Major Apple and Tesla Suppliers Halt Production Due to China’s Electricity Crisis

TAIPEI – Several key suppliers to Apple and Tesla have halted production at some of their Chinese facilities to comply with Beijing’s stricter energy consumption policy, endangering the continuity of the supply chain for a peak season for electronics, including the latest iPhones.

Eson Precision Engineering, a subsidiary of Foxconn – the world’s largest iPhone assembler – and a key supplier of mechanical parts to Apple and Tesla, announced on Sunday that it had suspended production from Sunday to Friday at its facilities in the Chinese city of Kunshan live response to the city’s policy of shutting down the supply of electricity for industrial use.

“The company will leverage its inventory to maintain operation during production shutdown,” Eson said in a filing with the Taiwan Stock Exchange. “We plan to organize the production on weekends or during the next holidays [next month] to meet customer needs. “

China’s crackdown on energy use stems from a combination of reasons – soaring coal and natural gas prices, as well as Beijing’s efforts to reduce emissions and increased demand for energy. – and has an impact on a wide range of industries. It comes at a time when global markets are shaken by the debt crisis hitting China Evergrande Group, one of the country’s leading real estate developers.

Unimicron Technology, a major circuit board maker and key supplier to Apple, said its subsidiaries in the Chinese cities of Suzhou and Kunshan in Jiangsu Province were also to stop production from Sunday noon until the end of the month. The Taiwanese company said it would mobilize production capacity at its other manufacturing sites to mitigate the impact, according to its filing on Sunday.

IPhone speaker component supplier Concraft Holding, which has manufacturing facilities in the Chinese city of Suzhou, said in a stock file that it would suspend production for five days until noon Thursday and use its inventory to respond to the request.

Key iPhone assembler Pegatron, which operates huge production sites in Kunshan and Suzhou, told Nikkei Asia on Sunday evening that its facilities were operating as usual for the time being, but had already prepared generators if the company was receiving further notice from municipal governments.

To date, Foxconn’s manufacturing plants in Longhua, Guanlan, Taiyuan and Zhengzhou – the world’s largest iPhone manufacturing complex – had not yet been affected by the power supply restrictions on Sunday, according to two. people familiar with the matter.

A man walks near a coal-fired power station in Harbin, Heilongjiang Province. Soaring coal prices, along with Beijing’s efforts to cut emissions, have sparked an energy crisis. © Reuters

Several key chip packaging and testing service providers supplying Intel, Nvidia and Qualcomm have also received notices to suspend production at their facilities in Jiangsu for several days, people with knowledge of the matter told Nikkei Asia, pointing out. thus endangered an electronic industry affected by the supply of chips. bite.

Chang Wah Technology, one of the leading chip packaging material manufacturers supplying NXP, Infineon and ASE Tech Holding, said in a stock exchange filing on Sunday night that it must comply with the government’s call to stop the production from the evening of September 26 until the end. of the month.

The shutdown of production in several Chinese provinces could send another shockwave through the global technology and automotive supply chain, which has already suffered from unprecedented shortages of chips and components and is still experiencing hard times. disruption due to COVID variants in Vietnam and Malaysia.

The suspension of industrial electricity supply comes amid Beijing’s recent intensified targeting of provinces such as Liaoning, Jilin and Heilongjiang for failing to reduce their total energy use. Beijing has pledged to impose tougher sanctions in the event of failure to meet the targets. Other provinces, such as Jiangsu, Zhejiang and Guangdong, where many technology makers are based, are among those with restrictions on industrial electricity supply.

Many small and medium-sized businesses have also felt the energy pressure, as local governments seek to deal with Beijing’s new policies. “We also received a notice that the power would be cut from September 25 to 28 every day from 8 a.m. to midnight,” a Dongguan-based electronics supplier told Nikkei Asia. “We could only ask our production line workers to take night shifts to ship certain products. “

The tighter controls affected a wide range of traditional industries, encompassing coal and steel production as well as electronics manufacturing, which accounted for a large portion of China’s total exports in 2020.

Additionally, the power suspension creates uncertainty for the continuity of the technology supply chain in the coming months, which mark the busiest time of year as companies strive to meet the demand. Christmas request.

Chinese President Xi Jinping told the United Nations General Assembly last week that China will no longer build coal-fired power plants in the future, as his country aims to switch to green energy. China has said it will control carbon emissions, which are expected to peak by 2030 and then decline. The country’s ultimate goal is to achieve carbon neutrality by 2060.

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