The reason Apple decided to shift its supply chain away from China

Massive power cuts in China give manufacturers one more reason to move supply chains out of the country.

The reason Apple decided to shift its supply chain away from China
The reason Apple decided to shift its supply chain away from China

Partners of Apple, Amazon... in China are trying their best to maintain production before the busy holiday season. At a medium-sized electronic accessories factory in Zhongshan, Guangdong, power outages are a "new normal".

One manager said there have been a few sporadic outage notifications since June, but more often from mid-September.

The company's 500 employees manufacture Bluetooth receivers, headphones, and other consumer electronics accessories for international brands such as Harman Kardon and Edifier. Because they are only supplied with electricity two days a week, they have to use their own generator to maintain a basic level of operation.

If the situation continues, some orders will be delayed. The company may rethink whether to lease or build a new factory outside of China.

Suppliers in Jiangsu, Zhejiang and Guangdong - which have tens of thousands of tech factories - said they faced varying levels of power cuts this month, as local governments wanted to reduce levels. energy consumption.

Rising prices, soaring electricity demand and Chinese President Xi Jinping's pledge to reduce carbon emissions are among the reasons for the power cuts.

Apple partners warn such power cuts threaten the stability of the supply chain. According to an official at the speaker supplier in Dongguan, the situation seems likely to last until the end of the year, or even longer. Sometimes, the company can only use electricity 3 days/week.

This person said that gradually could not stand the inconvenience. They are reconsidering opening factories abroad, maybe in Vietnam, Indonesia or Thailand.

Edward Yang, president of Goodway Machine Tools, a supplier to Toyota, Ford and Samsung, said the effects of a power outage could last longer than the power cut itself. “Businesses operating in China will certainly face much higher electricity prices in the future.

This will spur a wave of industry structural changes in pursuit of low carbon emissions, while encouraging capacity diversification to reduce the risks of over-centralization.”

The natural connection of the supply chain further amplifies the impact of the power outage. A server factory that supplies Amazon, Facebook and Microsoft in Con Son said it will depend on spare parts inventory to maintain production after many of its own partners had problems due to cutting. electricity.

During this time, they really want to accelerate their expansion plan in Taiwan. “The situation is really unsafe for the continuity of the supply chain,” commented the company leader.

What's worse is that it's not clear who got the power cut and who didn't. According to an official at an Apple partner, the situation is chaotic and confusing. Some are still supplied with electricity through relations and negotiations with local authorities, while others are severely affected. For example, Luxshare - an iPhone assembly partner - and its branches in different provinces were not cut off power.

Another official of a printed circuit board supplier to Apple revealed that the government decides who to power in part based on the value of the product. “If you don't offer as much value as high-end displays or semiconductors but consume a lot of power, sorry, you've lost. Better to close the door and move somewhere else.”

Printed circuit boards are important for mounting chips and components, but they are not very valuable. Producing them also takes a lot of energy.

Unstable power supply occurs in the context that businesses operating in China have many other worries. An official at Apple's supply chain said that supply chain transformation is a sensitive topic in the country. "From Jack Ma to the tightening of games, education ... all suggest instability for companies operating in China."

Karen Ma, a researcher at the Industrial Technology Research Institute, believes that many types of companies will begin to move.

Previously, it was only multinational assemblers that carried out diversification plans, but it is clear that other players will move at least some parts out of China. Ultimately, customers like Apple, Google, HP and Dell all want a more flexible supply chain outside of China.

Google Tech News

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