China announced in April that it would be cutting its energy use by 3 percent by the end of 2021, as well as reducing its use of coal down to under 56 percent of its overall energy consumption. (Coal consumption made up 56.8 percent of the country’s energy use in 2020.) But coal shortages have now forced the country to ration its supply by curbing energy use in northeastern China and implementing earlier cuts than expected. As winter approaches and some areas experience near-freezing temperatures at night, China’s National Energy Administration (NEA) has had to ask the nation’s natural gas and coal companies to ensure sufficient supply to warm homes through the winter, creating a sense of competition between the needs of residential communities and industry.
Therein lies the problem for Apple and Tesla: as Reuters reports, heavy industry has taken a hit, and that comes with unfortunate consequences for tech companies as we approach the season of giving. Some suppliers, like Apple’s Unimicron Technology Corp, halted production for nearly four days beginning Saturday, lest they violate the government’s energy consumption limits. Concraft Holding Co Ltd, which supplies speaker components for iPhones, told Reuters it would suspend operations for five days this week and pull from its current inventory instead. Eson Precision Engineering, which supplies key mechanical parts for Apple and Tesla, halted production on Sunday and won’t resume until Friday. Though the tech giants are major focuses as the production facilities face shutdowns, even small and mid-size enterprises are facing the domino effect that comes from major overseas supply chain issues, according to Asian news outlet Nikkei Asia.
Meanwhile, Taiwanese chipmakers United Microelectronics Corp (which works with Qualcomm) and Taiwan Semiconductor Manufacturing Co Ltd have stated that production at their China facilities has yet to experience any impact. “UMC’s Hejian fab in Suzhou is currently running at full capacity utilization of 80,000 plus wafers per month,” the chipmaker told Reuters.
The pause in production could mean clear inventory issues, especially following a major Apple release and as the world continues to navigate global chip shortages. Economists at China International Capital Corp estimate the power shortage will drastically slow the country’s economic growth, as cuts are expected to extend through March of next year.
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