Smartphone Design Meets Rare Earth Reality-A New Model for Cutting REE Risk Without Killing Profit

Highlights

• Concurrent product-supply chain design delivers 18.5% higher profit and better sustainability scores than traditional 'design first, source later' approaches while reducing rare earth element usage in smartphones.
• Multi-sourcing strategies further improve outcomes, cutting modeled REE usage from 918 to 807 units while increasing profit to 7,650 and sustainability scores to 8.55 in the optimization framework.
• The study operationalizes how manufacturers can design around China's midstream processing dominance by reallocating REEs across modules and diversifying suppliers—treating REE risk as a design problem, not just procurement.

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Payam Khazaelpour and Shabnam Rezapour, Florida International University, Miami, with Sara Behdad University of Florida, report a practical way to reduce rare earth exposure in electronics without sacrificing margin. In a new SSRN preprint (not peer reviewed), the team builds an optimization framework that designs a smartphone’s architecture and its supply chain at the same time, treating rare earth elements (REEs) as strategically scarce—not just another line item. In their case study, joint (“concurrent”) design delivers higher profit and higher sustainability scores than the conventional “design first, source later” approach, while reducing total REE use further when multi-sourcing is allowed.

Study Methods, Explained for Non-Engineers

Most manufacturers separate two decisions: (1) what the product is, and (2) where parts come from. The authors argue this is backwards in a world where REE processing is concentrated—especially in China—and where costs and supply shocks can cascade. They build a bi-objective mixed-integer optimization model that decides:

• how parts are grouped into modules,
• which REE type and usage level each part uses, and
• which suppliers make each module (single-sourcing, then multi-sourcing).

One objective maximizes profit, linking product price to module-level functional efficiency. The other maximizes a composite sustainability / resilience score using supplier ESG ratings plus REE criticality, environmental burden, price volatility, partner diversification, and distance.

Key Findings

1) Sustainability gains don’t require profit collapse. The Pareto results suggest meaningful sustainability improvements can be achieved with only minor profit reductions in the modeled smartphone scenario.

2) Concurrent beats sequential. When design and sourcing are optimized together, the model reports ~18.5% higher profit (6,894 vs. 5,821 in their objective units) and a higher sustainability score (8.13 vs. 6.47) than the sequential approach. Translation: treating product design and supplier selection as one problem creates better outcomes than treating them as separate departments.

3) Multi-sourcing further reduces REE intensity. Allowing fractional sourcing increases profit (7,650 vs. 6,894), raises the sustainability score (8.55 vs. 8.13), and cuts modeled REE usage (807 vs. 918 units).

REEx Take: The China Midstream Monopoly is the Shadow Constraint

The model doesn’t “solve” China’s dominance in REE processing—but it operationalizes how firms can design around criticality by reallocating REEs across modules and diversifying suppliers. That matters because the most durable leverage in rare earths is not mining—it is midstream processing and magnet capacity, where China remains heavily concentrated.

Limitations and Controversial Edges

This is a preprint and uses a smartphone dataset that mixes real sources with assumed/hypothetical parameter ranges for how additional REE content boosts efficiency and cost. The sustainability score also depends on third-party ESG ratings, which can diverge across providers. Finally, the model optimizes within today’s supplier set; it does not prove real-world feasibility of substituting away from China-linked midstream inputs.

Conclusion

Even with limitations, this study makes a useful point for investors and manufacturers: REE risk is a design problem, not just a procurement problem. In a world where processing concentration can weaponize scarcity, concurrent product–supply chain design is a credible path to lower REE dependence while protecting performance and profit.

Citation: Khazaelpour P., Rezapour S., Behdad S. Concurrent product–supply chain design under rare earth element criticality: A resource-efficient smartphone case study (SSRN preprint; not peer reviewed). https://ssrn.com/abstract=6116930 (opens in a new tab)