Following COVID-19, Heatwave... Apple and Toyota Factories Halted Due to Planned Power Outage in Sichuan Province, China

Foxconn and Toyota Also Established Factories
"Prolonged and Regional Spread Will Inevitably Cause Damage"

[Image source=AP Yonhap News]

[Asia Economy Reporter Kim Hyunjung] Amid the power supply pressure leading Sichuan Province in China to implement a planned power outage halting all industrial facility operations for six days, local media reported that the economic impact would be limited. However, foreign media predict that the suspension of manufacturing plants of companies such as Foxconn and Toyota in Sichuan will adversely affect supply chains, expressing concerns over the situation prolonging or spreading to surrounding areas.

According to local media including China's state-run Xinhua News Agency on the 17th, Sichuan Province recently announced a notice to "supply electricity to the people," ordering a six-day shutdown of all industrial facilities in the province starting from the 15th, with employees granted heatwave leave. This planned power outage also includes whitelist core protected companies, and strict measures are enforced such as restrictions on external advertising lighting and nightscape lighting.

◆Foxconn and Toyota Also Stopped= Following the planned power outage, not only local companies such as CATL, the world's number one battery manufacturer, panel maker BOE, and Tianma, but also Foxconn's Chengdu plant producing Apple Watches, solar silicon production plants, and major Sichuan companies including Toyota have halted their production lines.

This is a response to the surge in power demand caused by sustained high temperatures reaching 40 to 42 degrees Celsius and droughts drying up rivers and reservoirs. The Baihetan Hydropower Station downstream of the Jinsha River, with a capacity of 16 million kW, supplies electricity to eastern regions such as Zhejiang and Jiangsu, located 2,800 km away. However, due to the ongoing heatwave since June, reduced water inflow from upstream has disrupted hydropower generation.

Sichuan Province, with a population of 84 million, ranks as the sixth largest economic city in China by GDP, with silicon metal, electrolytic aluminum, chemicals, electronics, and power equipment production accounting for 28% of its economy.

The full suspension of industrial production is expected to negatively impact not only the Sichuan regional economy but also the global supply chain. Last year, Sichuan's electronic information industry sales reached 1.4611 trillion yuan (approximately 281.6854 trillion KRW), ranking first in the central and western regions. Half of the world's laptop computer chips and 50% of Apple tablet computers are produced in Sichuan. Chinese economic media 21st Century Business Herald stated, "The power outage in Sichuan means a temporary halt in the province's electronic information industry production, including semiconductors and panels," but also predicted that companies in Sichuan would respond in a timely manner. A BOE official explained, "We are currently conducting an impact assessment after the notification and will announce it soon," adding, "We will flexibly arrange production line operations to ensure customer deliveries."

[Image source=Reuters Yonhap News]

◆Damage Inevitable if Prolonged or Spread= Carbon analyst Qin Yan from financial information firm Refinitiv told Hong Kong's South China Morning Post (SCMP), "Power restrictions definitely have a negative impact on the economy, but if the situation improves, lost production can be made up later," and forecasted, "If restrictions are lifted within a few weeks, the negative impact on GDP will be limited."

However, major foreign media are concerned about the prolongation of power supply shortages or their spread to surrounding regions. Power restriction measures are already expanding not only in Sichuan but also in Chongqing, Zhejiang, and Jiangsu provinces.

Japan's Nihon Keizai Shimbun reported that about 16,500 manufacturing companies in Sichuan are affected by the planned power outage, warning of possible supply chain deterioration. It also predicted that if Toyota's production suspension prolongs, it could affect sales of some car models in China.

Professor Yuan Jiahai of North China Electric Power University expressed concern, saying, "Sichuan, which had relatively fewer COVID-19 outbreaks, consumed more electricity," and warned, "Power restrictions due to the southern heatwave could expand to other regions."