Component Plants Shutdown Due to Power Cuts in China

A combination of tougher emissions standards, coal supply shortages, and increased demand from manufacturers have sent coal prices sky-high in China. Due to this, China has had to halt production at multiple factory sites—including sites used to supply Apple and Tesla—to curb energy usage and ensure that residents in North China have enough energy to remain warm during nights that now approach freezing temperatures.

Where are the power cuts taking place?

Prominent manufacturing plants operating in China are experiencing production cuts and entire shutdowns, according to DigiTimes Asia, which reports at least five provinces are affected.

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However, the Z2Data team has compiled an extensive update that shows at least 13 provinces and regions in China are experiencing shutdowns and delays due to ongoing energy cuts.

Z2Data tracker and timeline for affected regions:

Guangdong:

• Guangdong Power Grid stated that it will implement the "on-two-stop-five" power plan from September 16 till 30th, and implement peak shifts on Sundays, Mondays, Tuesdays, Wednesdays, and Thursdays, and only reserve peak-shift days, the security load will remain below 15% of the total load, and the peak shift time will be 7:00-23:00.

Jiangsu:

• Enterprises are generally required to start two and stop two, the tentative duration of power rationing will be 15 days till September 30th.
• Taizhou Xinghua, Nantong, and other places issued notices that all industrial enterprises must suspend production, and the expected power outage period will expire at 24:00 on October 8th.

Jilin:

• The Northeast Electric Power Management Bureau and the Jilin Provincial Energy Bureau will implement irregular and unannounced power outages. This situation will continue until March 2022.

Shandong:

• Power shortage 9 hours per day from 15:00-24 lasted until September.

Zhejiang:

• Zhejiang's high-energy-consuming enterprises (printing and dyeing plants, chemical plants, and chemical fiber plants) would shut down from September 21 to 30th, several steel companies in Zhejiang have been ordered to reduce power.

Sichuan:

• Suspend non-essential production, lighting, and office loads.

Ningxia:

• High energy-consuming enterprises stop production for one month.

Shaanxi:

• Enterprises have implemented measures such as reducing the operating load of their production lines and shutting down submerged arc furnaces to limit production to ensure a 50% production limit in September, Shaanxi’s power curtailment will be till the end of the year.

Chongqing:

• Some factories cut off power production in early August, and the deadline is yet to be determined.

Henan:

• Some processing enterprises have limited power for more than three weeks.

Liaoning:

• Province has initiated orderly electricity usage measures, 3 rounds of level II (load gap 10-20%), the impact of electricity use is extended to residents and enterprises that do not implement orderly use of electricity.

Anhui:

• There is a gap of about 2.5 million yuan in the balance of power supply and demand, the supply and demand situation is very tight.
• It is Decided to start the province's orderly electricity use plan from September 22.

Shanghai:

• From September 27th till October 3rd a widespread planned power outage will hit many areas.

‍Update as of September 29, 2021:

• Major industrial towns such as Dongguan, Zhongshan, Huizhou, and Foshan have started power rationing and suspending production in Guangdong.
• In Dongguan, factories generally receive notifications to open two hours and stop production five hours, while some small and micro enterprises have to open one hour and stop six hours.
• In Foshan and Huizhou, large and small companies have received notices of power cuts and shutdowns, which has caused certain problems in production.
• Power plants, printing and dyeing plants, chemical plants, and chemical fiber plants all shut down in Zhejiang.
• Two thermal power plants in Zhejiang issued a notice stating that as thermal coal soared to 1,450 yuan per ton, and there was no stock, it would have to cut off electricity.
• Jiangsu has implemented power rationing in some areas. Starting from September 15th, the tentative duration of power rationing will be 15 days.
• Nantong took the lead in power curtailment. Currently, other areas in Jiangsu Province have begun to curtail power, and 2000 chemical plants will be temporarily shut down.
• In Taizhou, most companies are required to suspend work from the 16th to the end of the month.
• About 160 energy-intensive companies have been affected, mainly in the textile, dyeing and chemical fiber industries. "It is mainly for the provincial government's energy consumption control requirements," said a community official at Ma'an area in Shaoxing city, in northeastern Zhejiang province.

Potentially affected sites and commodities

According to Z2Data's Supply Chain Watch, energy cuts in the Jiangsu and Guangdong provinces could have a significant impact on the electronic components industry. At least 121 Tier-1 sites could be affected by the power cuts, while at least 35 Sub-Tier sites could experience disruptions in output. Significant suppliers operating in this region include Samsung, ON Semiconductor, Lattice Semiconductor, Celestica, Walsin Technology, Micron, and more. The level of impact on the suppliers in this area is not currently known.

