18-01-2022 | | By Robin Mitchell
Recently, Tesla announced that it had signed an agreement with a graphite mine in Mozambique for use in Tesla batteries. Why does the electronics industry involve so many countries worldwide to produce a single part, what does the agreement between Tesla and Mozambique do, and why are companies beginning to look away from China?
The first electronic components were straightforward to produce; resistors would be made from graphite and carbon that's easily obtainable from coal and plant matter. Valves were simply light bulbs with metal mesh gates, and capacitors simply consisted of rolls of foil and paper sandwiched together.
As time passed, advancements in material science combined with the ability to extract rare compounds from the Earths' crust allowed researchers to develop more advanced electronic components. This eventually led to the development of semiconductors and their widespread use in everyday life.
Creating such components is no small feat, and the need for unusual compounds not found in nature makes this even more challenging. For example, silicon can be sourced almost anywhere on the planet as it is abundant in sand. However, finding Tellurium or Rubidium deposits is extremely challenging when such elements have concentrations of less than 500µg per KG of crust. Some places will have higher concentrations of rare compounds, and it is these places that are sought after for mining.
Tons of rock needs to be mined to extract the smallest quantities of rare elements. Mining can have severe consequences for the surrounding environment, whether through chemical processes that leak into the ground or the very act of destroying land and habitats in open cast mining. This can make opening new mines extremely difficult as government regulations behind environmental protection increase.
After considering all of this, it makes perfect sense why creating a single electronic component can involve dozens of countries. China is one of the world's biggest producers of rare elements, with Africa and Russia following suit. By far, the most significant factor in determining the importance of a country in the production of rare elements is its total land area; more land equals more mining opportunities.
Recently, Tesla announced that it had come to an agreement with a graphite mine in Mozambique whereby Tesla will purchase up to 80% of the plant's production capacity. According to reports, this would see Tesla purchasing a total of 8,000 tons of graphite starting in 2025, and this move would remove the dependency Tesla has on China for graphite.
The need for graphite in Tesla vehicles comes from the battery technology used. Graphite is a versatile carbon compound that offers excellent electrical and thermal properties and resists corrosion. But the reason for choosing Mozambique comes from a desire to remove dependency on China and meet the increasing demand for electric cars.
Tesla is currently producing just over one million vehicles a year, and all Tesla vehicles use Tesla manufactured batteries. As such, Tesla must secure the raw materials needed to produce cars of the future from reliable and safe sources. The desire for the US to become technologically independent will also likely see government incentives for companies that demonstrate independence which could include tax relief, access to resources, and funding.
There is no doubt that China is one of the most prominent players globally for manufacturing, and China is arguably the single most important country when it comes to electronics. Of course, countries worldwide, including the US, UK, and EU, provide electronic services, including PCB fabrication and board population. Still, China is single handily responsible for most consumer products worldwide.
Historically, China taking over manufacturing has caused little concern for the West; more jobs turned towards services, manufacturing declined, and rising wage costs made manufacturing expensive. The theft of IP from companies in the West was a frequent nuisance, but overall both the West and East benefitted from Chinese manufacture; the West saw cheaper products, and the East saw an increase in living standards from foreign investment.
However, China has turned in on itself for the last two decades. The rising adoption of capitalism is increasingly being replaced with a totalitarian regime that looks to control its population. One example is the introduction of a social credit score that actively monitors civilians to ensure that they are operating within the ruling party's interest (not dissimilar to George Orwells 1984 Telescreen).
But this totalitarian system is threatened by the world around it, and the electronics industry dependency on Chinese operations could give China the perfect tool for exercising its influence and power across the globe. For example, Intel recently removed references to the Xinjiang region in a letter to suppliers to not damage the country's reputation. This was likely done so that Intel could secure supplies and customers in China.
The idea behind nations becoming independent for key supplies is to prevent foreign nations from exerting pressure and influence. But it is quickly becoming apparent that nations are only trying to become independent from Chinese influence, or better put, influence from the Chinese Communist Party. Using Mozambique for graphite does not make Tesla independent; it only means that Tesla no longer needs to deal with those in power in China.