Why Loudspeaker Prices Will Skyrocket

In addition to skyrocketing prices for petroleum and copper that have affected the cost of cabling, there is another looming crisis for the custom electronics industry: the increasing price of neodymium, a rare-earth metal.

The magnets are instrumental in the manufacturing of some low-profile loudspeakers from Definitive Technology, Earthquake, Wisdom Audio, Totem Acoustic, BG Radia, and MartinLogan. Not all manufacturers use neodymium drivers, some use magnets made of ferrite, which has the same properties as neodymium but requires a larger magnet.

Due to the rising prices of neodymium, Shin-Etsu Chemical Co. Ltd, a neodymium supplier, raised its price by 40 percent, effective July 1. According to the Business China, it is only a matter of time before the move trickles down to U.S. manufacturers.

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Business China says the price for both neodymium and dysprosium "continue to rise steeply due to mining restrictions and the cutting of export quotas for rare-earth minerals by China." China exports over 90 percent of the world's rare-earth metals and houses more than one third of the world's reserves, according to Business China. The market is controlled by the Chinese government, which in recent years has limited export quotas.

Neodymium Price Up 1400%
The price of neodymium has risen to RMB 1.4 million per ton from RMB 100,000 per ton since the end of 2008, when China issued a series of tightening measures for the country’s rare-earth industry, according to a survey by the 21st Century Business Herald.

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On June 3, Japan enacted a series of emergency measures to prevent the country's consumer electronics manufacturing companies from being held hostage by the price increase by China. The Japanese government will use 8.7 billion yen to buy rare-earth metals in 2010.

How Will Manufacturers Respond?
It will be interesting to see how long manufacturers can hold the line on the price of their speakers given this looming threat. Wisdom Audio is keeping an eye on the market. Wisdom uses the material is all of its Sage Series planar magnetic devices, as well as the 6-inch dynamic woofer in the Sage line and even its big 15-inch woofers found in its STS subwoofer.

"Neo packs more magnetic energy into less space than any other permanent magnets," says Jon Herron, vice president of sales. "If you are space-constrained but need high motor strength, it yields a huge advantage. Also (and specific to planar magnetic designs), it allows you to use smaller magnets in front of the film while maintaining high magnetic field strength; the result simply sounds better, and enjoys higher sensitivity than would otherwise be possible."