Sales hit by China's rare earth curbs, Indian audio electronic firms look to diversify supplier base

High-performance magnets made of rare earth materials vital for devices such as headphones and true wireless earbuds.

Indian audio electronics makers are rushing to diversify supply chains for rare earth metals after China’s export curb on materials used in high-performance magnets have hurt production and sales over the past two quarters.

In April, China tightened export licensing norms for seven rare earth elements, including dysprosium and terbium, which are vital for producing neodymium-iron-boron (NdFeB) magnets that are used in devices such as headphones and true wireless (TWS) earbuds.

“Yes, it’s a real issue. Over 89 percent of our products are assembled in India but raw materials like magnets can’t be sourced domestically. China is creating artificial scarcity due to trade tensions with the US. We're trying to diversify suppliers even within China but there are constraints,” Varun Gupta, co-founder and CEO of audio and wearables maker GoBoult, told Moneycontrol.

The shortage has impacted growth. “We could’ve grown another 10 percent if not for this. We are facing supply constraints. So the production has gone down, the sales have gone down,” he said.

The China problem

China accounts for over 90 percent of global dysprosium production, a rare earth metal used alongside neodymium to create high-performance magnets essential for audio electronics and other consumer devices.

Sources said other domestic firms, too, have seen a similar impact on their production and sales. While domestic brands scramble to manage the disruption, analysts say global players are better equipped to absorb the shock due to stronger supply chain control and negotiation power.

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“It has started to show impact... For smartwatch and TWS this is coming at a crucial year end festive season and new product launches are likely to be impacted if there is no immediate solution,” Tarun Pathak, research director at Counterpoint, said.

The curbs have also forced many Indian companies to shift to importing fully assembled speaker modules from China.

The Electronics Industries Association of India (ELCINA) recently warned that the crisis had put 5,000–6,000 direct and nearly 15,000 indirect, mainly in Uttar Pradesh’s Noida and southern India, jobs at risk.

Moneycontrol reported that Apple’s AirPods production at Foxconn’s facility in Telangana had been hit but was slowly regaining pace. If the disruption persists, it could hurt the competitiveness of Apple’s India manufacturing and lead to shift to rival vendors such as Luxshare and Goertek in Vietnam, sources said.

A senior executive at a top Indian contract manufacturer supplying Bluetooth earbuds and neckbands for both local and global brands, including Chinese firms, confirmed that the problem hasn’t been fully resolved.

“India needs to find a long-term solution to this problem, as it could cripple the local industry. It is an important component and China could disrupt the industry not just in India but globally,” the executive said, requesting anonymity.

Despite the challenges, Indian players remain hopeful. Most expect supply chains to stabilise by the end of 2025, even as they navigate short-term pressure on production and component sourcing.

In recent months, China has stepped up pressure on India’s electronics sector by ordering select capital equipment firms to exit India and withdrawing Chinese-origin professionals from assignments at Indian and multinational firms.

China’s evolving restrictions are sparking concern across India’s electronics ecosystem. Industry bodies such as the Indian Cellular and Electronics Association (ICEA) and ELCINA have warned of supply chain disruptions, rising input costs and the risk of downgrading product features if the restrictions persist.

ICEA has requested urgent consultations with the government, cautioning that these “carefully calibrated” curbs could undermine India’s competitiveness and derail its $32-billion export-driven electronics manufacturing ambitions under the PLI scheme.