Major Apple and Tesla suppliers stop production amid China’s power crisis

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TAIPEI – Several key Apple and Tesla suppliers have shut down production at some of their Chinese plants to comply with Beijing’s stricter energy use policy, which threatens supply chain continuity during a peak season for electronics, including the latest iPhones.

Eson Precision Engineering, a subsidiary of Foxconn – the world’s largest iPhone assembler – and a major supplier of mechanical parts for Apple and Tesla, announced on Sunday that it would be directing production from Sunday to Friday at its factories in the Chinese city of Kunshan has stopped responding to the city’s policy to stop supplying electricity to industry.

“The company will use its inventory to maintain operations while production is suspended,” Eson said in a filing with the Taiwan Stock Exchange. “We assume that we can arrange production on the weekends or the coming holidays [next month] to meet customers’ needs. “

China’s crackdown on energy consumption has a combination of reasons – rising coal and natural gas prices, and Beijing’s efforts to reduce emissions and increase energy demands – and is affecting a variety of industries. It comes at a time when global markets have been rocked by the debt crisis that is gripping China Evergrande Group, one of the country’s leading real estate developers.

Unimicron Technology, a major printed circuit board manufacturer and major Apple supplier, said its subsidiaries in the Chinese cities of Suzhou and Kunshan in Jiangsu Province would also have to stop production from Sunday noon until the end of the month. The Taiwanese company said it will mobilize manufacturing capacity in its other manufacturing sites to mitigate the impact, according to Sunday’s listing.

IPhone speaker components supplier Concraft Holding, which owns manufacturing facilities in the Chinese city of Suzhou, said in an IPO that it would cease production for five days through Thursday noon and use its inventory to meet demand.

Key iPhone installer Pegatron, who has huge manufacturing facilities in both Kunshan and Suzhou, told Nikkei Asia on Sunday evening that its systems were currently in operation as usual, but had already prepared power generators in case the company received further communication from city governments should receive.

So far, Foxconn’s production facilities in Longhua, Guanlan, Taiyuan and Zhengzhou – the world’s largest iPhone manufacturing complex – have not been affected by the power restrictions on Sunday, according to two people familiar with the matter.

A man walks near a coal-fired power station in Harbin, Heilongjiang Province. Rising coal prices, as well as Beijing’s efforts to curb emissions, have created electricity shortages. © Reuters

A number of key chip packaging and testing service providers supplying Intel, Nvidia and Qualcomm have also received notices to suspend production at their Jiangsu facilities for several days, experts told Nikkei Asia, further lurking an electronics industry affected by the chip shipment crunch.

Chang Wah Technology, a leading manufacturer of chip packaging materials that supplies NXP, Infineon and ASE Tech Holding, said in an IPO late Sunday that it had to comply with government requests to end production from the evening of September 26th set the month.

Production halts in several Chinese provinces could create another shock wave through the global technology and automotive supply chain, already suffering from an unprecedented shortage of chips and components and still experiencing disruptions from COVID variants in Vietnam and Malaysia.

The industrial power suspension comes amid Beijing’s recent escalation of attacks on provinces such as Liaoning, Jilin and Heilongjiang for failing to reduce their overall energy consumption. Beijing has promised to impose tougher penalties for missing the goal. Other provinces such as Jiangsu, Zhejiang and Guangdong, where many technology manufacturers are located, are subject to restrictions on industrial power supply, among other things.

Many small and medium-sized businesses have also felt the energy shortage as local governments try to cope with Beijing’s new policies. “We also received a notice that the power will be cut every day from 8:00 a.m. to midnight from September 25-28,” a Dongguan-based electronics supplier told Nikkei Asia. “We could only ask our employees on the production line to work night shifts to get some products out quickly.”

The tighter controls have impacted a large portion of traditional industries, including coal and steel production and electronic goods manufacturing, which made up a large portion of China’s total exports in 2020.

In addition, the interruption of the power supply in the coming months will lead to uncertainties with regard to the continuity of the technical supply chain.

Chinese President Xi Jinping told the United Nations General Assembly last week that China will not build coal-fired power plants in the future as his country wants to switch to green energy. China has announced that it will control CO2 emissions, which should peak by 2030 and then decrease. The country’s ultimate goal is to be carbon neutral by 2060.


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