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Foxconn’s newly established facility in Telangana, India, responsible for assembling Apple’s AirPods, is facing a production slowdown due to a severe shortage of key rare-earth materials. These materials—especially dysprosium and neodymium—are crucial components in the production of magnets used in AirPods. The supply disruption has been caused by China’s recent move to tighten its export controls on rare earth elements, creating significant hurdles for global electronics manufacturers.

The Telangana unit, which became operational in April 2024 as part of Apple’s strategic shift to diversify its supply chain away from China, now finds itself entangled in bureaucratic delays. China’s new policy mandates an export license for these rare earths, and shipments from the company’s Chinese supplier have been held up awaiting approvals. While Foxconn maintains that production has not come to a complete halt, internal sources have confirmed a noticeable drop in output, as the factory relies on limited existing inventory to keep operations going.

To address the issue, Foxconn has escalated the matter to the Telangana government, which in turn has sought intervention from India’s Department for Promotion of Industry and Internal Trade (DPIIT). A key requirement for obtaining the necessary Chinese export license is an end-use certificate from the recipient country. This document has been processed by both the Ministry of External Affairs and the Chinese Embassy in India, but final clearance from China remains pending.

The disruption underscores India’s dependence on Chinese exports for critical raw materials, despite efforts to boost domestic capabilities in rare-earth extraction and processing. Indian authorities are exploring long-term solutions, including incentivizing local production of rare-earth magnets to prevent future bottlenecks.

This issue is not unique to Foxconn; several other sectors, including the auto industry, are also grappling with rare-earth shortages due to China’s tighter export regime. While Foxconn is hopeful that export permissions will be granted by the end of July, until then, the Telangana plant must rely on short-term workarounds to keep production afloat.