Chinese Power Outages: The Next Semiconductor Disruption

In several Chinese provinces, there have been mandated power cuts to reduce energy consumption and CO2 emissions. China’s President, Xi Jinping, has committed to “not build a single new coal-fueled power plant going forward.” As of 2019, around 65% of the electricity in China came from coal, and now the government of China has demanded that the Jiangsu, Zhejiang, and Guangdong provinces cut their energy consumption.

While this is a positive effort to curb growing climate concerns, these power outages come with their own set of disruptions. These provinces happen to be the areas where some of the world’s largest high-tech producers are located. Although the largest chip foundry is not required to cut electricity supply, these provinces are also production hubs with their own supply chains. That means as these hubs readjust their production schedules, the ripple effects will be felt in other areas of the supply chain. Even a day or two of production delay could lead to serious issues with maritime or air freight deliveries.

With hundreds of companies in the three provinces impacted by the government’s mandate, short-term effects have yet to be fully determined. However, in the long-term, all will be impacted including EMS companies, OEMs, and suppliers.

Contact your Converge rep today to analyze how this new disruption will impact your supply chain and the efforts needed to keep your production lines running.

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