Tech hegemony: Now, China's rare-earth experts face travel restrictions

Just a few days after Foxconn recalled Chinese technicians and engineers from iPhone factories in India, the next big squeeze is on preventing experts working in the rare earth magnet space from going abroad. 

The Chinese Ministry of Commerce has asked their rare earth companies for a list of employees with expertise and research capabilities in the complex processing of rare earths as well as in making the magnets. The move is aimed at ensuring that such experts are under scrutiny and that they don’t travel abroad and leak out crucial technology in an area where China dominates the global market. 

According to sources in the know, some of these experts have been requested to surrender their passports to the company or the government, so that their movements can be scrutinised when they go abroad. 

This move by China means Indian auto companies will be left with only one option — to import the full motors powered by the magnets — which will only increase the cost of the vehicle. It will also ensure that the Chinese government is able to control any possibility of a “dual usage” of the product beyond vehicles. 

Under the export control order, China has squeezed exports of rare earth magnets to India from early April this year, leaving most auto companies with stocks till July-end, at the most. With all other alternatives (like making rare earth magnets in India) a long-drawn process, import of electric motors seems to be the best bet for the time being. 

“Imports of the motor will lead to an increase in the cost of production of electric two-wheelers (e2Ws) by ₹3,000 to ₹6,000, depending on the volume. It will also require the production-linked incentive (PLI) scheme for electric scooters to be rejigged as with motors, which were earlier supposed to be manufactured in the country, the localisation of 50 per cent has to be brought down. Otherwise no one will be eligible for incentives,” says a senior executive of an e2W company. 

China is also ensuring that their domination in the processing of rare earths and making the magnets is not impacted. Therefore, they are doubling down to stop smuggling of rare earth magnets outside the country without the permission of the government. For instance, the government has already taken strict action by cracking down on illegal shipments, and has put in place a system of tracking production and distribution of rare earths. 

The directive of the Chinese government to Foxconn to recall its technicians and engineers was primarily meant to increase the cost of production of smartphones in India. While these experts can be hired from Taiwan and Japan, the cost of production would go up by two-to-three times.