What happened? China has imposed restrictions on energy consumption in regions with high industrial needs. These incentives range from clearing the air ahead of the upcoming Winter Olympics to increasing coal and natural gas reserves for local energy uses.
China is not content with cracking down on cryptocurrency transactions. The country's next target is industrial energy consumption, which has risen amid a global crisis to meet demand for a variety of products, including electronics and cars. New domestic policies limit energy consumption for industrial use. Some factories are closed until Friday, but at least one supplier will stop production at the end of the month. Rising prices for these resources and efforts to reduce carbon emissions have all prompted officials to take steps to reduce electricity consumption. While it is not uncommon for the Chinese government to order factory closures if the pollution level rises above a threshold or events such as the upcoming 2022 Winter Olympics, most of the country's electricity is generated using fossil fuels.
One affected is Eson Precision Engineering, a Foxconn partner and a major supplier of mechanical parts to companies such as Apple and Tesla. An Esson representative said the company has a plan to make up for lost production time on weekends so it can meet expected demand. It manufactures small speakers for portable devices, and plans to use the stock to deliver it to its customers. Others, such as iPhone assemblers Pegatron and Foxconn, claim that they have already taken steps to ensure production continues with power systems if needed.
Several other companies that have been asked to package and test chips for customers, such as Intel, Qualcomm and Nvidia, will stop production at their Jiangsu factory by the end of the month.
The timing of these power supply constraints is unfortunate, as all global supply chains are under great pressure to meet the ever-increasing demand for everything in electronics. Prices of rare earths have risen in the past 12 months, as have aluminum and copper prices in recent months as long-term quarantines have disrupted production at several facilities in Asia.
These issues are accompanied by a lack of everything. From plastic to shipping containers, they are used to transport goods to consumers around the world. The Chinese government is now adding to all this by prioritizing domestic energy consumption, which could have a serious impact on industrial production, as consumer demand is expected to peak before the holiday season.
Several suppliers, Apple, Tesla and Qualcomm, have stopped production due to power restrictions in China