China's ongoing Power Crisis continues to pressure Apple and all tech company supply chains leading to frustration, uncertainty & more
In August and again in late September we reported on Apple's production in Vietnam was suffering due to COVID-19 hitting component plants. On September 29, Patently Apple posted a report titled "China's Power Crisis is Surging and putting the Squeeze on Apple's Supply Chain," and provided a video to show the chaos that power outages were having, especially in the evening when traffic lights are not functioning.
Our report noted that power blackouts were occurring in more than 10 provinces across the mainland have forced several major Apple suppliers to suspend operations at some of their factories. The damage caused by China’s power-rationing measures could negatively impact electronics manufacturers during their peak season, though Taiwan component makers were giving priority to iPhone 13 components.
Today Nikkei Asia reports that Apple suppliers are scrambling to keep production on track going into the holiday season. Apple suppliers are currently reporting that they've been receiving notices every week notifying them which days in the following week they'll face a power cut.
Further, Apple suppliers have warned that the power cuts are threatening the entire supply chain and that these weekly disruptions might last till the end of this year and possibly even longer. Yet another issue is that suppliers don't know which firms will receive power and which won’t.
One executive at an Apple supplier told Nikkei Asia that it's "very chaotic and confusing. Some suppliers managed to secure power supplies based on their friendly relations and negotiations with the local governments, while some were affected badly." The good news is that the supplier added that "Many large Chinese tech suppliers, such as emerging iPhone assembler Luxshare and its subsidiaries across different provinces, were also spared from the power suspension, according to three people familiar with the matter.
Another executive of an Apple supplier of printed circuit boards said local governments are deciding who to give electricity to based in part on the value of the products being made: "If you don't bring as much value as, say, displays or high-end semiconductors but consume a lot of energy, sorry you are out! It's better that you just shut down and move away."
The uncertain electricity supplies come against a backdrop of other concerns for companies operating in China.
"It's not just about power issues," said another iPhone supplier executive who declined to be named, as supply chain shifts are a sensitive topic in China. "From Jack Ma to the crackdowns on gaming and education ... these all suggest increasing uncertainty for enterprises operating in China. People are scared." For more, read the full Nikkei Asia report.