Apple is currently holding discussions to secure long-term supplies of cobalt, a metal used in smartphone batteries, according to a new report.
Reportedly, Apple is in talks to begin buying cobalt directly from mining companies. Cobalt, a hard silver-gray metal, is an essential material in the production of lithium-ion batteries used across Apple’s product lineup.
The Cupertino tech giant is reportedly seeking to secure at least a five-year contract for several thousand metric tons of cobalt a year, Bloomberg reported. Though, of course, the publication’s sources noted that the deal hasn’t been finalized.
The move is a stark contrast to how Apple has previously treated the cobalt in its supply chain. Historically, Apple has left the job of procuring the metal solely to its battery suppliers. Here are a few reasons why Apple could be buying cobalt directly.
To Save Money
The price of cobalt has tripled over the past 18 months, according to TechCrunch. That’s due to a variety of factors, including a sharply rising demand for the metal.
Daniel Ives, a chief strategy officer at GBH Insights, told CNBC that securing a stable and long-term supply of cobalt could save the company “hundreds of billions” over the next few years.
That makes even more sense when you consider the company’s battery replacement program, which has likely significantly spiked battery demand. Securing a stable supply of cobalt might bode well for the firm, allowing it to better stock its battery suppliers.
The Electric Vehicle Rush
Saving money is just a symptom of the skyrocketing demand for the metal. While a quarter of global cobalt supply is used for smartphone batteries, other industries have been putting additional pressure on mining firms.
Due to the impending rise in popularity of electric vehicles (which use cobalt in their own batteries), automakers are making similar moves to Apple. Firms like BMW and Volkswagen are looking to sign long-term cobalt supply contracts.
That means Apple is now in direct competition with these car firms in the race to secure sufficient supplies of cobalt.
Supply Chain Control
Some market watchers have taken the recent noise about cobalt to signify something else: a global shortage on the horizon, thanks to the prevalence of lithium-ion batteries in devices, and now, cars.
But there’s also the issue of ensuring that the cobalt is ethically produced. Two-thirds of the global cobalt supply originates from the Democratic Republic of the Congo — where child labor is still used in parts of the country’s mining industry.
Inadvertently, some of that child-mined cobalt may have ended up in Apple’s products or other devices, Amnesty International alleged in 2016. Buying straight from the source could help mitigate any chance of using unethically produced resources.
First-Party Batteries
Lastly, and this is speculation at this point, Apple could use its secured supply of the essential metal to produce first-party batteries.
There’s currently no word that this is the case, and it may not be on Apple’s agenda for the foreseeable future. But Apple has taken to producing its own proprietary CPUs, GPUs and power management chips in recent years.
Apple wants to be able to supply itself, or at the very least, maintain a strict amount of control over its supply chain. It’s not hard to imagine a future in which it does.
If Apple did make its own iPhone batteries, it could ensure that they are of the highest quality and efficiency moving forward — which makes even more sense when you consider the firm’s recent battery debacle.