Demagnetization is one of the most important and major faults in permanent magnet (PM) machines caused by harsh operating conditions, physical damage, high-temperature, aging, or an inverse magnetic field. This fault results in the asymmetry of the rotating flux in the air gap, thereby inducing certain additional frequency components in the stator current which decrease the efficiency and reliability of the machine. This article presents an in-depth analysis of demagnetization faults in various types of flux modulation machines with fractional slot concentrated winding (FSCW). The type of machine winding is determined based on the number of slots and poles. Then, a novel, comprehensive, and reliable fault index is introduced for analyzing demagnetization fault. This index can be applied to distributed and concentrated winding configurations and is developed by examining the machine design parameters. Different types of demagnetization faults-magnet chipping, magnet weakening, and multimagnet demagnetization are explored in this study. Furthermore, demagnetization faults are distinguished from other common machine faults, such as eccentricity and short-circuit faults. Finally, simulations and experimental results are used to validate the reliability and robustness of the proposed fault diagnosis method. The simulations cover different structures of FSCW machines. The experimental tests involve three generators, including an outer rotor generator with a surface-mounted PM configuration, a surface-mounted PM generator with a split-tooth structure, and an inner rotor generator with an internal PM configuration.