The electronics industry has sounded an alarm to the government flagging what it calls “informal sanctions” imposed by China on the export of rare earth materials, a CNBC TV18 report stated, citing sources. Industry bodies said that the restrictions and even the recall of Chinese technical personnel from Indian factories, are posing a grave threat to the nation’s ambitious export-linked smartphone manufacturing target of $32 billion for FY26.
According to the sources who talked to CNBC TV18, industry stakeholders have urged the government to intervene in order to ensure supply chain continuity, facilitate technology transfers, and protect India’s competitiveness in the global value chain (GVC).
The electronics industry has voiced concerns that Beijing’s “deliberate” restrictions are aimed at three critical pressure points: the supply of rare earths, the withdrawal of Chinese technical experts, and curbs on essential manufacturing equipment. These actions, they warned, present a “strategic threat” and could undermine the progress India has recently achieved in electronics production and exports.
Meanwhile, the CNBC TV18 report maintained that the Prime Minister’s Office (PMO) is expected to hold a high-level meeting today to discuss the escalating crisis.
Rare earth and its significance
Rare earth elements—such as terbium and dysprosium—are critical for manufacturing Neodymium-Iron-Boron (NdFeB) magnets, which are widely used in everything from smartphones to headphones and electric vehicles.
Now China controls about 90 per cent of global rare earth processing and 70 per cent of production and in April 2025, introduced stricter export licensing for these materials.
This has led to manufacturers in India being forced to revert from local component assembly to importing finished goods, driving up costs and putting several thousand jobs at risk in the audio and wearables segment alone.
Where does India stand on rare earth availability?
While it may come as a surprise, India possesses the fifth-largest reserves of rare earth materials globally. However, it is crucial to understand that the sector is primarily controlled by a single entity—India Rare Earths Limited (IREL)—and the nation currently lacks the infrastructure for large-scale production.
Building a strong domestic supply chain for magnets is a logical step forward, but it’s a complex, long-term endeavor.
Meanwhile, according to reports, the Indian government is planning to invest about Rs 1,000 crore to incentivize domestic production of rare earth magnets. An earlier CNBC-TV18 report had stated that India’s Ministry of Heavy Industries and Department of Atomic Energy are working on a scheme with a budget of Rs 1000 crore to incentivize rare earth magnet production.
With this, several companies are lining up for domestic rare earth magnet production. A senior government official hd earlier told Reuters, “Some companies have shown interest in investing or setting up rare earth magnet production, including Mahindra.” He added, “It will take a year or two to have our own production… but we have to find ways to be independent.”