INTERVIEW: Global electronics sector braces for war-induced aluminum shortage

The Middle East war is set to cause an aluminum supply shortage that is expected to heavily impact the global electronics industry, John Mitchell, president and CEO of the Global Electronics Association trade group, told Platts, part of S&P Global Energy, in an interview.

The association represents companies across the electronics supply chain, including tech giants Apple, Dell, Nvidia, and Siemens. Mitchell described the kinds of impacts member companies are experiencing from historically tight aluminum supply driven by the war in the Middle East and highlighted the growing value of recycled aluminum amid strained supply chains.

This interview has been edited for space and clarity.

Platts: What impact do the disruptions to Middle East aluminum supply have on the global electronics sector?

John Mitchell: It has very large impacts, especially outside of China. China has its [aluminum] supply. We have the aluminum shortage and the energy impact. And the oil and gas that comes out of the Strait of Hormuz impacts [South] Korea and Taiwan, which is a huge center for electronics development in terms of semiconductors. AI is also being impacted in two ways. You have structural things that are holding the racks together [in data centers], but also thermal management [components]. Putting those heat sinks on those major [computing] chips is a serious thing.

What kind of challenges have you been hearing about from your member companies?

We're hearing challenges in terms of people building data centers. Now we have to add increased costs, because energy is more expensive, aluminum is more expensive, and producing aluminum is more expensive. And then circuit boards themselves [are more expensive]. We've seen some [price] spikes there. At one point, we saw a spike of 40% increase in costs [for circuit boards]. Those boards are used in every single piece of electronics in the world.

How have electronics companies adapted to the tight aluminum supply environment?

It's a struggle, frankly. Let's say the war ended tomorrow -- There's probably a 12-month lag in trying to get back to our previous normal because these plants were bombed or disrupted severely enough. In the short term, we've got cost increases, and we're looking for alternative supplies. If it goes on beyond 12 months, then we may have a structural shift toward reshoring or friendshoring their building capabilities. And recycling [is another solution]. Aluminum is easily recyclable, which is great. You may see a push for that as well.

Has the tightening global aluminum supply caused a shift in perspective on recycled aluminum?

Recycling on the aluminum front is an opportunity because there's a lot of waste in electronics right now. It's gotten better over the years, but there's still a long way to go. That waste can translate into defraying some of the pressure from the aluminum shortage. There's less pressure for sustainability in the world today, because there are higher priorities like the war and the energy crunch. And yet companies are still focused on recycling. Why is that? It actually makes fiscal sense. It's good business. So we're going there.