Electronics recycling in the U.S. is increasing because the industry consolidates and matures. The way forward for electronics recycling – at least in the U.S., and perhaps globally – is going to be driven by electronics technology, precious metals, and industry structure, in particular. Although there are more things that can influence the business – like electronic products collections, legislation and regulations and export issues – I believe that these particular 3 factors may have a far more profound impact on the future of electronics recycling.
The latest data on the industry – from the survey conducted by the International Data Corporation (IDC) and sponsored through the Institute of Scrap Recycling Industries (ISRI) – found the industry (during 2010) handled approximately 3.5 million tons of electronics with revenues of $5 billion and directly employed 30,000 people – and this it has been growing at about 20% annually within the last decade. And can this growth continue?
Pc equipment has dominated volumes handled through 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 laptops have declined by a lot more than 10% which the shipments of smartphones and tablets now each exceed that of PCs. About 1 billion smart phones will likely be shipped in 2013 – and the very first time exceed the volumes of conventional mobile 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 already been a substantial area of the input volumes (by weight) within the recycling stream – up to 75% in the “consumer electronics” stream. As well as the demise of the CRT implies that fewer CRT TVs and monitors is going to be entering the recycling stream – replaced by smaller/lighter flat screens.
So, what exactly do these technology trends mean towards the electronics recycling industry? Do these advances in technology, which lead to size reduction, result in a “smaller materials footprint” and much 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 are going to probably dominate the future volumes entering the recycling stream. Plus they are not merely much smaller, but typically are less expensive than PCs. And, traditional laptops are now being replaced by ultra-books as well as tablets – meaning the laptop equivalent is significantly smaller and weighs less.
So, even with continually increasing quantities of electronics, the load 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% from the total industry input volume by weight and TVs have comprised a large area of the volume of “consumer electronics” (about 15% of the industry input volume) – then up to 75% from the input volume may be subjected to the load lowering of technologies – perhaps just 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 worth of these units may be more than PCs and CRTs (for resale as well as scrap – per unit weight). So, industry weight volumes may decrease, but revenues could carry on and increase (with resale, materials recovery value and services). And, since mobile phones are expected to turn over more rapidly than PCs (which may have typically turned over in 3-five-years), these changes in the electronics recycling stream may happen within 5 years or less.
Another factor for that industry to think about, as recently reported by E-Scrap News – “The entire portability trend in computing devices, including traditional form-factors, is described as 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 simplest way to manage these units responsibly, because they gradually compose a growing share of the end-of-life management stream.” So, does that mean that this resale prospect of these smaller devices may be less?
The electronics recycling industry has traditionally centered on PCs and consumer electronics, but how 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 considered when it comes to the electronics recycling industry, but may be a progressively important and larger share from the volumes that it handles. And a few, otherwise much, of the infrastructure arrives jgigrb to change in technology – resulting in a large volume turnover of equipment. GreenBiz.com reports that “… because the industry overhauls and replaces… servers, storage and networking gear to allow for 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 through the consumer towards the data center… While the amount of consumer devices is increasing, also, they are getting smaller in proportions. Meanwhile, data centers are upgraded and expanded, potentially creating a substantial amount of future e-waste.”
But, outside the U.S. – and then in developing countries in particular – the input volume weight towards the electronics recycling stream improves significantly – as the utilization of electronics spreads to a broader market plus an infrastructure for recycling is developed. In addition, developing countries will continue being attractive markets for that resale of used electronics.
Within the IDC study, over 75% by weight of industry output volumes was found to get “commodity grade scrap”. And over half of that was “metals”. Precious metals represent a small area of the volume – the normal concentration of precious metals in electronics scrap is measured in grams per ton. But their recovery value is actually a significant part of the total value of commodity grade scrap from electronics.
Precious metals prices have increased significantly lately. The current market prices for gold, silver, palladium and platinum have each a lot more than doubled in the last five years. However, silver and gold have historically been very volatile since their costs 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 usually more stable.
Telecommunications equipment and cellular phones have the greatest precious metals content – approximately ten times the average of scrap electronics according to per unit weight. As technology advances, the precious metals content of electronics equipment generally decreases – because of cost reduction learning. However, the lesser, newer devices (e.g., smart phones, tablets) have higher precious metals content per unit weight than conventional electronics equipment – such as PCs. So, when the weight volume of electronics equipment handled by the electronics industry decreases, and the market prices for precious metals decreases – or at best fails to increase – will the recovery value of precious metals from electronics scrap decrease? Possibly the recovery price of precious metals from electronics scrap per unit weight improves since more electronics goods are getting smaller/lighter, but have a higher concentration of precious metals (e.g., mobile phones) than traditional e-scrap overall. So, this aspect of the industry may actually become a little more cost efficient. However the total industry revenue from commodity scrap – especially precious metals – may not continue to increase.
The electronics recycling industry inside the U.S. can be regarded as comprising 4 tiers of companies. Through the very largest – that process well in excess of 20 up to greater than 200 million lbs. per year – to medium, small, and the very smallest companies – that process less than 1 million lbs. annually. The top 2 tiers (which represent about 35% in 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 most likely drive it more to the familiar 80/20 model. Even though there are over 1000 companies operating within the electronics recycling industry in the U.S., I estimate the “Top 50” companies process almost half in the total industry volume.
What is going to occur to the smaller companies? The mid-size companies will either merge, acquire, get acquired or partner to compete with the larger companies. The little and smallest companies will either locate a niche or disappear. So, the complete quantity of companies in the electronics recycling industry will probably decrease. And more of the volumes is going to be handled by the largest companies. Just like any maturing industry, by far the most affordable and profitable companies will survive and grow.