Front End I Electronic Components Supply Network
Specialty Metals, Rare Earth Elements and Passive Components
The Global supply of Rare Earth Elements (REEs) and specialty metals is again proving to be a headache for the electronic components supply network. Of particular concern is the impact that shortages of these materials can have on the price and availability of ubiquitous Thick Film Chip Resistors (TFCRs) and multi-layer ceramic capacitors (MLCCs). In this article Adam Fletcher, Chairman, the Electronic Components Supply Network (ecsn) summarises the current situation for CIE readers and shares his thoughts on likely outcomes
A New Challenge on the “To Do” List
In recent articles I have reported on emerging challenges for the electronic components supply industry, such as the blocking of the Suez Canal, the fire at a Renesas foundry in Japan, electricity ‘outages’ in Texas that brought output at Infineon, NXP, and Samsung wafer foundries to a standstill, trade wars and the lack of regional investment in semiconductor manufacturing capacity. And that’s in addition to Brexit, Covid-19, extending manufacturer lead- times, price increases, new legislation, M&A activities, counterfeit components and issues concerning international-to-last- mile logistics. However, another ongoing challenge is now rapidly climbing towards the top of the industry “to do” list …
Rare Earth Elements / Specialty Metals
Rare Earth Elements (REEs) are a group of seventeen metals valued for their optical and magnetic properties. Along with a few other specialty metals they are commonly used in a wide range of electronic components, particularly in magnets, lasers, batteries, fuel cells, LEDs, passive components and semiconductors etc. The global need for REEs continues to grow due to increased demand for renewable energy, smartphones and electric vehicles. In 2017 China accounted for
10 June 2021
81% of the global supply of these materials, while Australia occupied second place with a market share of 15%. REEs are eminently re- usable, however recycling rates are currently very low (<1%), because these materials are generally difficult or uneconomic to recover from the wide variety of finished products in which they are found.
Following the consolidation of the REE mining and smelting companies under its control, the Chinese government imposed production and export quotas, claiming the need to “reduce over exploitation”. In 2010 these actions triggered a World Trade Organisation (WTO) lawsuit on behalf of the US, EU and Japan, appealing against the level of export restriction. Four years later the WTO ruled that China had broken the free trade agreements and stated, "the overall effect of {China’s} foreign and domestic restrictions is to encourage domestic extraction and secure preferential use of [REE] materials by Chinese manufacturers". China agreed to withdraw the quotas but said, “it would need some time to do so”. In fact, by 2019 the overall China owned market share of REEs was estimated to have increased to nearer 85%, peaking at a 95% market share for some materials, and that’s despite significant new mining investment in the US and Australia. Concerns are also mounting that the ongoing trade war
Components in Electronics
between the US and China may further exacerbate the supply situation. At the recent G7 meeting in Cornwall Global political leaders agreed to “act decisively” to curb some of this monopolistic behaviour by China and investigate ways of increasing the global production capacity for REE and specialty metals but this will probably take years to implement. No surprise then that the market price for all REE materials continue to rise on commodity metals markets.
Other Precious Metals – Impact supply of Thick Film Chip Resistors
Although it doesn’t appear in the list of seventeen REEs Ruthenium is a rare transition metal used extensively in the manufacture of Thick Film Chip Resistors (TFCRs). It is a minor constituent of the platinum ore predominantly mined and smelted by South African organisations, many of whom are today under Chinese ownership. The output of these facilities are being severely impacted by a number of long, ongoing trade union industrial disputes, mostly related to working conditions and pay but it appears that owners see little urgency in reaching settlements.
It’s estimated that some 36M tonnes of Ruthenium was mined in 2017 of which almost 45% was destined for electronic
applications. Of that percentage an estimated >85% was used as ruthenium dioxide, which is combined with lead, bismuth ruthenates and binding agents for the manufacture of TFCRs. TFCRs are very widely used in the design and manufacture of all electronic products and are manufactured in almost unbelievable volumes, measured in the many trillions of units p.a. A standard mobile phone design for example calls for many hundreds of TFCRs per unit. In 2017 the market price of Ruthenium increased by 60% before stabilising, but in March ’21 it jumped up once again by circa 22% and look likely to escalate further unless producers dramatically increase supply. Unfortunately, the increased commodity market pricing more than offsets the reduction in supply volume so there is little incentive for the organisations involved - who have a near supply monopoly - to do so. There is no viable alternative resistor technology available at anywhere close to the existing price points of Ruthenium based TFCRs
As things stand there are also significant “barriers-to-entry” in the manufacturing of these parts of which the massive economies of scale required and the constant incremental fine process tuning required to maintain or improve device performance and reduce their physical size predominate. When coupled with an unacceptably low return on capital employed (ROCE) these
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