Intel Plans Conflict-Free Tantalum Microprocessors

Intel (NASDAQ:INTC) has set the goal of manufacturing the world’s first microprocessor validated as conflict free for gold, tin, tungsten, and tantalum by the end of 2013. In efforts to achieve this objective, the company has set a shorter-term goal of demonstrating that its microprocessors are verified as conflict free for tantalum in 2012.

When sourced from the Democratic Republic of the Congo (DRC), the four minerals listed above are considered conflict minerals due to the extreme human rights abuses and violence that take place where they are mined, and the fact that proceeds from these mines have been used to bankroll violent groups.

“The DRC has rebel forces who are operating the Eastern portion who basically are under no control whatsoever of the government. They extort the population via mechanisms such as rape or illegal taxation to control them to do mining on their behalf,” explained Bob Leet, Intel’s industry lead of conflict minerals and co-lead of the EICC and GeSI extractive WG, in a company video.

A body of US law commonly referred to as the Dodd-Frank Act contains a section on conflict minerals that is pressuring companies to develop strategies to ensure that they are using conflict-free minerals. However, in its 2011 Corporate Responsibility Report, Intel reminds readers that its efforts to be conflict free predate the US legislation.

“From the time we became aware of the potential for conflict minerals from the DRC to enter our supply chain, we have responded to this issue with a sense of urgency and resolve,” the report says.

Intel claims to have been pursuing a conflict-free supply chain since 2009, when it asked its suppliers to complete a survey on the origin of minerals in their supply chains.

Intel outlines an array of measures that it has undertaken to demonstrate its responsibility and leadership in handling this issue. These steps include having company representatives travel to the DRC in 2010 to determine what was going on. According to Jerry Meyers, fab materials engineer for Intel, these efforts are especially important given the company’s recently announced goal of using conflict-free minerals.

Intel defines conflict-free microprocessors as those manufactured with metals from smelters that have been validated by the EICC-GeSI Conflict-Free Smelter Assessment Program.

Meyers said company has traveled over 120,000 miles and has visited 30 smelters.

By the end of 2011, Intel claims it had mapped out 92 percent of the tantalum, tin, tungsten, and gold supply lines supporting its core business.

Intel considered banning all material from the DRC, a move that, in theory, would have made its goals much easier to achieve. But according to Meyers Intel came to the conclusion that a ban wasn’t the right action to take because there are really only two major industries in the country: farming and mining.

“If we were to ban material from that country,” Meyers explained, “you would be depriving the local people of one of two of their main sources of livelihood. And we wanted to avoid that at all costs.”

Overall, the electronics industry has taken a strong stance against conflict minerals and the risk of supporting rebel groups. However, unlike Intel, many companies did not thoroughly analyze how their handling of the situation could impact the lives of the people in the DRC. They chose to simply avoid material from the region, which essentially created an embargo that put thousands of people out of work.

Efforts are now underway to turn this situation around. One program that is working to do so is Solutions for Hope (SfH); announced in 2011, it is a pilot initiative to source conflict-free tantalum from the DRC using a bag and tag scheme whereby minerals are tracked along their journey throughout the supply chain.

Intel is a member of SfH, although Leet said the company is not a large procurer of conflict minerals. “But, collectively our industry together create a big fish in a small pond.”

The industry that Leet was referring to includes Intel’s smelters, and that “small pond” highlights another issue that arises with refusing to use tantalum from the DRC: is there enough conflict-free tantalum supply available?

While the market is currently believed to be oversupplied, according to an industry insider who prefers to remain anonymous, if all of the tantalum projects currently underway were able to advance to full production, they would not produce enough conflict-free tantalum for the current demand coming from the electronics and aerospace industry. There is a limited amount of tantalum produced in conflict-free regions and there is even less that is not already claimed through offtake agreements.

Given the amount, the grades, and the ease of mining tantalum in the DRC, it is unrealistic to believe that these resources can or will be ignored.

Still, if companies fail to position themselves properly on this issue they run the risk of significant consequences to their reputations and their bottom lines.

Since much of the opposition to the conflict minerals section of the Dodd-Frank Act stems from the fact that companies say it is too difficult and expensive to track metal throughout the supply chain, one would assume that initiatives like the one undertaken by Intel would provide an opportunity for tantalum miners to successfully market their projects.

However, the insider says that historically western companies have been told they were not buying material that was sourced from the DRC. This statement is reflected in corporate responsibility statements from electronics majors, which have recited this empty assurance over the past decade.

The fact that some companies have acted duplicitously, claiming the moral high ground of corporate social responsibility while continuing to source conflict minerals, shows that efforts to target companies like Intel have been less than productive.

However the reality, says the insider, is that approximately half of all of the tantalum that has made its way into our electronics is from a conflict source. In setting its 2012 conflict-free goal, Intel is in fact stating that its microprocessors manufactured up to this point have conflict tantalum in them, he added.

Intel appears to admit as much, where it states in its report, “[i]n practice our products may already be conflict free but it is not possible to know with certainty until a mature system is in place that can validate smelters in our supply chain as conflict free. Intel and others in our industry have been working together to create such a system.”

Securities Disclosure: I, Michelle Smith, do not hold equity interests in any companies mentioned in this article.