In recent years, rare earth elements have become increasingly central to global technology and strategic industries, underpinning everything from electric vehicles and wind turbines to smartphones, aerospace, and modern defense systems. At present, China controls roughly 70 percent of the global market, leaving countries such as the United States, Japan, and South Korea heavily reliant on Chinese supplies. According to the U.S. Geological Survey, Vietnam holds an estimated 3.5 million tonnes of rare earth reserves, ranking sixth globally, with the Dong Pao deposit in Lai Chau province among its most significant. Collectively, China, Vietnam, Russia, Brazil, and India account for nearly 90 percent of known global reserves, while Western nations possess less than 10 percent. This underscores the strategic importance of Western nations developing alternative sources.
This context is particularly relevant given recent Chinese measures to tighten export controls on rare earths, prompting many countries to seek diversification of their supplies. Vietnam, with its material endowment, favorable geography in Southeast Asia, and an increasingly open investment environment, has emerged as a potential alternative. The question is not whether Vietnam can replace China overnight – it cannot, given China’s larger reserves and mature processing base – but whether Vietnam can play a meaningful, complementary role in the Asia-Pacific rare earth and magnet supply chain. On balance, the evidence suggests it can, provided the right investments, policies, expertise, and partnerships are in place.
One practical advantage for Vietnam is its emerging capability across the rare earth magnet value chain. While many resource-exporting countries still primarily ship raw concentrates, Vietnam is gradually moving toward manufacturing higher-value products. The domestic industry now spans multiple stages, from mining and initial processing to downstream magnet manufacturing. This vertical integration, if fully realized, could allow Vietnam to supply not just raw oxides but also finished magnet components. According to data from Adamas Intelligence cited by the U.S. Department of Energy, Vietnam currently produces roughly 1 percent of the world’s magnets, a modest but noteworthy contribution that underscores its emerging role in the global supply chain.
Other recent developments illustrate this trend. Baotou INST Magnetic, a leading magnet manufacturer and Apple supplier, recently began operations at a leased facility in northern Vietnam following client requests to diversify supply away from China. This reflects a broader pattern of magnet producers relocating operations to Vietnam to mitigate trade tensions, particularly with the United States, and to provide more secure, diversified supply chains for electronics companies like Apple. Similarly, South Korea’s Star Group Industrial has invested $80 million in a magnet factory in Quang Nam Province, which is expected to be operational in February 2025. The facility will increase the country’s output from 3,000 tonnes to 4,000 tonnes of magnets annually. At the same time, contract electronics manufacturers such as Luxshare and Foxconn are producing magnet-containing products in Vietnam, including iPads and MacBooks, drawn by the country’s competitive labor costs, improving infrastructure, and extensive network of free trade agreements.
Vietnam’s strategic goal is to capture greater value domestically rather than remain primarily a source of raw exports. Although current production is modest, around 300 tonnes of rare earths in 2024, the government has set ambitious targets to expand processing and downstream activities over the next decade. International partnerships play a central role in this strategy. Collaborations with firms such as Australian Strategic Materials, Australia’s Blackstone Minerals, South Korea’s LS Eco Energy, and Japanese-linked processing ventures reflect strong external interest in establishing refining and magnet-production capacity in Vietnam. Notably, the Korea-Vietnam Strategic Mineral Supply Chain Center, agreed earlier this year during Communist Party of Vietnam Secretary General To Lam’s visit to South Korea, seeks to combine Vietnam’s resource potential with South Korean refining expertise. This initiative is expected to support multiple cooperative projects, including contracts for neodymium and dysprosium oxides sufficient to supply magnet production at an industrial scale.
Nevertheless, the country’s rare earth ambitions face a number of constraints. The first involves technology and capital. Modern rare earth refining and magnet production require substantial investment and specialized knowledge, meaning that Vietnam will need significant foreign investment, technology transfers, and time to absorb complex processes and meet international quality and environmental standards. The second constraint is infrastructure and logistics. Many of Vietnam’s key deposits are located in the country’s northwest, where transport and processing infrastructure require significant upgrades. Without these improvements, cost competitiveness declines and project timelines are extended.
Third, environmental and regulatory considerations pose challenges. Rare earth extraction and refining carry inherent pollution risks, so robust safeguards, effective monitoring, and a clear legal framework are essential. These measures, however, add to upfront costs and could prolong project development. Geopolitics is the fourth constraint. Partners from the United States, Japan, South Korea, and Australia are likely to encourage supply diversification, but Vietnam must carefully balance these engagements with its longstanding economic ties to China. China continues to dominate global rare earth production, making any alternative supply efforts politically sensitive. Hanoi has demonstrated a deliberate and cautious approach, fostering foreign cooperation and investment while maintaining stable trade and economic relations with China. Handled prudently, this balance allows Vietnam to benefit from international interest in its resources, strengthen its rare earth sector, and integrate more fully into regional and global supply chains without becoming entangled in great power rivalry.
These constraints help clarify why any role play by Vietnam is likely to be complementary. Even with successful scaling, it is unlikely that Vietnam could ever displace China’s dominant position: China’s reserves are much larger, and its downstream ecosystem, from separation chemistry to magnet engineering, is far more advanced. What Vietnam can realistically provide is a reliable and diversified source of processed oxides and magnet components, helping to reduce concentration risk for regional manufacturers and buyers. In practice, this means that suppliers in South Korea, Japan, Europe, and the United States may source inputs from a combination of producers: some from China, some from Vietnam, and others from Australia or elsewhere. This approach spreads risk and lowers dependence on any single supplier while integrating Vietnam into the broader rare earth supply network.
Vietnam could gain certain economic and strategic benefits if it manages to advance this transformation. Expanding domestic capacity to produce magnet-grade oxides and finished magnets would help create jobs, raise export value, and attract foreign investors with needed technical and managerial expertise. Yet this process remains challenging, as it requires consistent policy support, advanced processing technology, and strict environmental oversight. Vietnam’s substantial rare earth reserves and growing industrial base give it a chance to play a modest but meaningful role in the Asia-Pacific rare earth magnet supply chain amid China’s export restrictions. China will continue to dominate global supply, but Vietnam can still contribute to regional supply chain diversification through targeted investment in refining, downstream production, and well-managed international partnerships. Real progress, however, will depend on patient, coordinated industrial development rather than rapid expansion.