Electronics recycling in the U.S. is growing as the industry consolidates and matures. The future of electronics recycling – at least in the U.S., and perhaps globally – will be driven by electronics technology, precious metals, and industry structure, in particular. Although there are other things that can influence the industry – such as consumer electronics collections, legislation and regulations and export issues – I believe that these 3 factors will have a more profound impact on the future of electronics recycling.
The most recent data on the industry – from a survey conducted by the International Data Corporation (IDC) and sponsored by the Institute of Scrap Recycling Industries (ISRI) – found that the industry (in 2010) handled approximately 3.5 million tons of electronics with revenues of $5 billion and directly employed 30,000 people – and that it has been growing at about 20% annually for the past decade. But will this growth continue?
Personal computer equipment has dominated volumes handled by the electronics recycling industry. The IDC study reported that over 60% by weight of industry input volumes was “computer equipment” (including PCs and monitors). But recent reports by IDC and Gartner show that shipments of desktop and laptop computers have declined by more than 10% and that the shipments of smartphones and tablets now each exceed that of PCs. About 1 billion smart phones will be shipped in 2013 – and for the first time exceed the volumes of conventional cell phones. And shipments of ultra-light laptops and laptop-tablet hybrids are increasing rapidly. So, we are entering the “Post-PC Era”.
In addition, CRT TVs and monitors have been a significant portion of the input volumes (by weight) in the recycling stream – up to 75% of the “consumer electronics” stream. And the demise of the CRT means that fewer CRT TVs and monitors will be entering the recycling stream – replaced by smaller/lighter flat screens.
So, what do these technology trends mean to the electronics recycling industry? Do these advances in technology, which lead to size reduction, result in a “smaller materials footprint” and less total volume (by weight)? Since mobile devices (e.g., smart phones, tablets) already represent larger volumes than PCs – and probably turn over faster – they will probably dominate the future volumes entering the recycling stream. And they are not only much smaller, but typically cost less than PCs. And, traditional laptops are being replaced by ultra-books as well as tablets – which means that the laptop equivalent is a lot smaller and weighs less.
So, even with continually increasing quantities of electronics, the weight volume entering the recycling stream may begin decreasing. Typical desktop computer processors weigh 15-20 lbs. Traditional laptop computers weigh 5-7 lbs. But the new “ultra-books” weigh 3-4 lbs. So, if “computers” (including monitors) have comprised about 60% of the total industry input volume by weight and TVs have comprised a large portion of the volume of “consumer electronics” (about 15% of the industry input volume) – then up to 75% of the input volume may be subject to the weight reduction of new technologies – perhaps as much as a 50% reduction. And, similar technology change and size reduction is occurring in other markets – e.g., telecommunications, industrial, medical, etc.
However, the inherent value of these devices may be higher than PCs and CRTs (for resale as well as scrap – per unit weight). So, industry weight volumes may decrease, but revenues could continue to increase (with resale, materials recovery value and services). And, since mobile devices are expected to turn over more rapidly than PCs (which have typically turned over in 3-5 years), these changes in the electronics recycling stream may happen within 5 years or less.
Another factor for the industry to consider, as recently reported by E-Scrap News – “The overall portability trend in computing devices, including traditional form-factors, is characterized by integrated batteries, components and non-repairable parts. With repair and refurbishment increasingly difficult for these types of devices, e-scrap processors will face significant challenges in determining the best way to manage these devices responsibly, as they gradually compose an increasing share of the end-of-life management stream.” So, does that mean that the resale potential for these smaller devices may be less?
