Production bottleneck

In Tesla’s Q1 2025 earnings call this week, Elon Musk revealed a critical hurdle for the production of Optimus, Tesla’s humanoid robot: China’s export restrictions on rare earth magnets.

Musk stated, “Optimus was affected… by the magnet issue from China because the Optimus actuators in the arm do use permanent magnets,” highlighting how China’s export restrictions, imposed in early April 2025, are poised to disrupt Tesla’s supply chain.

China’s new controls, a response to US tariffs, target seven rare earth elements (REEs) and magnets that contain them, requiring exporters to first secure licenses – a process Musk noted involves assuring Beijing the magnets are for civilian, not military, use.

This bottleneck threatens Tesla’s ambitious goal of producing thousands of Optimus units by year-end, casting uncertainty over the near-term rollout and sending ripples through the broader humanoid robotics industry.

Humanoid Robot Revolution

NdFeB Supply Chain Implications and Strategies

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Magnets for compact, high-torque motors

Musk’s comments underscore the critical role of rare earth magnets, particularly neodymium-iron-boron (NdFeB) varieties, in Optimus’ design. These magnets, often containing dysprosium and/or terbium for high temperature stability, enable compact, high-torque motors essential for the robot’s numerous actuators.

Musk’s specific reference to Optimus arm actuators is curious since it is widely believed that Optimus, at least Gen 1 and 2, uses permanent magnet motors throughout.

In reality, it could be that the arm actuators use NdFeB magnets containing dysprosium and/or terbium (and hence are restricted) while the other actuators do not, thus didn’t get a mention.

Alternatively, it could be that Optimus Gen 3 – the production version – does incorporate alternative motor types, or simply that Musk misspoke.

No guaranteed timeline

The Tesla founder explained, “When something is volume constrained, like an arm of the robot, then you want to try to make the motors as small as possible,” revealing why Tesla opted for these specialized magnets despite exploring alternative sourcing for years.

The export curbs, which halted shipments at many Chinese ports, have left Tesla navigating an opaque licensing process that could take weeks to months, with no guaranteed timeline.

While Musk remains optimistic about securing licenses, the delay risks pushing back Optimus’ internal deployment in Tesla’s Gigafactories, where 1,200 units were projected for 2025 testing.

The impact extends beyond Tesla, as China dominates 90% of global magnet production. Adamas Intelligence, in a March 2025 analysis, projects the US humanoid robot market to grow from 3,200 units in 2025 to 36,700 by 2027, with Tesla potentially capturing nearly half the market through its EV-style mass production and cost leadership.

However, Adamas warned that supply chain stability is critical, noting that “permanent magnet and other material shortages” could derail this growth.

Delays could cede ground to Chinese rivals

The current restrictions amplify this risk, affecting competitors like Agility Robotics, Figure and Boston Dynamics, who also rely on similar magnets for their robots’ actuators.

Chinese manufacturers like Agibot, aiming to produce 5,000 units in 2025, face less disruption due to domestic access but could still encounter export challenges for global markets.

In the near term, Tesla’s ability to resolve the licensing issue will determine whether it meets its 2025 targets. Musk’s assurance that the magnets are “just going into a humanoid robot” and not a weapon system may expedite approvals, but geopolitical tensions could prolong delays.

Competitors may seek alternative suppliers, though Adamas notes that scaled non-Chinese magnet production is years away, leaving the industry vulnerable. For Tesla, delays could cede ground to rivals like China’s Unitree, which is already deploying robots in factories, or Agibot, leveraging local supply chains.

Looking ahead, the restrictions highlight the fragility of global supply chains for advanced robotics. Adamas emphasizes that for the industry to achieve its projected tenfold growth by 2027, prices must drop, use cases must prove viable, and supply chains must stabilize.

Tesla’s vertical integration offers some resilience, but the broader sector faces a wake-up call to diversify sourcing. In the coming months, expect Tesla to push aggressively for licenses while exploring magnet alternatives, though Musk’s confidence in producing thousands of Optimus units by year-end may hinge on diplomatic breakthroughs.

For the humanoid robotics race, China’s grip on rare earths remains a formidable gatekeeper, shaping who leads and who lags in this transformative industry.

How much NdFeB does Optimus need?

Assuming Optimus uses permanent magnet actuators throughout, production of 2,000 robots this year would require single-digit tonnes of NdFeB magnets containing mere kilograms of dysprosium and/or terbium.

As such, while China’s export restrictions may present a bottleneck for Tesla in the near-term, by this time next year, or even this time next quarter, it could have a handful of qualified alternative magnet makers outside of China, ready to support its growth.

Meet with alternative suppliers

Meet with alternative rare earth miners and magnet producers in Toronto in September 2025 for Rare Earth Mines, Magnets & Motors 2025 where we’ll explore this topic further with leading market participants and industry experts.

The two-day event will bring together business and technical leaders from across the global mine-to-OEM supply chain for high caliber discussions and networking at a 5-star venue.

Key themes of this year’s conference will include robotics, automation, advanced air mobility, and the emerging mine-to-magnet supply chain coming together upstream.

Special guest: Steve Wozniak, co-founder of Apple

More information: www.adamasevent.com