Apple to invest $0.5 billion in rare earth metals production in the U.S. Why it matters

Apple has struck a $500 million deal with rare earth metals producer MP Materials, the company announced July 15. By doing so, it is trying to localize the supply chains of critical materials for its products, explains Reuters. The investment is part of a broader initiative to move iPhone production to the US amid efforts by the Donald Trump administration to reduce reliance on China.

Apple has entered into a $500 million "multi-year agreement" with US mining company MP Materials. It involves buying rare earth metals produced in Texas and setting up a joint plant to process them in California;not far from MP Materials' existing mine, the iPhone maker said in a press release;

As part of the partnership, the two companies will equip a Texas plant with new production lines for neodymium-based magnets specifically designed for Apple products. The company uses them in vibration motors (Taptic Engine), speakers, microphones, headphones, MagSafe mechanisms and magnetic mounts in iPhones, AirPods, MacBooks and iPads.

"American innovation is at the heart of everything we do at Apple, and we're proud to deepen our investment in the U.S. economy," CEO Tim Cook said in a press release. - Rare earth materials are essential to creating cutting-edge technologies, and this partnership will help strengthen their supply domestically."

Following the announcement, MP Materials shares jumped more than 26% to $62.9, setting a record high. Quotes of Apple strengthened by 1% - to $210.7.

Apple said the investment in MP Materials is part of a broader plan to invest $500 billion in the U.S. economy over the next four years. It reported in February that the investment package would also include building a large factory in Texas for artificial intelligence-powered servers, as well as creating about 20,000 new research and development jobs across the country. The sum includes a wide range of spending, from purchasing from U.S. suppliers to filming movies and TV series in the U.S. for the Apple TV+ platform.

Apple's investment in U.S. rare earth metals production reflects not only a shift in supply chain tactics, but also a broader geopolitical move amid escalating relations with China, writes Fortune. It's also a signal to President Donald Trump, who has been urging the company to move more of its manufacturing processes to the U.S., names BusinessInsider.  

According to data from The New York Times, China now controls more than 90% of the world's production and processing of rare-earth magnets, which are needed to create magnets critical in electronics, electric cars, and weapons. This makes China a critical bottleneck in global technology supply chains. In March, Beijing halted rare earth element exports to the U.S. over the trade war, nearly causing a massive
stoppage in U.S. auto production and increasing demand for supply sources outside China. In late June, Beijing eased restrictions as a result of an agreement with the U.S., but did not give up leverage by limiting the validity of export licenses.  

MP Materials is developing the only rare earth deposit in the United States, and it is the second largest in the world, according to Mining.com. Last week, the company signed a multibillion-dollar agreement with the U.S. Department of Defense. It involves expanding production of rare-earth-based magnets to weaken China's control over the global market for these components.

MP already mines and processes rare earth metals and expects to launch commercial magnet production at the Texas site by the end of this year. Once production is expanded, U.S. magnets will be shipped both in the U.S. and around the world - to meet growing global demand, Apple said in a press release.

This article was AI-translated and verified by a human editor