China’s restriction on rare earth magnets may impact smartwatches, TWS market too

The supply chain issue of rare earth magnets from China is not only going to impact the auto industry, but also the electronics manufacturers, especially the smartwatches and wireless earbuds (TWS) too, said sources in the industry.

“Although such magnets are a small part of these electronic items (TWS and smartwatches), but are a crucial components without which the products are incomplete. The companies have a stock of these magnets for at least a couple of months, but beyond that if the restriction continues, then it would impact the production cycle,” an industry source told businessline.

According to analysts tracking the electronics industry, rare earth magnets are crucial for the vibration motors that allow smartwatches and earbuds to provide alerts and notifications. These rare earth magnets are also used in other components of smartwatches, contributing to various functionalities.

Over the last few weeks, China has imposed export restrictions on rare earth magnets for which it holds a monopoly, in both supply and processing. China accounts for nearly 70 per cent of global rare earth element (REE) mining and controls 90 per cent of total worldwide production.

“It is impacting mostly the auto industry as of now and they do have inventory for the next couple of months, but after that it may even get more serious and impact other industries. But, for true wireless stereo (TWS) and smartwatches, we see very little impact. There were some issues last month, but as of now there is no big impact on the industry,” said a Delhi-based analyst.

According to the experts, China’s export restrictions could also lead to shortages of smartwatches and other devices that rely on rare earth magnets, and as demand outstrips supply due to restrictions, the price of smartwatches could increase.

India’s smartwatch sales already declined by 33 per cent year-on-year (YoY) in first quarter (Q1) 2025, despite experiencing a 5 per cent quarter-over-quarter (QoQ) uptick, according to the latest research from Counterpoint’s IoT Service Research.

This was largely driven by softening demand in the budget segment and inventory corrections across major brands, it said.

Noise maintained its market leadership with a 29 per cent share, but declined in sales by 17 per cent YoY, followed by boAt at 14 per cent market share, witnessing a significant decline of 35 per cent YoY in Q1 2025.

However, Titan, including its sub-brand Fastrack, moved to the third spot in India’s smartwatch market in Q1 2025, with a shipment growth of 7 per cent YoY and has a market share of 12 per cent in Q1, the data shared by Counterpoint indicated.