A Chinese flag flies in front of a coal fired powe
A Chinese flag flies in front of a coal fired power plant in Tianjin, China. (Photo by Jeff Hutchens/Getty Images)
  • Electricity outages in China have halted operations for some Apple and Tesla suppliers.
  • Key manufacturing hubs have been hit by energy-use restrictions as China works to cut emissions.
  • The energy shortage has caused more than 10 semi-conductor suppliers to halt productions for the month.
  • See more stories on Business Insider SA's home page.

Power outages in China threaten to add another snag to an already snarled global supply chain.

The power shortage has forced several key suppliers for major companies like Apple and Tesla to suspend production. Key manufacturing and shipping hubs in China have been hit by energy-use restrictions as the Chinese government works to make President Xi Jinping's carbon neutral goals a reality. The power shortage comes at a time when coal and gas prices are surging in the country as demand for Chinese products booms.

The outages threaten to further exacerbate the global supply-chain crisis, which has burgeoned from Covid-19 shutdowns paired with a buying frenzy.

Power outages in heavy shipping regions like Guangdong, paired with China's zero tolerance policy for Covid-19, could make it harder for the country to export key products.

In particular, the outages could have an impact on the global computer-chip shortage - a crisis that has left major tech companies scrambling for the product that goes in everything from cars to dishwashers, computers, and gaming consoles. Kushnan, an electronics-manufacturing hub, has been heavily impacted by the energy shortage. More than 10 Taiwan-based semiconductor companies in the area have announced this week that they are closing their facilities until the end of the month, The Wall Street Journal reported.

Three Taiwanese electronics companies that supply Apple and Tesla warned on Sunday that they had been forced to halt production at some of their factories in China. Tesla and Apple did not respond to a request for comment from Insider, but Tesla CEO Elon Musk commented on the issue on Twitter.

"This is a serious concern," Musk said.

The CEO has said in the past that the computer-chip shortage has caused "insane difficulties" for the electric carmaker.

Apple semiconductor supplier Unimicron Technology said on Sunday that three of its subsidiaries in China had moved to stop production from Monday until Thursday in order to comply with China's policy, Reuters reported. The company said it did not expect the shutdown to have a significant impact because other plants could help offset production losses.

A Foxconn affiliate, Eson Precision Engineering Company, said it suspended production from Sunday to Friday. The electronics company did not comment on the issue, but Reuters said the chipmaker had to diminish its capacity in facilities in Kunshan.

The outages have been focused in areas where smartphones are assembled. Pegatron, a firm that supplies and assembles elements for Apple's iPhones, said on Tuesday that it is reducing its energy consumption to cooperate with local government, CNN reported. The company has a major factory in Kunshan.

A supplier of speaker parts for the iPhone, Concraft Holding, has also halted production for five days this week, Reuters reported.

Two of the largest Taiwanese chipmakers, Chipmakers United Microelectronics Corp and Taiwan Semiconductor Manufacturing, told Reuters they have not been impacted by the energy constraints. The New York Times reported that several key electronics suppliers in China had not been forced to limit energy use, suggesting that Beijing may not be enforcing the limitations on its advanced manufacturing sector.

Dale Gai, a director at Counterpoint Research, told CNN that while the power outages may not have as significant an impact as the computer chip shortage, the energy shortage will likely delay smartphone components in the short-term.

"This is largely a self-inflicted supply shock," said Larry Hu, chief China economist at Macquarie Group, told The Journal. "It's clear by now that Beijing is willing to sacrifice higher growth this year in exchange for structural reforms in some areas."

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