bad news for the tech industry

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The supply chain crisis, which has hit all kinds of industries, seems to give no respite. Just a few months after Chinese factories began to show signs of recovery after the closures imposed by the government to limit the spread of COVID-19, the scenario that no one wanted to see again flashes before their eyes. This time, however, not because of the infectious disease, but because of an intense heat wave that hits the Asian country.

In many Chinese cities, like the recent all-time records set in Spain, temperatures hover above 40°C, putting more pressure on the power grid as air conditioning use increases. Some regions are suffering from the effects of the heat wave more than others. One of them is Sichuan, which added to the previous problem is having difficulty coping with the growing demand for electrical power.

Less energy and more consumption

Weather conditions have resulted in a drought that is depleting water levels in rivers, mainly in the Zi (Yangtze) River basin, on which Sichuan’s hydroelectric power generation depends, which is responsible for covering 80% of the energy needs of the province. “Hydroelectric power generation capacity continues to decline,” said the head of the plantZhou Jian, in an official statement.

Sichuan is a very important part of the global supply chain. Within its territory, where 84 million people live, there are factories related to semiconductors, solar panels and lithium batteries, but the government, in an “urgent” request, has ordered all its cities to suspend industrial production from Monday to Saturday. The objective behind this decision, according to the authorities, is to reduce energy consumption and prioritize homes.

In response to the rush order, factory closures have begun. the chinese giant CATLwhich is a key player in the production of electric car batteries, has suspended all its operations in Sichuan, according to Reuters. Intel, which maintains two factories in Chengdu, with production, assembly, testing, distribution and administrative offices, has also temporarily closed its doors. Also Toyota has suspended its operations there.

Tesla, which is the world’s largest electric car maker, relies on suppliers with factories in Sichuan for production in Shanghai. In this sense, according to Bloomberg, the company led by Elon Musk has said that the lack of components due to the heat wave could negatively impact its production goals. This would have prompted state authorities in Shanghai to speak with their southern counterparts to request priority access to electricity for Tesla suppliers.

If Shenzhen sneezes, Apple gets a cold: China's lockdowns put the tech industry in check again

At this time there is no guarantee that Tesla’s suppliers can have priority access to the electricity grid to run their factories. Another Chinese carmaker, SAIC, could also benefit if the authorities give the go-ahead. The truth is that at the moment there are also no certainties about how long production will be stopped in general and what final impact it could have on the supply chain, although, of course, it is not good news.

Pictures | Intel

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The supply chain crisis, which has hit all kinds of industries, seems to give no respite. Just a few months…

The supply chain crisis, which has hit all kinds of industries, seems to give no respite. Just a few months…

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