90 percent of electronic companies not ready for SEC 'blood minerals' rules

90 percent of electronic companies not ready for SEC 'blood minerals' rules

Summary: Tantalum, tin, tungsten, and gold are key in the manufacture of cellphones and almost every other piece of electronics. But their source -- the war-torn Congo has attracted attention -- and regulation from the SEC.


Back in August, the U.S. Securities and Exchange Commission (SEC) voted to pass rules that required companies to disclose the purchase of four minerals from the war-torn Democratic Republic of Congo. But with less than two years to go until the rules kick in, research firm IHS claims that most of the industry is unprepared.

Conflict minerals -- specifically tin, tantalum, tungsten and gold -- are defined as those mined in locales of armed conflict and human rights abuses. As the demand for consumer electronics grows, so does the demand for these minerals, which in turn increases the likelihood that they will originate from areas of the world where wars rage on.

For example, IHS estimates that about $0.15 worth of tantalum was contained in every smartphone shipped in 2010.  In 2012, this would amount to $93 million worth of tantalum in smartphones alone.

The new rules by the SEC will now require all publicly trading companies in the U.S. -- some 6,000 in total -- to tell customers where the minerals originated. The rules do not prohibit companies from using blood minerals, though companies have until May 2014 to make their first minerals disclosure. On top of that, companies will simply be able to disclose for two years that they cannot determine if the minerals they use are conflict minerals or not.

The SEC rules are estimated to directly impact 5,994 companies that file reports to the SEC, and hundreds of thousands of their suppliers.

"Large electronic original equipment manufacturers (OEM) use tens of thousands of parts that must be examined to determine their conflict mineral content," said Rory King, director, supply chain product marketing at IHS. "The next 19 months really is not very much time to communicate, collect, analyze, and prepare information on mineral sources across a globally diverse, multi-tier value chain, in order to determine conflict minerals content and develop reports that comply with the SEC rule."

Image source: IHS.

The rules could have an effect on prices.

"The Reduction of Hazardous Substances (ROHS) legislation in Europe produced a series of unintended consequences, including shortages, price increases, and large-scale obsolescence of components," King said. "Similar unexpected events could arise from the SEC conflict minerals rule, especially as a pooling of two supply chains materialize where some companies and their supply chains move away from minerals sourced from illegal operations in the DRC and other global supply chains do not."

The SEC has estimated that the compliance costs could total as much as $5 billion initially, but the costs will fall to between $200 to $600 million annually as compliance procedures are put in place.

Some companies have already taken it upon themselves to eliminate conflict minerals from the market or their own supply chains. Intel is committed to "conflict-free" processors by 2013, while Apple was the first company to draw up a list of all 175 of its supply chain suppliers, and require that they are audited where possible.

Other companies such as General Electric, HP, and Motorola have joined forces to create the Public-Private Alliance for Responsible Minerals Trade with the aim of helping those in the Congo and other governments in the region to break ties with the conflict mineral trade.

Topics: Hardware, Smartphones, Tablets

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  • Cheaper route for big internationals...

    Spending $200 to $600 million a year to report on and encourage avoidance of a market of $93 million a year sounds like the sort of stupid idea the US government would come up with. While that $200-$600 million isn't *their* money (it will be paid by the companies they regulate), that's $200-$600 million in added costs, all of which is tax deductible, which lowers government revenue.

    If I were the companies involved, I'd possibly calculate that it would be cheaper to eliminate the conflict than to pay year after year to report about what minerals I was getting from such regions. For a couple of years costs I could hire mercenaries and supply them to go into those regions and kill anyone who was responsible for keeping the conflict going, and just take over the sources of the minerals. I suspect that the UN would say all sorts of things about such goings on, but, like with most conflicts, would do nothing to actually interfere, and would likely be relieved that someone was doing something to end the fighting.
    • Cheaper route for big internationals...

      I totally agree with plonk@...

      I would like to add one additional point and that is that Companies and the Government do not pay for anything. "We the People" pay for all this with an increase in product prices and taxes. the worst part of this mess is that the government is funding many of their operations with additional debt ( $16 trillion and rising) that will have to payed off by our children, grandchildren and future generations for decades or centuries.

      Part of the solution is to start backing off our stupid US "Our Way or the Highway" Policy of conducting social engineering in other parts of the world. If we are truly serious about social engineering then mercenaries is one way to go. Unfortunately mercenaries in Africa have not really resulted in democracy in many countries including the Congo. Another way to go is to inject our own US Forces directly into countries where we disagree with their Policies. This Policy did not work in Vietnam, Laos or Cambodia and seems to date failing in Iraq and Afghanistan as we dessert them as we did in Southeast Asia in the 70s. The only places that we seem to have had any success is where we left troops on the ground in Europe and South Korea to back them up if needed.

      Bottom Line: Less Government and Regulation and most importantly stop using our "We the People's" to fund Moral issues around the World.
    • I could swear I read this in a novel

      The Dogs of War perhaps?
    • I guess

      you have already taken the bait and you are waiting for them to reel you in.
      Brian Bath
  • Just a matter of Price

    Australia has the worlds largest known reserves of some of these metals example Tantalum.
    However they have been forced to close mines, as legitimate sources can't compete with "blood" sources. As we are all to familiar with global capitalist markets these days. Why pay a higher price from a legitimate source ie Australia, when one can get it on the black market from Rwanda for less. Save a couple of pennies on each iPhone made and one gets the picture
  • US SEC is Disgrace

    Due to all respect, "Blood Mineral" regulation is another is a big laugh from U.S. SEC in 2012. I would challenge US SEC to go after China and Chinese companies.
    If SEC could not focus on its jobs and prosecute criminals in America to rebuild our country, then don't bother anything else.