On July 15, according to Reuters, Apple has signed a $500 million (about 3.59 billion RMB) agreement with MP Materials, a U.S. Department of Defense-supported company (short for: MP), to supply rare earth magnets.

This foreign media believes that this move reflects Apple's strong support for MP, the only operating rare earth mining company in the United States. Just a few days ago, the U.S. government announced that it would become MP's largest shareholder. Both events mark a surprising shift in MP's position. Last year, in order to survive, MP considered merging with an Australian competitor and opened new businesses.

Last February, according to Reuters, Lynas Rare Earths of Australia said that secret negotiations with U.S. MP Materials on a possible merger had ended. Industry sources said it was difficult for both sides to agree on the value.

Lynas is the world's largest rare earth producer outside China, while MP is the largest rare earth producer in the United States. This negotiation took place as Western countries seek to diversify their supply chains for rare earth magnetic metals.

Rare earth magnetic metals are widely used in various fields such as wind turbines, electric vehicles, and missiles.

In the transaction with Apple on Tuesday (July 15), MP's stock surged 21%, reaching a record high, while Apple's stock rose by less than 1%.

Reuters stated that this agreement ensures Apple can obtain rare earth magnets stably. Analysts told Reuters that for Apple, the cost of supporting the production of American magnets is "negligible" compared to the long-term risk of completely losing key parts supply.

Last week, MP reached a deal worth billions of dollars with the U.S. Department of Defense, making the Pentagon the largest shareholder and financial backer of MP. Although the agreement does require the use of magnets made from recycled materials, which aligns with Apple's long-standing goal of reducing reliance on mining, Apple did not disclose the specific duration of the agreement or the exact number of magnets to be supplied.

Rare earth elements consist of 17 metals used to make magnets that convert electrical energy into kinetic energy, including devices that make phones vibrate. They are also used in the manufacturing of weapons, electric vehicles, and many electronic products.

As part of the agreement, Apple will pay $200 million (about 1.43 billion RMB) to MP Materials in advance to order magnet supplies starting in 2027. The two companies stated that these magnets will be produced at MP Materials' factory in Texas, using recycled magnets from MP Materials' location in California.

Apple CEO Cook said in a statement: "Rare earth materials are essential for manufacturing advanced technologies, and this collaboration will help strengthen the supply of these important materials in the United States."

Bob O'Donnell, president of market research company TECHnalysis Research, said that given the large amount of rare earth magnets needed for Apple devices, this move is "completely reasonable."

Apple stated that this transaction is part of its commitment to invest $50 billion over four years in the United States. The company previously faced threats from Trump due to iPhones not being manufactured in the U.S. The company had said in February that it would invest $50 billion in the U.S. over the next four years, including building a large artificial intelligence server factory in Texas and adding about 20,000 R&D positions nationwide.

However, many analysts say that producing iPhones in the U.S. is impossible considering labor costs and existing smartphone supply chains.

Apple did not reveal which devices will use these magnets. MP stated that the transaction will supply magnets for hundreds of millions of devices, which will constitute a significant portion of Apple's entire product line.

According to Reuters, MP produces and processes rare earths and stated that it expects to begin commercial magnet production at its factory in Texas by the end of this year.

A few days before Apple's investment plan was disclosed, the U.S. Department of Defense just announced an investment of $400 million in MP Materials, acquiring 15% equity in the company. The U.S. Department of Defense also promised to purchase the company's products at twice the current market price for a period of 10 years.

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