New phones are small because of the use of certain metals, such as copper, nickel, palladium, gold and tantalum, to help reduce the size of a cellular phone. Take, for example, the silver-gray precious metal tantalum, which is mined largely in Australia and Central Africa. Tantalum, a powder compacted for use in producing passive capacitors, has been a key factor in reducing the size of the mobile phone in recent years. The expensive and rare powder is used to build these capacitors that regulate voltage at high temperatures. Demand for this tiny but sophisticated component from the likes of mobile phone giants Nokia and Motorola has pushed the price of the precious metal around 600 percent higher in less than three years, traders say. Tantalum highlights the importance that "old'' economy precious metals have in the make-up of "new'' economy products, not just in mobile phones but also in portable computers, game consoles and other electronic devices where size is king. Around one third of the world's tantalum is mined by the Australian company Sons of Gwalia.

Precious Metal Helps Run Heart Of Cellphone A mobile phone is one of the most intricate devices that people use on a daily basis, but many don't know that it is really a radio -- an extremely sophisticated radio that sends and receives signals while working under very low power. If you dissect a phone, you will find it contains a battery, a small microphone, a tiny speaker, a liquid crystal display, a keyboard not unlike a TV remote control, an antenna -- used for receiving and transmitting signals -- and a circuit board. But it is the printed fiber glass circuit board and the content that sits atop it that allow the phone to function. Gold plating covers the surfaces of circuit boards and connectors. While the cellular phone is mostly made up of plastics, it is run by several powerful computer chips. Some of the key parts are the microprocessor, the digital signal processor (DSP), the read-only-memory (ROM), connectors, the radio frequency (RF) power sector and flash memory chips. But the tantalum capacitor and other passive capacitors are also crucial. About 35 percent of them are made for mobile phone makers, according to industry experts. They are used as storage vessels, storing energy, ready for use when there is a big surge of energy to a cellular phone. These components help supply that extra kick of energy for the phone, which the battery cannot provide on its own. They are also used as an ingredient of superalloys, principally in aircraft engines and spacecraft.

Demand Outstripping Supply The unexpected surge in demand from mobile phone and computer makers in recent years has boosted the price of tantalum on the metals market, forcing makers of tantalum capacitors, such as American companies AVX Corp. and Kemet Corp. to pass on some of the cost to their clients. Last year, more than 400 million phones were sold globally, a 45 percent increase on the previous year. In 2001, mobile phone leaders expect over 500 million units to be sold worldwide. Because cellular phones are not yet recyclable, manufacturers cannot reuse the rare metals for future phones. But plans are underway to allow for limited recycling. Tantalum prices have also stayed high because demand is outstripping supply and the only replacement to tantalum capacitors -- ceramic capacitors -- cannot yet be made small enough to fit the dimensions of tiny cellular phones. "There's no substitute for tantalum that would meet the requirements of mobile phones,'' said Jim McCombie, managing director of A&M Minerals and Metals Ltd., which trades tantalum. Last year, annual usage of tantalum stood at around five million pounds, up from three million in 1997 and yearly demand is rising by around 15 percent, tantalum traders say. The rise in demand is also due to a rise in non-mobile phone electronics, especially from makers of small electronic devices. Prices for tantalum jumped to around $350 per pound last month, up from $40 in 1997, traders said. In the early 1990s the metal traded at around $20 per pound. But one trader said the price range was now off its highs as financial markets digested news that the mobile phone market would not grow as fast as expected in coming years. "We may now be past the big peak in tantalum, but demand is still outstripping supply and will do so for the foreseeable future,'' one tantalum trader said. "At least until scientists have found a viable replacement.'' Even if the consumer appetite for mobile phones cools it will still be a big market and tantalum traders expect to see increased demand from Asian manufacturers of electronic gadgets that are also constrained by size.

"Tantalum may not be the flavor of the month, but it's still in fashion,'' London-based McCombie said.

By Mike Duvall
Industry Professional