Apple signs $500 million rare Earth deal With Pentagon-backed MP Materials

India Today

2 days ago

Apple has signed a $500-million deal with Pentagon-backed MP Materials for a supply of rare earth magnets, becoming one of the first tech companies to ink a US supply agreement after China curbed exports earlier this year.The move reflects strong backing for the Las Vegas-backed MP by one of the world's most-valuable companies, coming just days after the US government said it would become MP's largest shareholder. Both mark an amazing about-face for MP after it contemplated merging with an Australian rival last year just to survive.advertisementMP shares jumped 21% in Tuesday trading to a record high, while Apple's stock gained under 1%.
The deal, announced on Tuesday, guarantees Apple a steady flow of rare earths and magnets free from China - the world's largest producer. For Apple, the cost to support US magnet production paled in comparison to the long-term risk that it could lose access entirely to the critical components, analysts said.MP last week agreed to a multibillion-dollar deal with the US Department of Defence that will see the Pentagon become MP's largest shareholder and financial backstop."Any time you have government ownership, that's a huge vote of confidence," said Gracelin Baskaran, director of the critical minerals security program at the Centre for Strategic and International Studies. "We're in an era where executives are willing to pay a significant premium for a reliable supply chain. They don't want stoppage."Neither the precise length of the deal nor the specific volumes of magnets to be supplied were provided, although the agreement does call for magnets produced from recycled material, in keeping with Apple's long-standing goal of ending its reliance on the mining industry.Rare earths are a group of 17 metals used to make magnets that turn power into motion, including the devices that make cell phones vibrate. They are also used to make weapons, electric vehicles, and many other electronics.China halted exports in March following a trade spat with US President Donald Trump that showed some signs of easing late last month, even as broader tensions underscored demand for non-Chinese supply.As part of the agreement, Apple will prepay MP Materials $200 million for a supply of magnets slated to begin in 2027. The magnets will be produced at MP's Fort Worth, Texas, facility using magnets recycled at MP's Mountain Pass, California, mining complex, the companies said."Rare earth materials are essential for making advanced technology, and this partnership will help strengthen the supply of these vital materials here in the United States," Apple CEO Tim Cook said in a statement.Bob O'Donnell, president at market research firm TECHnalysis Research, said Tuesday's move "makes complete sense" given that Apple requires significant amounts of rare earth magnets for its devices.advertisement"Plus, by focusing on a US-based supplier, it does help position Apple more positively in Washington," he said.Apple, which said the deal is part of its $500 billion four-year investment commitment to the US, has faced threats from Trump over iPhones not made in the U.S. But many analysts have said making the iPhone in the U.S. is not possible, given labour costs and the existing smartphone supply chain.Apple, which sold about 232 million iPhones last year, according to data from IDC, did not disclose which devices in which it will use the magnets. MP said the deal will supply magnets for hundreds of millions of devices, which would constitute a significant share of Apple's product line, which also includes wearable devices such as watches and earbuds.MP already produces mined and processed rare earths and has said it expects to start commercial magnet production in its Texas facility by the end of this year.The company already has a magnet supply deal with General MotorsG and Germany's Vacuumschmelze.Last week's deal between MP and the US government includes a price floor for rare earths designed to spur investment in domestic mines and processing plants, which has been lagging partly due to low prices set in China.- EndsMust Watch