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TECHNOLOGY
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APRIL 27, 2011
Firms Seek Supply Route Around Conflict in Congo
By DEVON MAYLIE
While the aftermath of the Japanese earthquake is causing many companies to worry about the electronics supply
chain, a different pall is hovering over a rare, blue-gray metal that is mined in the Democratic Republic of the
Congo.
The substance is tantalum, an ingredient in components that are a mainstay of devices like smartphones, digital
tablets and personal computers. And recently big technology companies like Intel Corp. and Hewlett-Packard Co.,
which either use tantalum directly or buy semiconductors made with it, have started a push to find sources
without links to war-torn regions of Africa.
A new U.S. law requires publicly traded companies to ensure key
minerals in their products aren't coming from the Congo's rebelcontrolled mines. A civil war in the Congo, the world's thirdlargest producer of tantalum, ended in 2003, but violence in the
eastern part of the country continues.
The Dodd-Frank financial-regulation law, enacted last year,
identifies four minerals—tantalum, tin, tungsten and gold—that
are mined in the Congo and are blamed for helping to fund
violent conflict there. Under the law, companies that use the four
Agence France-Presse/Getty Images
minerals must inform the Securities and Exchange Commission
A soldier with the U.N. mission in Congo manned a
post last year.
annually whether any of them in their supply chains originated
in the Congo or nine neighboring countries. If they did, the
companies must tell the SEC what efforts have been made to
determine the source and custody chain of the minerals.
Rules implementing the law haven't been finalized. As it stands, the law doesn't punish companies that buy any of
the four listed minerals from the Congo, though punitive measures may be added.
Tantalum is used in parts such as capacitors, which store electric charges and help power most smartphones and
other electronic devices. Companies like Intel and AT&T Inc. don't buy directly from the Congo. They purchase
finished products through suppliers that source from smelters, which in turn buy from traders on the ground.
While tech products typically contain only trace quantities of
tantalum, companies in the technology industry are its biggest
buyers. "We're working to get to a conflict-free space," says
Chuck Mulloy, a spokesman at chip giant Intel, which uses
tantalum in its semiconductors.
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Firms Seek Supply Route Around Conflict in Congo - WSJ.com#printMode
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Mr. Mulloy says Intel is working with the Electronic Industry
Citizenship Coalition, an industry body, to review 25 smelters in
eight countries that supply minerals that end up in electronic
products.
Reuters
Intel is also setting up systems to track the minerals from the
ground all the way through the doors of its semiconductor
plants, a step the company and the electronics industry had
already taken before the law was passed, according to Mr.
Mulloy.
Rep. Barney Frank is a co-author of the law prompting
technology firms' heightened scrutiny of suppliers.
The law will affect all technology companies publicly traded in
the U.S. Oregon-based TriQuint Semiconductor Inc. is working
with its suppliers to help them track the four affected minerals
they use. Dell Inc. says it, too, is working with suppliers as they adjust purchasing processes. Microsoft Corp. is
also among those scrambling to comply with the new legislation.
"The purpose is to cut off funding to people who kill people," says Rep. Barney Frank (D., Mass.), an author of the
act. Conflict in eastern Congo is blamed for at least five million deaths since the late 1990s.
The minerals in question pass through many hands before reaching manufacturers, making tracing their origin
difficult. AT&T said in a filing with the SEC that as a retailer of phones and devices made by others, it is far
removed from the manufacturing process.
To track the four minerals specified in Dodd-Frank in a wireless handset, AT&T estimates it would have to wade
through 35 manufacturers, 60 to 80 parts suppliers, more than 1,000 commodity-part suppliers and an unknown
number of brokers and distributors to get to the mine that was the original source of its tin and tantalum.
"Tracing metals and verifying they are conflict-mineral free is very difficult," a Microsoft spokeswoman said.
The legislation will also ripple beyond major tech companies, affecting manufacturing and even jewelry. Ford
Motor Co. said in an SEC filing that it already tracks a number of the materials used to make its cars and that
adding the conflict minerals will require additional investment. A sharp reduction in mineral purchases from the
Congo could deal a huge blow to a country that ranks 119th out of 193 in gross domestic product, as measured by
the World Bank. Congo accounts for roughly 10% of global tantalum production, with industry leader Brazil
accounting for roughly 16% to 23% of output and China with about 14%.
Mining remains a key source of income for thousands there—much of its tantalum and tin is mined by individuals
who sell to dealers that trade with smelters across the globe. The main tantalum and tin mines in Congo are
owned by individuals or independent mining groups, and rebels often take over the mines.
Congo-based exporters now fear that suppliers to U.S. companies may impose a blanket ban on purchases from
the country in a bid to comply with the new law.
"It's very good to make sure stakeholders don't fuel armed conflict," says John Kanyoni, the chairman of the
exporters association in North Kivu, Congo. "The problem we have is with the time—we're concerned smelters
will stop buying altogether to meet electronic-industry demands," referring to when the rules will be
implemented and the fact that some smelters are already halting purchases in anticipation of the implementation.
That is already happening in some parts of the Congo. Serge Mulumba, who represents independent miners in
Katanga province, said the area isn't designated as a conflict zone, but he said traders have already stopped
buying.
"There are no verifiably conflict-free sources from the Congo right now," says Rick Goss, the vice president of
sustainability at the Information Technology Industry Council, which represents high-tech companies. "There is
too much chaos on the ground."
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Write to Devon Maylie at devon.maylie@dowjones.com
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