The Rare-Earth Chokepoint: Designing Around Dependence
In this edition, we unravel rare-earth elements - what they are, their importance and the opportunity for startups as globally industries hunt alternatives for China’s control on rare-earths.
In April 2025, China’s brief 4-month rare-earth curb exposed a hard truth: China controls nearly 90% of magnet supply globally, bringing this to an abrupt halt. EVs stalled, factories stumbled, and diplomatic channels scattered to find a solution. While brief, the incident has put a glaring spotlight on the global rare-earth supply chain.
What really are rare-earth metals?
Remember those two lonely rows at the bottom of the periodic table from high-school chemistry?
That’s where you’ll find the 17 rare-earth elements (REEs) - 15 lanthanides plus a pinch of scandium and yttrium. Despite the name, they aren’t geologically scarce. They’re called ‘rare’ because they occur in small, mixed deposits often bound up with other minerals, making separation and refining complex with limited economic viability. This makes their supply strategically tight.
What makes REEs so important is their atomic structure (for chemistry geeks, this is their partially filled 4f electron structure), giving these elements powerful magnetic, optical and thermal properties which make them indispensable across key industries:
Clean Energy and Mobility: Neodymium, praseodymium and dysprosium are used to produce magnets that have exceptional strength and heat resistance (much higher than any magnet built from say Iron) with reduced size and energy loss. They’re the workhorses inside electric-vehicle motors, wind turbines and industrial robots.
Electronics and Communication: Europium, terbium, yttrium and cerium emit pure, stable colors when energized, enabling LEDs, flat-panel displays and fiber-optic networks to deliver vivid light with minimal energy waste.
Defense and Aerospace: Samarium, neodymium and yttrium combine high magnetic strength with stability under extreme conditions, powering high-energy lasers, radar, precision guidance systems and toughening alloys for jet engines and stealth coatings.
Advanced technologies: Yttrium in superconducting compounds and neodymium in laser crystals provide the conductivity and optical gain needed for MRI machines, particle accelerators and emerging quantum devices.
Because these functions cannot be easily substituted by other materials, rare earths have become the invisible backbone of modern industry. From clean energy grids and EVs to precision electronics and defense hardware, a secure supply of these elements is now a strategic necessity for economies and governments alike.
The Dragon Stronghold
We have spoken about how important REEs are, especially for the growing industries in clean energy, advanced materials and defense. Let’s zoom out and see how the REE supply chain actually works. Today, China is amongst the largest miners of REE - accounting for almost 60% of global supply. But China’s stronghold goes beyond mining - when it comes to processing and refining REEs, China controls over 90% of the global supply chain. This means ore dug in Australia, India, or the US still travels to China for separation, alloying, and magnet fabrication.
This processing monopoly is no accident. Over decades, China systematically built the world’s only complete rare earth supply chain with overwhelming scale and cost advantages. While other nations outsourced, China mastered solvent-extraction and rare-earth separation at a scale no one could match. Every major rare earth mining project outside China faces the same dilemma: ship ore to China for processing or spend billions building new facilities. This magnet monopoly represents the most concentrated industrial chokepoint in the global economy.
And hence, in April, when amidst the tariff wars China choked the global supply of REEs with curbs, the world felt the heat, realizing that the concentration of supply with China, was a geopolitical trump card and not just economics.
India’s Awakening: From Vulnerability to Vision
The April crisis became India’s wake-up call. Realizing the need to develop an independent supply chain for REEs, India’s response has been two-handed: secure local supply and localize production.
Supply and Policy: India has one of the world’s largest REE reserves, with an estimated 6.9 million tonnes of Rare Earth Elements Oxide. Policy is catching up, led by the ₹16,300 crore National Critical Mineral Mission and bilateral agreements with countries like Australia and Japan. The GoI is now putting in the effort to see what can be mined and processed locally.
Localization: IREL’s (Indian Rare-Earth Limited) permanent-magnet facility in Visakhapatnam is India’s first indigenous production line. It’s pilot-scale in global terms, but symbolically vital: India has officially entered the club of magnet-producing nations.
Yet, a troubling reality emerges - localization alone cannot solve the rare earth dependency trap. Building a mirror image of China’s full-stack will take time, capital, and resources. In parallel, we need a second act.
Beyond Localization: The DeepTech Revolution
As governments rush to localize mining and refining, a quieter revolution is unfolding - one that asks a far bolder question: what if we could sidestep rare earths altogether? Across labs and early-stage companies, founders are working on solutions that don’t depend on a fragile global supply.
The opportunity is massive. In 2022, India imported magnets worth ₹1,245 crore, meeting 100% of its demand through imports. By 2030, that figure is projected to soar to ₹7,295 crore, driven by exponential growth in EVs, wind turbines, and clean energy infrastructure.
This demand explosion creates fertile ground for DeepTech startups building substitutes, circular supply chains, and new material systems that can decouple India’s industrial growth from global chokepoints.
1. Rare Earth Substitutes
Some startups are attacking the problem at the atomic level - replacing rare earths with abundant elements like iron and nickel while matching their magnetic performance.
Niron Magnetics, for instance, is pioneering iron-nitride (Fe-N) magnets, where precise atomic ordering makes everyday iron behave like high-grade neodymium something that seemed impossible until recently. Similarly, lab-grown tetrataenite (Fe-Ni) - once found only in meteorites is now synthesized in hours, mimicking rare-earth magnet strength without the supply risk.
These are low-friction adoption bets: they plug into existing motor architectures, tap familiar supply chains, and can reach market faster than any deep-infrastructure play.
2. Rare Earth Alternatives
Others are asking a bolder question: what if motors didn’t need permanent magnets at all?
Designs like switched-reluctance and synchronous-reluctance motors have existed for decades, but advances in control software and next-gen power electronics are finally unlocking performance parity with rare-earth-based systems. Chara Motors, one of our portfolio companies, is a homegrown example - building a rare-earth-free motor and controller stack that delivers high torque and efficiency through software-defined precision.
And because magnets will remain in use for years, circularity is emerging as the other frontier. New processes such as HyProMag’s hydrogen-based recovery can extract high-quality rare-earth material from scrap, turning old motors and electronics into a renewable domestic stockpile.
These rare-earth alternatives trade material dependency for software and process moats - creating a new, resilient value chain that decouples supply from geopolitics. It’s a playbook for how DeepTech innovation can out-think resource constraints, not just outbuild them.
3. New Material Innovations
A third group is reimagining how materials are discovered and sourced.
AI-Designed Materials: Traditional materials discovery has been slow, empirical, and expensive. Platforms like MagNex are changing that - using AI and quantum modelling to sift through millions of chemical combinations and identify promising magnetic materials in months.
Protein-based Extraction: On the sourcing side, companies like Alta Resource Technologies are using engineered proteins that can selectively bind and extract target elements from low-concentration streams, replacing chemical-intensive methods with bio-led, sustainable recovery.
These innovations are more than one-off breakthroughs - they’re platform bets. Once proven, they can be applied across multiple industries and will form the foundation of a resilient materials economy no longer hostage to supply chokepoints.
At Kalaari, we see this as the frontier where materials science meets market pull - where innovation can not only solve a national challenge but also reshape global supply chains from the bottom up. India’s big opportunity is not just to ‘onshore’ yesterday’s stack, but to own ‘the next stack’, where science, code, and capital come together.