China is going through an intense heat wave phase. In Sichuan province, the heat has caused a power shortage. By order of the government, the factories of Tesla, Apple, Intel and other large groups were forced to close their doors to save energy.
A heat wave hits Sichuan Province, in southwest China. In this region, temperatures settled above 40 degrees at the beginning of August. This heat wave, the worst in 60 years, caused severe droughts across the province, lowering water levels in rivers. The level of precipitation has collapsed by 51% in one year, underlines the government of Sichuan.
Under these conditions, Sichuan is in electricity shortage. Hydroelectric dams, which produce 80% of the province’s electricity, are idling. The situation is aggravated by the massive use of air conditioners. The electricity network is struggling to keep up and several cities, including the locality of Dazhou, have regularly found themselves in the dark.
The authorities then decided to ration electricity. Factories and businesses have been ordered to save electrical resources while waiting for the heat wave to end. The local government even demanded that several factories close their doors for a period of six days, report our colleagues from CNN. Until August 20, 2022, some factories will be shut down.
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Apple, Tesla and Intel factories shut down
Among the manufactures concerned are those of Foxconn, BOE, Volkswagen, Tesla, Texas Instruments, Toyota, Intel and CATL, the world’s largest manufacturer of batteries for electric vehicles. CATL notably supplies batteries to Tesla, the automotive group of Elon Musk.
By paralyzing Foxconn sites in Chengdu, Sichuan authorities are also affecting production of Apple devices. Foxconn is one of the main partners in charge of assembling iPhones and iPads. The Taiwanese firm, which produces part of the iPhone 14, wants to be reassuring. The factories of Sichuan are indeed essentially devoted to the iPad. Moreover, Foxconn does not expect too much disruption.
According to Foxconn, the production of the iPhone 14 will therefore not be affected by the closure. However, it should be noted that BOE, the Chinese company which supplies part of the iPhone 14 OLED screens, is one of the factories shut down until August 20. It is unclear whether the pause imposed on BOE will have an impact on Apple’s production lines.
According to analyst Ming-Chi Kuo, the heat wave should not unduly penalize the production of new iPads. If everything is back to normal during August 20, ” impacts should be limited », assures the financial expert. Several other companies are also very optimistic. Despite the temporary closure of one of its factories, Volkswagen wants to be reassuring and says it does not expect major delays in delivery.
For the record, China ordered plant closures on several occasions these last years. Beijing has demanded the closure of factories for health reasons during the coronavirus crisis. True to its zero-tolerance policy, China returned a plethora of sites to shutdown last spring. In Shanghai and Shenzhen, factories closed for a few days due to yet another lockdown.
Last year, the Chinese government, led by Xi Jinping, decreed regular power cuts in Jiangsu, Zhejiang and Guangdong. This measure aimed to limit the increase in energy prices and contain the emission of greenhouse gases.
Shortage in prospect?
Unsurprisingly, this new compulsory closure risks slowing down the production lines of many groups. Already weakened by the health crisis and the lack of semiconductorsfactories may struggle to catch up.
It is not impossible that certain products will become scarce again in the months to come. For now, however, it is still difficult to assess the consequences of the heat wave on the industry.