The world is scrambling (desperately) for rare earths, the invisible currency of the modern tech age. These 17 obscure-sounding elements – dysprosium, neodymium, terbium and the like – are the lifeblood of everything from AirPods and iPhones to EVs, missiles, and satellites.

But there’s a catch: China controls the lion’s share of global production, processing nearly 90% of the world’s supply. As the West talks of de-risking and diversification, Beijing is quietly flexing its mineral muscle, weaponizing rare earths with the precision of a chess grandmaster. And now, as Apple’s manufacturing shift to India collides with a Chinese export chokehold, the consequences are no longer theoretical, they’re industrial, geopolitical, and painfully real.

Production of Apple’s AirPods at Foxconn’s Telangana facility has encountered headwinds due to a shortage of dysprosium, a critical rare earth element, stemming from China’s recent curbs on exports, according to individuals familiar with the matter.

The facility, operated by Foxconn Interconnect Technology (FIT) and located at Kongara Kalan, approximately 45 km from Hyderabad, is a key manufacturing site for Apple’s audio devices. FIT, listed on the Hong Kong Stock Exchange, is a wholly owned subsidiary of Hon Hai Precision Industry Co., the Taiwan-based contract manufacturing giant better known as Foxconn.

While Foxconn has officially maintained that production remains on track, people aware of the situation said the supply chain has come under pressure. The company began manufacturing AirPods at the Telangana plant in April 2023 as part of Apple’s broader efforts to diversify its supply chain beyond China.

AirPods rely on rare earth materials such as neodymium and dysprosium, which are primarily used in magnets and miniaturized electronic components. China remains the dominant global supplier of these elements, controlling the majority of both mining and processing capacity.

The supply constraint was flagged by Foxconn to the Telangana government, which subsequently escalated the matter to the Department for Promotion of Industry and Internal Trade (DPIIT), said one of the sources.

“Foxconn has sought assistance from the state to secure an End User Certificate (EUC), which is a necessary step in obtaining export clearance from Chinese authorities,” the person added.

The EUC is a document verifying the final recipient and intended use of sensitive materials, often required in cases where the goods have strategic or dual-use potential.

“Foxconn secured the certificate from the Ministry of External Affairs and also received attestation from the Chinese Embassy,” said another source. “Following this, its supplier submitted the application for dysprosium export approval to the Chinese government. However, the clearance is still pending. Once approved, the supplier will be able to ship the material.”

In India, Apple relies primarily on Foxconn and Tata Electronics as its key suppliers. Globally, Foxconn remains Apple’s largest contract manufacturing partner.

According to an industry official, while there was a temporary slowdown in production at the AirPods assembly unit in Telangana, the situation has since stabilized. “The supply chain for rare earth metals remains extended, but Foxconn is managing the current constraints,” the person said.

A second individual familiar with the matter noted that Foxconn’s logistics team expects to receive export approval for dysprosium by the end of the month. “The approval window typically ranges between 45 to 50 days from the date of application. In the interim, the company is utilizing existing inventory to keep production on track,” the person added.

Behind The Chinese Wall

In April, China placed seven categories of medium and heavy rare earths—including samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium-related products—under an export control list. The move was widely viewed as a response to earlier tariff measures imposed by the United States under the Trump administration.

On July 18, the India Cellular and Electronics Association (ICEA), of which Apple and Foxconn are members, notified Indian authorities that China’s export restrictions were leading to shipment delays and higher procurement costs for manufacturers.

Meanwhile, Foxconn recently recalled more than 300 Chinese engineers and technical staff from its iPhone production units in India, reportedly following directives from Beijing. While Taiwanese engineers can potentially replace Chinese personnel, industry experts have raised concerns over broader supply chain disruptions, especially with respect to machinery and critical raw materials.

Further complicating the matter, China announced its first set of rare earth mining and smelting quotas for the year on July 18, according to reports. These quotas are considered an important gauge of global rare earth availability. China continues to dominate global production, accounting for the majority of these strategically important elements, which are used in a range of industries, from electric vehicles and wind turbines to robotics and defense systems.

