China’s energy cut puts peak season for electronics at risk | companies

Shoppers around the world could face a shortage of tech products, including smartphones and computers, in the final stretch of the year, just when the important Black Friday and Christmas campaigns arrive, triggering the purchase of consumer electronics devices. The cause? The temporary closure of some factories in China that work for technological giants such as Apple after the cut in energy consumption imposed by the Chinese Government. An action that responds to the scarcity and increase in the cost of coal to generate energy in the country, and to the environmental objectives that Beijing has set itself to reach the peak of emissions before 2030 and reach carbon neutrality before 2060.

Apple component supplier Eson Precision Engineering, a subsidiary of giant Foxconn, is one of those forced to stop production at its factory in Kunshan, west of Shanghai, from September 26 to 30, according to the agency. AP. The company has assured that the suspension should not “have a significant impact” on long-term operations. Another supplier of the iPhone manufacturer that has been forced to stop part of its activity has been Unimicron Technology Corp. Both companies would have exceeded the local energy consumption quotas set by the Beijing Government.

“Beijing’s unprecedented resolve to enforce energy consumption limits will bring long-term benefits, but the short-term economic costs are substantial,” Nomura economists said in a report cited by the agency. Goldman Sachs estimates that up to 44% of China’s industrial activity has been affected by power shortages.

Components

Information from Reuters and Nikkei Asia indicate that factories linked to the technology sector in at least five provinces would have had to close due to this problem. According to these sources, the stoppages are affecting component manufacturers of brands such as Apple, Tesla, Intel, Nvidia, Qualcomm, Infineon and NXP.

Faced with these closures, the plants of Foxconn, Pegatron, UMC and TSMC would be operating almost at full capacity, according to the companies themselves. The former said it had a “very small” impact on non-Apple laptop production. Also Apple’s component supplier, Concraft Holding, with a factory in the Chinese city of Suzhou, told Nikkei that it will be able to meet demand using available inventory.

Although some suppliers say they will make up for lost production with other factories, the disruption to some factories looks set to wreak havoc on Asia’s tech supply chain for weeks and even months. The list of companies affected by these restrictions, but also by a wave of Covid-19 in Vietnam and other supply problems, is expanding and, according to Nikkei, would also include Microsoft and HP. This medium states that these causes will lead buyers of the new iPhone 13 to wait up to five weeks to receive it in Japan and China and four weeks in the US.

Chinese manufacturers are warning of new interruptions that could aggravate the situation, since China is asking the most industrial provinces, such as Hiangsu, Guangdong and Huberi, to comply with “the control of energy use and carbon emissions” marked by the Government, reports Nikkei Asia.

“We are currently reviewing the inventories of all the components and parts that we have in stock. The situation is still controllable at the moment, but we fear that it will happen again. There will be a big disruption if we run out of inventory next month,” an Apple supplier executive told the outlet. Pegatron, assembler of iPhones, is preparing for big reductions in energy use.

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