The electronics industry is currently in a vicious cycle. While electronic manufacturers continue to harm the environment, supply chain disruptions are becoming increasingly frequent.
A significant pollutant from our electronics sector is electronic waste (e-waste). In 2022 alone, the world generated approximately 62 million tons of e-waste, making it the fastest-growing solid waste stream globally[1] [2].
Beyond furthering the ongoing environmental crisis, e-waste also represents a significant financial challenge. In 2022, $91 billion USD worth of valuable minerals was hidden within electronics disposed of inadequately[1]. With so much on the line, it begs the question of why more is not being done to recuperate this value. Enter the grey market.
Sometimes called the secondary market, the grey market is a marketplace for electronic components not sold directly through original distributors or franchise channels. The grey market sometimes gets a bad reputation due to the presence of counterfeit components and dubious sellers. However, the grey market is not black and white, and it could also be the answer to reducing e-waste.
The Electronic Industry's Dirty Secret
E-waste has long been low on the list of priorities for many OEMs (original equipment manufacturers) and EMSs (electronics manufacturing services). However, as public pressure for companies to operate more sustainably increases, the way e-waste is managed is coming under increased scrutiny.
Although recycling and smelting are more environmentally friendly than landfill dumping, these practices have significant flaws. Components in landfills can take hundreds of years to decompose while leaching toxic substances, and common recycling methods save only a fraction of rare earth elements (REEs) at a high energy cost.
Much of the world's e-waste ends up in Agbogbloshie, Ghana, the largest e-waste dumpsite globally. Here, over 40,000 locals risk their health by manually sifting through electronics to extract precious metals. Agbogbloshie is just one example of similar practices in other areas of the world.
A popular electronics recycling method is smelting, often using acids or bonfires. This practice's popularity is partly due to its ability to retrieve REEs from discarded components. However, the trade-off is significant energy consumption—typically from fossil fuels—and the emission of greenhouse gases into the atmosphere.
Saving the Environment One Chip at a Time
A key principle of a circular economy is summarized in the three Rs:
- Reduce
- Reuse
- Recycle
The order of the three Rs is deliberate. First, electronic manufacturers should reduce their waste with more accurate forecasting. Second on the list, and intentionally before recycling, is reusing. This is where grey market suppliers like Component Sense come in.
Much of the electronics industry’s e-waste comprises excess and obsolete (E&O) stock, which is in pristine condition and perfectly usable. Trustworthy grey market suppliers redistribute this untouched E&O inventory from reputable manufacturers to other companies. The grey market is entirely safe and legal, so long as procurers vet their sellers.
Buying from the grey market retains rare earth elements within the supply chain and reduces the demand for new components, saving valuable resources.
Beyond prolonging component lifespans, the grey market also facilitates the sale of legacy components. Often unavailable through direct channels, components over ten years old are often crucial for repairing industrial and military equipment, extending its lifespan.
“If a company is re-manufacturing when there is plenty of excess in the market, it doesn’t make sense,” explained Kenny McGee, Managing Director and CEO, Component Sense.
Other Grey Market Benefits for Procurers
Optimal supply chain solutions achieve sustainability and profitability. The amount of e-waste produced annually is valued higher than many countries' GDP (gross domestic product). Recuperating even a portion of their excess and obsolete (E&O) stock value could open significant revenue streams for electronic manufacturers, aiding in year-end financial balancing. Many companies are sitting on approximately 10% of their overall revenue in excess inventory.
The financial benefits of sourcing from the grey market extend beyond merely reselling stock. If electronic manufacturers cannot source the parts they need directly from franchises, the grey market helps avoid starting new product lifecycles, saving companies substantial sums, particularly in redesigning printed circuit boards (PCBs).
In recent years, the electronics industry has faced significant supply chain disruptions and lengthy part lead times due to stock shortages. The roll-on effect of these delays can easily disrupt production schedules and product launches. In these instances, the grey market can provide a lifeline. Companies like Component Sense only advertise items that are in stock / available and ready to be shipped the moment an order is placed.
Looking Ahead
As active participants in the electronics supply chain, it is crucial that manufacturers address growing e-waste challenges head-on. Recycling is more sustainable and cost-effective than landfill disposal, yet redistribution through the grey market offers an even smaller environmental footprint.
Procurement professionals sometimes hesitate to turn to the grey market due to concerns about unreliable suppliers within the sector. However, a selection of grey market sellers are honest and passionate about helping their customers and the environment. Part buyers can ensure safe purchasing from the grey market by verifying suppliers who:
- Implement a robust and detailed quality assurance inspection process for all components they sell
- Provide full traceability back to the original manufacturer for all parts they sell to avoid counterfeits
- Only source components directly from OEMs and EMS who already have safety built into their supply chain
In some cases, excess inventory is unavoidable. Utilizing the grey market should be an essential part of the solution to minimizing E&O stock becoming e-waste.
