Contract manufacturers are feeling the pinch of rising prices for strategic raw materials.
Rising prices for rare earths are increasingly becoming a burden for electronics manufacturers, Nikkei Asia writes. The cost of alloys of neodymium and praseodymium, which are needed for speakers, for example, doubled from June 2020 to August 2021, according to one contract manufacturer.
One reason for the development is the increasing political tensions between the U.S. and China. There are repeated fears that China will use its great market power in the raw materials sector as leverage and reduce or even stop exports of rare earths or other strategic raw materials. Price developments are also driven by the increasing demand for high-tech products, such as microprocessors, but also by the energy and transportation transition. Without rare earths and strategic metals, future technologies such as electromobility or zero-emission energy generation would be virtually inconceivable.
Both manufacturers and analysts do not believe that the high prices are a temporary phenomenon, but rather the new normal. If this proves to be true, it can be assumed that the costs will be passed on to end customers sooner or later.
Photo: iStock/Dilok Klaisataporn