Apple Secures Rare Earth Magnet Supply in $500 Million Deal with MP Materials

Apple has entered into a $500 million agreement with MP Materials, a company backed by the Pentagon, for the supply of rare earth magnets. This deal highlights the increasing trend of American corporations aligning with U.S. industrial policy, which supports projects involving critical minerals. Following the announcement, MP Materials' stock experienced a significant increase, while Apple's stock saw a modest gain.

The multi-year supply agreement is part of Apple's broader strategy to shift iPhone production to the United States. This initiative aligns with previous efforts to reduce reliance on electronics manufacturing in China. MP Materials recently finalized a substantial deal with the U.S. Department of Defense, which will make the Pentagon its largest shareholder and provide financial backing.

Rare earths are a group of 17 metals essential for creating magnets that convert power into motion. These magnets are crucial components in various devices, including cellphones, and are also used in weapons, electric vehicles, and other electronics. The demand for non-Chinese sources of these materials has increased, particularly after China's past actions regarding rare earth exports.

As part of the agreement, Apple will provide MP Materials with a $200 million prepayment for a supply of magnets, with deliveries scheduled to begin in 2027. The magnets will be manufactured at MP Materials' facility in Fort Worth, Texas, using recycled magnets from its mining complex in Mountain Pass, California.

Apple's CEO emphasized the importance of rare earth materials in advanced technology and stated that the partnership would strengthen the supply of these vital materials within the United States. Market analysts have noted that the deal is a logical move for Apple, given its need for rare earth magnets in its devices. Furthermore, it positions Apple favorably in its relationship with the government.

Apple's commitment to the U.S. market is part of a larger investment plan. While the company has faced pressure regarding manufacturing in the U.S., analysts have noted the challenges associated with producing iPhones domestically, considering labor costs and existing supply chains. MP Materials is already involved in the mining and processing of rare earths and anticipates commencing commercial magnet production at its Texas facility by the end of the year. The recent agreement with the U.S. government includes measures to encourage investment in domestic mines and processing plants.