“The Ministry of Commerce has acknowledged similar concerns from automotive manufacturers,” said the first source. “The Indian embassy in Beijing has been alerted and is currently working on potential solutions.”

Beyond consumer electronics, dysprosium plays a vital role in enhancing the thermal resistance of neodymium magnets. It is also used in military applications, including laser targeting systems and communications infrastructure, making it a critical input for high-performance environments.

Foxconn, Apple’s largest contract manufacturing partner, has withdrawn over 300 Chinese engineers and technicians from its iPhone production facilities in India over the past two months, raising concerns around operational continuity ahead of the iPhone 17 manufacturing cycle. The move, comes amid escalating geopolitical tensions between China and the United States, with Apple increasingly caught in the middle.

India currently accounts for nearly 20% of global iPhone output, illustrating its growing importance in Apple’s manufacturing strategy. Foxconn, which recently committed $2.56 billion to expand its Devanahalli plant near Bengaluru, aims to produce around 100,000 iPhones at the facility by December. Between March and May this year alone, the company exported iPhones worth $3.2 billion from India, with nearly 97% of shipments bound for the United States.

While there has been no official explanation for the employee recall, the Chinese government had directed some of its nationals to return home amid strained trade relations and tightening visa norms for Chinese executives in India. In parallel, reports indicate that shipments of critical manufacturing equipment and rare-earth magnets are facing delays due to Chinese regulatory hurdles.

Although Chinese nationals make up less than 1% of Foxconn’s workforce in India, they occupy strategic roles in production line management, quality control, and automation oversight.

“The departure of this small but crucial group may impact production schedules, particularly during key ramp-up and quality assurance phases,” said a person familiar with the development.

The timing of the pullback is critical. Apple is relying on India to evolve into its principal global manufacturing base, with plans to shift a significant portion of its US-bound iPhone production to India by late 2026. The sudden exit of key personnel could potentially slow this transition.

Indian authorities are reportedly monitoring the situation. A formal report is expected to be submitted to the relevant ministries, particularly in light of prior instances where China has delayed the shipment of factory equipment once it learns that production lines are being relocated out of the country.

More Than..

The impact of China’s economic pressure extends beyond electronics since Beijing has also halted exports of specialty fertilizers to India over the past two months, a significant disruption given that nearly 80% of such fertilizers are imported from China and are vital for the June–December cultivation season.

Rajib Chakraborty, President of the Soluble Fertilizer Industry Association, noted that while China has restricted supply in the past, this time there appears to be a complete stoppage. “Although there is no formal ban, procedural delays and clearance bottlenecks from Chinese authorities have made it virtually impossible to receive shipments,” he said.

Despite the emerging challenges, Foxconn has more than doubled its India revenue to over $20 billion in FY25 and expanded its local workforce to approximately 80,000 employees. However, the recall of experienced Chinese personnel and continued pressure on imports of critical inputs could present logistical and operational hurdles in the months ahead.

The Last Bit, The Risk of Reliance, The Price of Transition

Apple’s manufacturing pivot to India seen as a strategic hedge against overexposure to China is now confronting the hard limits of global interdependence.

The shortage of rare earth metals, triggered by China’s tightening export controls, has exposed the fragility of even the most meticulously planned supply chains. From AirPods in Telangana to iPhones in Bengaluru, the ripple effects of Beijing’s resource diplomacy are beginning to show.

For India, this is a crucial moment. The country is positioning itself as the next global manufacturing hub, but success depends not just on labor and capital, but on seamless access to critical materials and technical know-how. China’s rare earths stranglehold, coupled with the recall of Chinese engineers and equipment delays, underscores just how difficult it is to decouple in practice even when the intent is clear.

As geopolitical fault lines deepen, supply chains are no longer just business logistics, they’re national strategy. For Apple and its suppliers, managing the fallout from China’s assertive stance will require more than diversification, it will demand resilience, speed, and a rethink of what “Made in India” truly entails in a world still reliant on Chinese-made parts.