The electronics recycling industry has traditionally focused on PCs and consumer electronics, but what about infrastructure equipment? – such as servers/data centers/cloud computing, telecom systems, cable network systems, satellite/navigation systems, defense/military systems. These sectors generally use larger, higher value equipment and have significant (and growing?) volumes. They are not generally visible or thought of when considering the electronics recycling industry, but may be an increasingly important and larger share of the volumes that it handles. And some, if not much, of this infrastructure is due to change in technology – which will result in a large volume turnover of equipment. GreenBiz.com reports that “… as the industry overhauls and replaces… servers, storage and networking gear to accommodate massive consolidation and virtualization projects and prepare for the age of cloud computing… the build-out of cloud computing, the inventory of physical IT assets will shift from the consumer to the data center… While the number of consumer devices is increasing, they are also getting smaller in size. Meanwhile, data centers are being upgraded and expanded, potentially creating a large amount of future e-waste.”
But, outside the U.S. – and in developing countries in particular – the input volume weight to the electronics recycling stream will increase significantly – as the usage of electronic devices spreads to a broader market and an infrastructure for recycling is developed. In addition, developing countries will continue to be attractive markets for the resale of used electronics.
In the IDC study, over 75% by weight of industry output volumes was found to be “commodity grade scrap”. And more than half of that was “metals”. Precious metals represent a small portion of the volume – the average concentration of precious metals in electronics scrap is measured in grams per ton. But their recovery value is a significant portion of the total value of commodity grade scrap from electronics.
Precious metals prices have increased significantly in recent years. The market prices for gold, silver, palladium and platinum have each more than doubled over the past five years. However, gold and silver have historically been very volatile since their prices are driven primarily by investors. Their prices seem to have peaked – and are now significantly below their high points last year. Whereas, platinum and palladium prices have traditionally been driven by demand (e.g., manufacturing – like electronics and automotive applications) and generally more stable.
Telecommunications equipment and cell phones generally have the highest precious metals content – up to 10 times the average of scrap electronics based on per unit weight. As technology advances, the precious metals content of electronics equipment generally decreases – due to cost reduction learning. However, the smaller, newer devices (e.g., smart phones, tablets) have higher precious metals content per unit weight than conventional electronics equipment – such as PCs. So, if the weight volume of electronics equipment handled by the electronics industry decreases, and the market prices for precious metals decreases – or at least does not increase – will the recovery value of precious metals from electronics scrap decrease? Probably the recovery value of precious metals from electronics scrap per unit weight will increase since more electronics products are getting smaller/lighter, but have a higher concentration of precious metals (e.g., cell phones) than traditional e-scrap in total. So, this aspect of the industry may actually become more cost efficient. But the total industry revenue from commodity scrap – and especially precious metals – may not continue to increase.
The electronics recycling industry in the U.S. can be thought of as comprising 4 tiers of companies. From the very largest – that process well in excess of 20 up to more than 200 million lbs. per year – to medium, small and the very smallest companies – that process less than 1 million lbs. per year. The top 2 tiers (which represent about 35% of the companies) process approximately 75% of the industry volume. The number of companies in “Tier 1” has already decreased due to consolidation – and continued industry consolidation will probably drive it more towards the familiar 80/20 model. Although there are over 1000 companies operating in the electronics recycling industry in the U.S., I estimate that the “Top 50” companies process almost half of the total industry volume.
What will happen to the smaller companies? The mid-size companies will either merge, acquire, get acquired or partner to compete with the larger companies. The small and smallest companies will either find a niche or disappear. So, the total number of companies in the electronics recycling industry will probably decrease. And more of the volumes will be handled by the largest companies. As with any maturing industry, the most cost efficient and profitable companies will survive and grow.
What are the implications of these trends?
• The total weight of input volumes will probably not continue to grow (as it has at 20% annually) – and may actually decrease in the U.S.
• The electronics recycling industry will continue to consolidate – and the largest companies will handle most of the industry volumes.
• The inherent value for resale and materials recovery will probably increase per unit volume.
• Reuse and services may become a more significant part of the total industry revenue than recycling and materials recovery.
In an environment of consolidation and potentially decreasing volumes, developing additional capacity or starting a new facility for electronics recycling in the U.S. could be very risky. Acquiring the most cost efficient existing capacity available would be more prudent.
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