Apple to pour $500M into US rare earth supply for iPhones

As I’ve noted before, it will take the better part of a decade for Apple or anyone else to manufacture smartphones in mass market quantities in the US. Getting there requires huge investments to solve big problems, including training, manufacturing, component sourcing, and raw materials supply.

And now, Apple is about to invest $500 million in the last of those, working with the only US rare earth supplier, MP Materials. The decision includes plans to purchase US-made rare earth magnets from the company in what is being billed as a win for the Trump Administration. Apple and MP Materials will build a new recycling facility in which to extract materials from used electronics, along with another factory to make components for Apple devices.

Unlocking the component supply chain

It’s a big deal because right now China produces around 60% of the globe’s rare earths and processes around 90% of that material. The investment puts at least some of that capacity in US hands, even though a recent deal with China saw the trade in those critical materials between the two nations resume. (The materials are available elsewhere, but they are so rare they are paid for in human misery.)

There’s a lot that matters in the news. First, the reality is that rare earths are essential to manufacture most modern electronic devices, from iPhones to satellites, cars to stealth bombers. Secondly, America’s reliance on external suppliers for these substances is a strategic problem that puts the brakes on any hope of bringing electronics manufacturing back to the US. A recent US Department of Defense decision to invest $400 million in MP Materials has contributed to interest across US rare earth stocks as investors sense opportunity.

“MP Materials is America’s only fully integrated rare earth producer with capabilities spanning the entire supply chain, from mining and processing to advanced metallization and magnet manufacturing,” the company’s website explains. “We extract and refine materials from one of the world’s richest rare earth deposits in California and manufacture the world’s strongest and most efficient permanent magnets.”

The complexity management business

Apple has been in the current US government’s cross hairs in recent weeks, under pressure to build up manufacturing of Apple products in the US. Apple has, no doubt, argued that it has taken steps to reduce reliance on China and invested billions in making products in India and elsewhere. Still, the company has been slammed for not doing enough, even though moving manufacturing is not simple and requires extensive investments in everything from skills development to infrastructure enhancement, not to mention the logistics of component supply.

Apple must hope that by committing half a billion dollars to a US rare earth supplier it will be seen as showing a willingness to invest in the country on a journey toward future expansion of US manufacturing. I see it as most likely that any Apple products made in the US will either be very high-end advanced technologies, or lower-end products that require less skill to manufacture — the US just doesn’t have enough trained staff.

Jaw-jaw beats war-war

Apple CEO Tim Cook’s determination to continue to negotiate with people even where he doesn’t agree with them may be paying off, at least a little. Commenting on the arrangement a White House official told Fox News, “Apple deserves a lot of credit for stepping up.”

While it remains open to question whether the government sees the full significance of this step, it is significant all the same. The principle in play is that if Apple can source raw materials in the US, it is one giant step closer to being able to manufacture some of the more advanced components it uses in its devices. While the practicalities of production and supply mean many of the rest of these components will continue to come from elsewhere, the opportunity to move toward final assembly in the US grows a little each time Apple manages to source components in the US. 

Nothing will – or can – happen overnight. But it is certainly not at all true that Cook’s complex approach to working with sometimes opposing intergovernmental demands has failed – because while there’s no doubt its complicated, he continues to find incremental positives within an incredibly complex politico-business environment.

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