Key Takeaways
- Electronics rely heavily on commodities like silicon, copper, and rare earth metals.
- Commodity market fluctuations can affect electronics pricing.
- Lithium, ceramics, and glass are essential for modern device components.
Common metals used in everyday electronics include copper, lithium, tin, silver, gold, nickel, and aluminum. Many electronics rely heavily on these and other raw materials, and fluctuations in those commodity markets can influence prices for electronics items.
Essential Commodities for the Electronics Industry
Many of these materials provide protection for the inner workings of electronic devices, make them easier to clean or improve their functionality. Some are highly conductive and work beautifully at transporting electricity, and are therefore used in the wiring for the devices. Plastics are often molded into coatings and casings. Some ceramics make excellent insulators and are used to protect electrical components. The production of some of these materials is cost-intensive and often requires substantial energy use.
Personal computers, a popular electronics sector product, require components manufactured from resources obtained around the world. Approximately half of a computer is composed of various metals. To produce circuit boards, a substantial amount of copper wiring is required. Copper mines use as much as 500 gallons of water per second of operation, so water is also a significant commodity consumed by the industry.
Electronics production also involves a range of different chemicals. Solvents and various gases help in controlling product quality, stripping away impurities, cleaning components and de-greasing materials. Electronics manufacturers have to purchase chemical supplies on an ongoing basis, and many of them benefit from locating their operations close to key producers.
The Role of Commodities in Driving Innovation
Creating advanced chemical compounds and other materials contributes to technological advancement in the industry. With electronics using increasingly better technologies and benefiting from improved design, new advances in synthesizing materials and improving raw materials are becoming more important to the electronics sector than ever before.
The demand for affordable, high-quality electronics is driving research and development in the materials and chemicals sectors. This, in turn, creates new opportunities for electronics and related industries as these products reach new customers in emerging market economies. Many of these advances also improve longevity and decrease the environmental impact of new devices.
Understanding Raw Material Price Volatility
Price volatility of raw materials is an ongoing challenge for businesses in the electronics sector. Changing supply and demand for these materials rapidly affects their prices and creates a point of financial insecurity for many companies. Many electronics manufacturers proactively work to identify possible substitute materials to use in the event that their usual sources become cost prohibitive. The energy costs for transporting extracted and manufactured materials may also pose problems. Anywhere along the supply chain, additional costs may accrue when significant changes to the market impact prices.
Rising commodity futures may cause a company to consider significant adjustments to its supply chain. If the materials impacted by price changes are major inputs for the sector, controlling variable costs may become a challenge. Prices for finished products may rise as a result. Electronics companies are very sensitive to materials costs increases and actively work with suppliers to minimize the risks associated with them.