Top Apple, Tesla Suppliers Suspend Production Amid China Power Crunch

Top Apple, Tesla Suppliers Suspend Production Amid China Power Crunch 

BY TYLER DURDEN MONDAY, SEP 27, 2021 - 11:00 AM 

Update (0948ET): Several suppliers for Apple and Tesla announced the suspension of manufacturing operations in China on Sunday and Monday due to local electricity constraints. 

The latest is Pegatron, which assembles iPhones at manufacturing plants in Kunshan and Suzhou, announced Monday that it's "taking energy-saving measures to comply with local government policies," according to Bloomberg

Pegatron said Sunday that all operations were running normally, and it prepared alternative power generator sources should the government reduce or shut power to their plants. 

Sources told Bloomberg that Pegatron's iPhone facility in Kunshan will be affected the most. 

"Pegatron has been adopting energy- and water-saving measures over the past few years and there is a comprehensive response program for the current situation to reduce the impact on our operations and production capacity," the company said in a statement.

It's not immediately known what supply chain disruptions for Apple and Tesla will be. Other suppliers have also had electricity shutoff and will last anywhere from a few days to the end of the month.  

* * *  

China's power curbs worsened over the weekend when top suppliers for Apple and Tesla halted production at some manufacturing plants due to Beijing's tighter energy consumption policy, according to Nikkei sources. 

Foxconn subsidiary Eson Precision Engineering, one of the world's largest iPhone assemblers and part suppliers for Apple and Tesla, announced today it suspended production from Sunday to Friday at its plants in the Chinese city of Kunshan in response to the city's environmental measures. 

"The company will leverage its inventory to maintain the operation while production is halted," Eson wrote in a filing with the Taiwan stock exchange. "We expect to arrange production on the weekends or in the upcoming holidays [next month] to meet customers' needs."

Heading into the weekend, we noted several provinces with top industrial hubs were experiencing a crackdown on power consumption by Beijing. This comes as soaring power demand has boost coal and natural gas prices and goes against Beijing's promise to cut emissions. 

Sources said Unimicron Technology Corporation, a major printed circuit board manufacturer and a top supplier for apple with plants in Suzhou and Kunshan in Jiangsu Province, were forced to shutter production until the end of the month. The company released an update Sunday and said it would boost production elsewhere to compensate for the loss of output. 

iPhone speaker supplier Concraft Holding released a filing Sunday that said its production facilities in Suzhou would be suspended for five days. 

Pegatron, which assembles iPhones, said its manufacturing facilities in Kunshan and Suzhou were still operating Sunday night but have prepared alternative power generator sources should the government reduce or shut power to their plants. 

Sources said Foxconn's manufacturing facilities in Longhua, Guanlan, Taiyuan, and Zhengzhou have yet to be affected by the power supply restrictions. 

Another chip supplier, Chang Wah Technology, who makes parts for NXP, Infineon, and ASE Tech Holding, announced it had to pause production on Sunday through the end of the month to abide by the government's order. 

Other reports indicate power cuts are more widespread. 

This comes as China's 23 provinces missed energy intensity targets set by Beijing and are now under pressure to curb power use. The broader implications could be another "shock wave through the global tech and automotive supply chain, which has already suffered unprecedented chip and components shortages and is still experiencing disruptions from COVID variants in Vietnam and Malaysia," said Nikkei.


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