Nikkei is reporting that many often overlooked materials, such as neodymium and the lesser known praseodymium, have increased by almost 74 percent since the same time last year and that’s only one of several key materials that have increased in price by 50 percent or more in a year.
It’s no secret that lithium has increased in price and it now costs about 150 percent of what it was costing last year. However, many other, less obvious materials have also increased in price, with copper up over 37 percent and tin up almost 82 percent in a year. To TPU’s readers this mainly means that you can expect higher costs for PCBs and all the components that are soldered onto them, as tin is used to solder just about every component in place.
Neodymium and praseodymium are used in everything from simple speakers, to electrical car motors to wind turbines. With prices continuing to go up, as the demand is increasing due to governments in many western countries switching to a green economy and focusing on electrification of cars, while at the same time trying to go fossil fuel free, seems to be an undertaking that is poorly timed with the current state of the electronics industry.
Other materials like terbium oxide, which is used in LEDs, flat panel displays and high-temperature fuel cells among other things, have gone up by over 60 percent in price. Even good old aluminium is up over 55 percent, which means more expensive parts in just about everything that uses a lightweight metal structure or housing.
As the report goes, China controls 55 percent of the global market when it comes to production of rare earth metals and 85 percent of the refining process. The Chinese government has been putting tighter export controls in place this year, which is also part of the reason for the increase in costs. This might be a way for the nation to try and fight back against some of the trade disputes that have arisen with the US, but it’s clearly affecting every nation in the world, as China is without a doubt the world’s manufacturing hub.
What China seems to have missed though, is the fact that this is affecting local Chinese companies as well, since increased material costs have caused their profits to tumble, as they often have long term contracts with their business partners that can’t be renegotiated easily. As such, many small and mid-sized Chinese suppliers are suffering losses and if this continues we might see some of these companies go out of business. Large, international corporations aren’t unaffected by these price increases either, since at some point they’re going to have to increase their prices to the end customer of their products, which is likely to translate into fewer sales.
Right now, a lot of negotiations are taking place all around the world to try to maintain pricing, but someone, somewhere is going to have to eat the cost and that can only go on for so long. So far, Sonos has already increased the pricing of its speakers, by anything from $10 to $100 depending on the product. This might be a sign of things to come, as Sonos is unlikely to be the only company to adjust prices accordingly.