Apple suppliers warn China’s energy disruption threatens supply chain
Manufacturers are warning that further disruption to China’s energy supply would wreak havoc on the tech supply chain as the industry prepares for peak production season, including that of the latest iPhones.
Several companies, including key suppliers to Apple, have already said they had to shut down or scale back operations at facilities in Jiangsu Province, the heart of China’s industrial technology, after local governments restricted the supply of electricity for industrial use until the end of the month.
Jiangsu cities have either told companies to stop using electricity altogether by the last week of September or set targets for manufacturers to reduce their energy consumption by 10 to 30 percent from usual levels, they said. several tech industry executives told Nikkei Asia.
The restrictions were introduced in the wake of Beijing’s warning that it would impose tougher penalties on provinces that fail to meet their annual targets for cutting energy use and cutting carbon emissions.
The National Development and Reform Commission, the country’s main economic planner, issued warnings in mid-August, calling on many provinces – including several key industrial centers in Jiangsu, Guangdong and Hubei – to use too much water. energy and not to respond to the country’s call to “control energy consumption and carbon emissions” in the first half of this year.
The measures have already affected a wide range of key suppliers from Apple, Tesla, Microsoft, HP and Dell, as well as disrupted production at the world’s leading chip packaging and testing suppliers to Qualcomm, Nvidia and Intel.
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Today, companies ranging from chip and component makers to assemblers are warning that a new power disruption in October would create ripple effects throughout the supply chain, as September through November is traditionally the busiest time for tech makers producing electronics for the holiday season. Missing this production window not only risks jeopardizing the continuity of the supply chain, but could also lead to disappointing sales for electronics.
“We are currently reviewing the inventory of all the components and parts that we have in stock. The situation is still controllable for now, but we fear it will happen again, ”an iPhone supplier official told Nikkei Asia. “It will be a huge disruption if we run out of stock [in October]. “
The disruption in production could also exacerbate the already severe supply crisis that has plagued the automotive and electronics industries.
ASE Technology Holding – the world’s largest chip packaging and testing service provider and a key supplier to Apple, Qualcomm, Nvidia and MediaTek – told Nikkei Asia it had complied with the policies of government energy saving but had arranged expeditions in advance to lessen the impact on its customers.
King Yuan Electronics confirmed to Nikkei Asia that it is likely to experience delays in providing services as the leading chip testing service provider has to operate with lower power consumption.
Key iPhone assembler Pegatron, which operates large production sites in Kunshan and Suzhou, planned to cut its non-essential power consumption to reduce its overall electricity use by at least 10 percent from the September 31, according to a person with direct knowledge of the matter. .
Many small and medium-sized businesses have already felt the energy pressure.
“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. “
Other technology providers in Jiangsu said they have negotiated with local governments and agreed to reduce their electricity consumption by at least 10 to 30 percent in order to keep operating.
Manufacturers have adopted a range of measures to meet the restrictions, ranging from idling production lines to reducing “non-essential” energy consumption and relying on existing inventory to fill short-term orders, a learned Nikkei Asia.
Some companies are having employees work overtime during the Golden Week holidays from Oct. 1 to make up for lost production capacity in September, according to Nikkei Asia interviews with industry executives.
The blackout comes as China continues to pursue its climate change goals, after saying its carbon emissions will peak by 2030. Last month, Chinese President Xi Jinping told the General Assembly of United Nations that China would no longer build coal-fired power plants. . The country’s ultimate goal is to achieve carbon neutrality by 2060.
A version of this article was first published by Nikkei Asia on September 27, 2021. © 2021 Nikkei Inc. All rights reserved.