Supply Chain Challenges from China Power Cuts | Fusion Worldwide

Manufacturers are facing another conundrum as China enforces power cuts that will mandate factories to limit operation or halt production entirely. The government's power cuts are in an effort to reduce carbon emissions and ration energy used in industrial sectors, which is part of the country’s goal to become carbon neutral by 2060. The increased price of coal and other natural gas costs also factor into the restrictions in various provinces, leaving manufacturers and residents in disarray.

According to DigiTimes, the restrictions apply to electronics components manufacturers, but semiconductor firms are in the clear of restrictions, which means firms like TSMC and UMC do not have to comply to the mandate at their China factories. Some of the electronics components facilities that do have to comply also provide testing and packaging to semiconductor firms, such as Nvidia and Qualcomm, which essentially adds strain to the already rocky semiconductor supply chain.

The Jiangsu province in Eastern China, near Shanghai, in particular, has as large population of semiconductor-related operating facilities that are temporarily halting operations. The chip-packing material supplier, Chang Wah Technology, which works with major manufacturers Infineon and NXP, will reportedly halt production Sept. 26, through the end of the month. Meanwhile, Foxconn, which is a large EMS provider for Apple, shut down multiple locations in Longhua, Guanlan, Taiyuan and Zhengzhou on Sept. 27.

Reports state that the length of this round of power cuts will vary in each region, but most will last from Sept. 20 to midnight Sept. 30, or early Oct. The delays and potential impact to operations at some China-based factories will be assessed following the mandate, which could increase lead times and pricing.

Frequently Asked Questions

Why is the Chinese government enforcing power cuts on manufacturers?

The government is enforcing cuts to reduce carbon emissions and ration energy as part of a goal to become carbon neutral by 2060. Additionally, the increased costs of coal and natural gas have influenced these restrictions.

Are semiconductor manufacturers like TSMC and UMC subject to these power restrictions?

According to DigiTimes, semiconductor firms are currently exempt from the restrictions. This means companies like TSMC and UMC do not have to comply with the mandate at their China factories.

How are the power cuts impacting the broader semiconductor supply chain if chipmakers are exempt?

While chip manufacturers are exempt, facilities providing testing and packaging for companies like Nvidia and Qualcomm must comply. This disruption adds strain to the supply chain.

Which major companies have halted production due to the mandate?

Chang Wah Technology, a supplier for Infineon and NXP, halted production in late September. Additionally, Foxconn shut down multiple locations, including Longhua and Zhengzhou.

How long are the power cuts expected to last?

The duration varies by region, but reports state that most restrictions will last from September 20 through the end of September or early October.

What are the potential market consequences of these production halts?

The delays caused by these mandated power cuts are expected to potentially increase both lead times and pricing for electronic components.