Significant electronics commodities produced in these regions include:

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Electronics components and heavy industry firms are all affected by the power cuts. Semiconductor firms, however, are not yet expected to be restricted by the ongoing outages. Yet industry insiders predict prices to rise for suppliers experiencing disruptions, and some suppliers may even put a halt to new orders.

What's next?

China's major coal producers met last week in an attempt to resolve the ongoing coal supply shortage and price increase. While the talks seek a resolution, China still wants to attain its carbon emission goals. These goals include reducing emissions to a peak by 2030 and achieving net-zero carbon emissions by 2060.

Meanwhile, the energy rationing and power cuts are likely to continue throughout major Chinese provinces for the foreseeable future.

See the above timeline for precise outlooks on energy rationing in specific regions.

Additional Updates as of October 6, 2021

What's been said:

• In order to alleviate the shortage of electricity in the north, the CCP has asked Russia for emergency power supply.
• Some Taiwanese businessmen mentioned that in fact there have been power rationing actions before, but local governments will notify companies in advance so that they have time to make adjustments.
• There are also Taiwanese businessmen in China who said that in the past, local governments would listen to the opinions of enterprises, but this time the orders were issued at a higher level.

Industry analysis:

• Despite persistent shortage of power management ICs and other small ICs for notebooks and other devices, makers of many parts, components, and other mechanical parts have seen mounting inventory as they can deliver shipments only after system clients ready supply of all related chips and components, the makers therefore have been unable to smoothly pass part of labor cost increases and price rises for raw materials onto clients, but ongoing power cuts in China will provide a good timing for their price hikes.
• Manufacturers already moving part of their production lines out of China are expected to step up their relocation pace in response to unpredictable power supply conditions in the country, and will strengthen production in Taiwan, Southeast Asia or North America.
• Makers still sustaining the vast majority of manufacturing operations in China, such as those for notebooks, tablets and handsets, are still taking a wait-and-see attitude and have little intention for relocation.
• Many makers of servers and networking equipment have set up new manufacturing bases in Vietnam, Taiwan and Mexico to avoid extra tariffs imposed by the US under the former Trump administration. And notebook ODMs have also diversified production to non-China areas at the request of brand vendors including Dell, HP and Apple, but their supporting components suppliers are still staying put in China.

Area-specific electricity price hikes:

• ‍Hunan: issued a notice stating that when the unit price of standard coal in the plant is higher than 1,300 yuan, for every increase of 50 yuan/ton, the upper limit of coal-fired thermal power transaction prices will be raised by 1.5 cents/kWh.‍
• Anhui: has issued a notice that the direct transaction price of coal power can be increased by no more than 10% on the basis of the benchmark electricity price.‍
• Guangdong: has also issued an adjustment plan. Starting from October, the peak-to-valley price gap will widen, and peak-to-valley electricity prices will increase by 25%.‍
• Shandong: stated that the specific electricity price is formed by market entities such as power generation companies, electricity sales companies, and power users through market-oriented methods, within the range of base price + fluctuations, and the increase is not more than 10%.‍
• Zhejiang: will optimize the time-division from October 15 to widen the spread between peaks and valleys.‍
• Henan: has appropriately expanded the scope of implementation of time-of-use tariffs and improved the peak-to-valley tariff mechanism.‍
• Guangxi: held consultation on improving Guangxi's peak-to-Valley time-of-use electricity price mechanism, the peak-to-peak electricity price will rise and the peak-to-valley price difference will widen. This may encourage the use of electricity at low times, which will help ease the pressure on the grid and help stabilize the power supply.

In Jiangsu:

• Some electronics companies revealed that in the past half month, Suzhou has been temporarily suspending electricity, sometimes for a few hours, sometimes for a day, affecting normal production.
• Taiwan-based makers with factory operations in Kunshan of China's Jiangsu provinces were notified on October 5 by the local government about immediate power cuts, and have expressed concerns that such restrictions could repeat randomly in the future. The notification came just one day after manufacturing plants in Kunshan restarted production following an eight-day suspension starting September 26 under power restrictions enforced in line with China's energy consumption.
• At the moment, only 50% of Taiwan-based makers operating plants in Kunshan have restarted production, mostly operating at 50-60% of regular capacity, the sources said. And it is expected that the government there will issue clear-cut instructions on power consumption by industrial users after China's National Day holiday ends on October 8, the sources continued.
• Power cuts in Kunshan are being implemented in two periods, 8:00 to 22:00 and 13:00-22:00, for different plants, who were told to control their power load within the safety level of 220 volts during the restriction time and be prepared for power loss at any time.
• In response, plants can only carry out assembly operations using 220-volt power systems during the restriction period, and conduct pressing, forging and cutting operations that require 380-volt power only at the night time after 22:00. Some makers facing power cuts from 13:00-22:00 have quickly adjusted their work time to 4:00-12:00.