Charging Ahead in the EU

Charging Ahead in the EU
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In our note of 9/23/21, we spoke about the proposal made by the European Commission to address the problems for consumers related to the presence of three different connectors (charging and data transfer) on the market.  The problem, a lack of charging interoperability and the environmental impact associated with the problem pushed the EU Commission to propose measures that would reduce ‘charger fragmentation’ and ‘performance interoperability’, and allow consumers to decide whether or not to acquire a charger when buying a new device.  Simply, the EU wants one charger standard so consumers do not have to buy a new charger with each new device.
As part of the review process the EU put forth a matrix of six options for consideration, with the “F” option the preferred choice by the commission.  We have added which options are supported by various organizations, although they seem rather obvious, at least in the working document proposal.  The final agreement could be a single option or a blend.  

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​[1] Including tablets, digital cameras, headphones, portable speakers, and handheld video game consoles.

This week EU countries agreed to implement the proposed rules that would limit mobile phones, tablets, and cameras to a single charging port type, which would in theory, allow users to use one charger for all of their mobile devices.  The port specified is what is known as a USB-C, which is commonly used for charging, transferring data, and mimicking your phone on a larger display, and most Android phones have USB-C charging ports currently (77.9% of all phone models available in 2021 and 2022 by our count), but the remainder, mostly iPhones and other Apple (AAPL) products, have a proprietary connector which Apple licenses to cable manufacturers.  With 420m portable electronic devices sold in Europe last year the EU says it would be able to avoid disposing of the 12,000 tons of chargers that are thrown away each year, saving 861,000 tons of copper, zinc, and tin in the process, and reducing the cost to consumers of standalone chargers, which is estimated to be about $2.8b each year.

USB-C Male & Female Configuration - Source: delock.com

​The agreement, which would be implemented two years after its final approval is a problem for Apple who has opposed the idea on the grounds that it would stifle innovation, although the company uses USB-C connectors on much of the MacBook line due to its higher power handling capabilities.  Apple will have time to make the changes as the rule implementation does not begin for two years after final approval for smartphones and tablets and two years later for laptops, and Apple’s MagSafe, which is a wireless charger could offer a solution that is less costly than reworking all Apple mobile products to USB-C if the company feels that consumers would accept it, although we believe the new rules as they stand would need to be modified for that option. 
Citing environmental concerns has been the company speak concerning Apple and Samsung’s (005930.KS) elimination of chargers and power cords in new device packaging last year, but it is hard to imagine that the environmental concerns were more than an add-on to justify cost cutting measures for both companies.  As the cost of producing separate Apple products tailored to EU rules would likely be cost prohibitive, we expect Apple will comply globally, especially given the momentum behind such rules in other countries, but will likely petition to have the process modified over the next two years.  We believe Apple has been prepared for such an event and will make the required transition in the iPhone 15 (2023) or the iPhone 16 (2024), but will not see license revenue for the Lightening connector from cable manufacturers trail off until 2024/2025.