A number of key Tesla suppliers from China are temporarily halting their production as the country deals with an ongoing power crunch. The production shutdowns are part of the companies’ efforts to comply with Beijing’s tighter energy consumption policy, which is caused by surging coal and natural gas prices, rising energy demand, and the country’s efforts to cut emissions — to name a few.
Foxconn affiliate Eson Precision Engineering, which produces crucial mechanical components for Tesla, noted on Sunday that it suspended its production from Sunday until Friday at its plants in Kunshan, China. The update was related by Eson in a filing with the Taiwan stock exchange. The Foxconn affiliate, however, highlighted that it intends to meet its customers’ demands despite the country’s power crunch.
“The company will leverage its inventory to maintain the operation while production is halted. We expect to arrange production on the weekends or in the upcoming holidays [next month] to meet customers’ needs,” Eson noted.
Pegatron, another Tesla supplier and a company known for its assembly work for the Apple iPhone, also confirmed to Nikkei Asia on Sunday that its production sites on Kunshan and Suzhou are ready to comply with Beijing’s power restrictions. Pegatron noted that as of Sunday local time, its facilities in Kunshan and Suzhou are still operational, but it had already prepared power generators if it receives any notices from the city governments.
A number of chip packaging and testing service providers for companies like Intel, Nvidia, and Qualcomm, have also noted that they have received notices to suspend their production operations in Jiangsu for several days. These delays could adversely affect the ongoing chip shortage, which is already weighing down the auto sector.
China’s restrictions for industrial energy consumption comes amidst recent Beijing’s focus on the provinces of Liaoning, Jilin, and Heilongjiang and their inability so far to reduce their total power consumption. Other provinces such as Jiangsu, Zhejiang, and Guangdong, which hosts key production sites from several tech companies, have also received strict restrictions on their industrial electricity supply.
China’s power restrictions have affected numerous industries so far. Apart from the semiconductor industry, coal and steel production have also taken a substantial hit. This would likely result in a challenging fourth quarter for some of China’s largest manufacturers, as the coming months typically mark the busiest time of the year.
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