　This round of imbalance between supply and demand has brought about a rise in rare earth prices. Apple purchased 400,000 yuan/ton of praseodymium oxide this time in August 2020. Now the price has reached 906,000 yuan/ton, and it is still difficult to obtain them.

　　“Prices are rising all the time now, and the market is out of stock, so Apple and upstream locking materials is also a guarantee of stable supply.” Zhang Lifeng, general manager of Feiyang Magnetoelectric Company, which is involved in the rare earth industry, said about 36 krypton.

　　The price of oxides smelted from rare earth recycling materials will actually not be lower, but when rare earth mining becomes more careful, the supply will be more stable.

　　Apple once thought of recovering rare earths directly from iPhones, but it was discovered that the efficiency was too low. For every 100,000 iPhones recycled, only 32 kilograms of rare earths could be extracted. Looking for a third party supplier was the most cost-effective option.

　　The rare earth recycling industry is also gradually attracting attention. In reality, Huahong Technology's 2021 Q3 earnings report shows that their revenue increased 116.32% year on year, and net profit after deducting non-net profit increased 179.63% year on year. This company made elevator parts in its early years, and only began to get involved in rare earth recycling after merging and acquiring Xintai Technology in 2020. This part already accounts for 30% of revenue, making it Huahong Technology's biggest business.

　　Using materials made from recycled rare earths does not mean that Apple can rest easy about supply.

　　An investor told 36that currently processing 10,000 tons of waste can extract 2000-3,000 tons of oxides. This means that the supply of recovered oxides from rare earth smelting is still limited.

　　When environmental protection becomes an issue

　　Although the bigger reason Apple uses recycled rare earths is to guarantee supply, they are also happy to go one step further in their environmental protection path.

　　Apple hasn't been focusing on words like green and renewable for a long time. At least in the Jobs era, environmental protection was never the focus of their attention. For a long time, only one person within Apple managed the environmental impact. When environmental groups advocated printing resource recycling codes on products, Apple declined because “they don't look good enough.” They and Greenpeace also experienced a back and forth tug-of-war of public opinion, and Jobs personally sent an open letter in defense.

　　Apple's attitude towards environmental protection changed quite a bit after Cook, who is passionate about mountaineering and cycling, took the helm. This includes removing heavily polluting polyvinyl chloride from the product and replacing it with greener materials. In 2015, Apple also collaborated with First Solar to build a $850 million solar power plant.

　　Looking at it now, Apple has become an environmental benchmark. They use recycled aluminum in their products and use Liam robots to recover materials from iPhones, reducing their carbon footprint by 4.3 million tons, and their average energy consumption is 73% lower than 12 years ago. They even cut out the attached charger (which of course increased some net profit), kept shrinking the size of the box, removed the plastic wrap, and reduced the amount of plastic used.

　　Apple also proposed an ambitious plan: they will achieve 100% carbon neutrality in their entire business, production supply chain, and product life cycle by 2030.

　　This means suppliers must be more “green,” after all, 77% of Apple's carbon footprint is in the supply chain. To become an Apple supplier, environmental protection is also a factor to consider. According to data released by Apple last year, 50 Chinese companies have joined supplier clean energy projects, more than double that of 2020.

　　Apple's actions have also caused quite a bit of controversy, including whether they will look for more consuming alternatives after sacrificing the user experience? Is this just an emissions transfer rather than an actual emissions reduction.

　　However, it is undeniable that with Apple's size and influence, its behavior does have an exemplary effect. 2021 is known by many as the first year of “carbon neutrality”. In the future, more companies will definitely pay attention to “carbon neutrality” and use recyclable and environmentally friendly materials in their production lines. It may not bring much brand bonus or immediate benefits to the company itself, but it is critical to a sustainable future.

　　Picture from 36