Addressing the Drone Supply Chain Challenge: The Role of Rare Earth Magnets
Bipartisan Legislation Aims to Strengthen Domestic Magnet Supply Chain
Focus on Rare Earth Permanent Magnets
A new bipartisan bill introduced in Congress seeks to enhance the United States’ domestic magnet supply chain, addressing a critical component for the drone industry: the permanent magnets that power electric motors. The Magnets Value Chain Support Act of 2026, introduced by Chairman John Moolenaar (R-MI) and Ranking Member Ro Khanna (D-CA), aims to promote U.S. production of rare earth permanent magnets and the materials necessary for their manufacture.
The legislation proposes a series of tax credits to support domestic production, covering the entire process from rare earth oxide processing to magnet manufacturing and their downstream applications in products such as electric motors. While the bill is relevant to various industries, including electric vehicles, robotics, and defense systems, it holds particular significance for the drone sector.
Addressing Supply Chain Security
Discussions regarding drone supply chain security typically emphasize batteries, communications equipment, and flight control systems. However, the proposed legislation brings attention to another vital dependency: the magnets used in electric motors and actuators. Permanent magnets are crucial components in the brushless electric motors that drive most commercial and military drones, as well as in gimbals, servos, generators, and other systems found in modern aircraft.
Currently, China produces over 90 percent of the world’s rare earth permanent magnets, creating a strategic vulnerability for industries reliant on electric propulsion and precision motion control technologies. This issue gained prominence in 2025 when China restricted exports of certain heavy rare earth materials used in high-performance magnets, highlighting the ongoing dependence on overseas supply chains.
Encouraging Domestic Production
The proposed legislation does not mandate manufacturers to purchase U.S.-made magnets but aims to enhance the competitiveness of domestic production. It would offer production tax credits for companies engaged in rare earth processing and magnet manufacturing, along with a separate credit for motor manufacturers that buy qualifying U.S.-produced magnets. Supporters of the bill argue that this approach is designed to stimulate investment throughout the supply chain while reducing reliance on foreign suppliers. Additionally, the legislation would prohibit credits for materials linked to designated prohibited foreign entities.
Developing a Domestic Ecosystem
Although the United States currently lags behind China in magnet production capacity, several companies are actively working to establish domestic sources of permanent magnets and related materials. Notable firms in this effort include MP Materials, eVAC Magnetics, USA Rare Earth, Noveon Magnetics, Niron Magnetics, and Vulcan Elements, many of which are expanding facilities to support U.S. defense and advanced manufacturing markets.
For drone manufacturers, this initiative represents a significant step toward creating secure and traceable supply chains. Recent policy efforts have focused on various components, including communications equipment, software, airframes, and batteries. The introduction of this legislation indicates that policymakers are now delving deeper into the aircraft‘s components.
As federal programs continue to promote domestic drone production and secure sourcing, the origin of the magnets within a drone’s motors may become increasingly important, paralleling the significance of battery and electronics sourcing. The message for the drone industry is clear: supply chain security now encompasses not only the power sources but also the materials that enable movement.