The subject of conflict minerals has long been a troubling issue for the electronics business in general—and the passives market in particular—because of the prominent role that tantalum capacitors play in the industry.
With revelations of the terrible human cost of mining these conflict minerals, many electronics companies long ago realized that detecting or eliminating disputed raw materials from their manufacturing processes is the right thing to do. The ratification of minerals disclosure laws in recent years means that it’s also the legal thing to do. However, some of the companies that have publicly taken the lead on this issue have demonstrated that going conflict-minerals free is also the smart thing to do.
For companies throughout the electronics supply chain, it’s critical to gather the information and equip themselves with the tools required to ensure compliance with the letter and the spirit of the laws. These companies need to know about the sourcing practices used not just by their suppliers, but by their suppliers’ suppliers.
Supply Chain Chains
The issue of conflict minerals arose from the conflict in the Democratic Republic of the Congo (DRC). For years, various factions in the DRC and surrounding countries have used mineral sales to fund their military activities. These groups have been known to employ forced labor in their mines, including children. Working conditions are reported to be horrendous and often dangerous.
The Eastern Congo is rich in coltan, which is used to produce tantalum. To address this problem, the U.S. Securities and Exchange Commission (SEC) approved a final rule on conflict minerals that implemented disclosure requirements for conflict minerals for the U.S. and some foreign companies.
Electronics Market in Conflict
For the electronics industry, detecting and reporting tantalum usage is a large-scale and highly complex endeavor.
Tantalum has been widely used in electronic products, employed in devices ranging from cellphones, to PCs, to televisions. About 15 cents worth of tantalum could be found in each cellphone shipped in 2010 according to the market research firm IHS. It has also been estimated that there was about $93 million worth of tantalum in all cellphones shipped worldwide in 2012.
Intel on the Front Line
Rather than avoid the issue, semiconductor market leader Intel Corp. has confronted the conflict mineral problem head on—announcing it would no longer use tantalum, tungsten, gold, and tin obtained from disputed sources in the DRC and nearby nations. In 2012, the company committed to only manufacturing conflict-free microprocessors by the end of 2013.
Intel took a rigorous approach to the issue, tracking down the source of its minerals and engaging in a third-party audit of all its smelters. The company also refrained from the quick-and-easy approach of simply divesting from the DRC and surrounding countries, taking care to identify and engage with conflict-free sources in the region.
By taking a public stand on this issue, Intel turned what could have been a negative for the company into a positive. Intel showed how a large company could choose social consciousness, and back up its words with real action.
Following the Supply Chain Links
However, Intel’s example also illustrates the complexity of tracking down all the sources in a supply base and weeding out conflict minerals.
Intel focused its efforts on smelters. However, the company quickly learned that many of its suppliers weren’t aware of which smelters they employed. Intel then carefully audited all smelters used by its suppliers to check the source of the mineral content.
This kind effort requires a level of investment and commitment that not every company can muster, compounding the challenge for the global electronics industry. The challenges faced by Intel underscore the need for electronics companies to be aware of conflict mineral usage and policies throughout their supply chain.
Tantalum Conundrum
The capacitor business faces a particular challenge with this issue. From a public-image perspective, the industry is associated with the conflict minerals problem because it offers a product named after a material central to the conflict mineral problem: the tantalum capacitor. More substantively, these capacitors represent the main consumers of tantalum.
In recent years, capacitor suppliers have taken steps to detect and disclose the usage of conflict tantalum from their supply chains. For example, German capacitor supplier EPCOS AG issued a statement, noting:
“In recent years, armed rebels in the Democratic Republic of the Congo or in adjoining countries have been conducting illegal mining and smuggling of minerals to fund their rebel activities. These actions not only serve to further conflict but constitute violations of human rights through forced labor and the abusive treatment of local people. As a components manufacturer, EPCOS has no intention of supporting the above-mentioned illegal activities and violations of human rights. We place a high priority on communication in our supply chain with regard to such ‘conflict minerals.’ We ask our suppliers to disclose such information, and share that information as appropriate with our customers.”
EPCOS’s parent company, TDK Group, in 2013 expanded on this policy, announcing that it would not procure “minerals that become a source of funding for armed conflict” from the DRC and adjoining countries. TDK specifically noted that it would not buy such material either directly or indirectly. The company added that if it becomes aware of conflict minerals procurement from a source, it would take steps to eliminate the use of that supplier.
Getting to the Source
An effective way for companies to track conflict minerals in their supply chains is to develop programs that track the source of materials.
Four leading companies—Intel, Motorola Solutions, HP and Apple—have been pioneers in this area, according to the Enough Project at the Center for American Progress. These firms have developed conflict minerals programs, including a smelter auditing program, direct sourcing and aid projects to help Congo promote legitimate minerals mining sale and tracking systems that allow companies to identify their smelters.
These programs are designed to aid and serve as an example to other companies throughout the electronics supply chain. While much remains to be done, the electronics industry now has the impetus and the means to detect the sources and rid their supply chains of conflict minerals. It’s the moral, legal and smart thing to do.
