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 / Winter 2010 / Issue 61(originally published by Booz & Company)


Reduce, Reuse, Recycle…or Rethink

Consider the case of cell phones. Motorola introduced the first cell phone in 1983. Though it was expensive ($4,000), heavy (more than a pound), and awkward (a foot long), it tapped an unmet need for wealthy people on the move. Today, prices have plummeted, a typical cell phone weighs between 3 and 5 ounces, and cell phones are seen as essential for nearly everyone. Annual sales of new phones worldwide exceeded 1.2 billion units in 2009. In the United States, entry-level designs are priced at less than $40 and high-end smartphones like the iPhone or Android are still less than $700 at full retail and less than $200 when combined with a two-year service contract. Some 285 million people in the U.S. have cell phones; that is, the penetration rate stands at 91 percent.

Cell phones, however, quickly become obsolete, creating a glut of older, unused phones with waste and environmental implications. In the U.S., for example, the high rate of market penetration has led to intense battling among phone service providers to entice customers away from the competition — and with ever-decreasing costs, it’s profitable for them to offer ever-lower phone prices. Meanwhile, manufacturers have made continued improvements in handset designs — some of them significant, such as Apple’s introduction of the iPhone, which gained a 40 percent market share in its first three years. As a result, the initial lifespan of a phone has fallen to between 18 and 24 months. In other words, roughly half of the phones in use one year are retired the next year. An estimated 10 to 15 percent of these are simply discarded and merged invisibly into the municipal waste stream. A much larger percentage of those retired are “stockpiled.” Because of their small size but high perceived value, roughly 65 to 70 percent of the old phones end up in a drawer as a rarely used backup.

That leaves less than 20 percent of retired phones in the U.S. to be collected for reuse or recycling. Of those, about 65 percent are reused, mostly in emerging markets in Africa and Latin America. Prices for reused phones range from around 10 to 50 percent of the price of the new version as fresh designs with better technology continuously displace — and devalue by 30 to 80 percent — functional older models. This being the case, used phones quickly become obsolete and unwanted even in the secondary market.

Ultimately, only 6 or 7 percent of cell phones are recycled for scrap metal. The typical recycled phone generates less than a dollar of revenue from the recovery of about an ounce of copper and trace levels of the more expensive precious metals such as gold, palladium, and silver. Frustratingly, the typical recycled phone easily could have remained operational for four or five more years from a functional point of view.

Electronic waste, which includes cell phones, makes up less than 2 percent of the mass disposed of in landfills, but it accounts for 70 percent of the hazardous waste. Since most old handsets remain stockpiled in a drawer, cell phones have had little impact on landfills to date. But with the retirement of 130 million handsets per year, there may well be more than a billion stashed handsets that could eventually end up as toxic waste.

Rethinking the Cell Phone Cycle

Our research into the cell phone value chain, in collaboration with Vered Doctori Blass of Tel Aviv University, offers two examples of how industry players at different points along the value chain could potentially increase profits while reducing the environmental impact.

The first opportunity is in phone design. Design decisions can affect the economic and environmental performance in different stages of the phone’s life cycle by affecting the manufacturer’s costs and consumer demand (in turn, affecting profitability), as well as the environmental impact at different stages. For example, cell phone manufacturers employ “design for assembly” techniques such as modular designs and snap-together fasteners to simplify the assembly process. Using common “platforms” for a range of models allows manufacturers to deal with unpredictable mix issues by delaying customization to the final steps, which reduces the need for expensive inventories. But cell phone manufacturers have been less aggressive in implementing “design for disassembly.” By focusing explicitly on the end-of-life stage in addition to the initial production stage, cell phone companies can design the product to automate the disassembly process and lower the cost of refurbishment and component reclamation. A clear technology road map for such modular designs would increase the odds that components can be reused rather than merely recycled. And components that are not likely to be reused can be designed for easier recovery of valuable raw materials.

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