China Power Reductions Affect Semi fabs

China Power Reductions Affect Semi fabs
​

Whether to meet the Chinese government’s desire to look good from an environmental standpoint, with the Winter Olympics (Beijing) about 7 months away and a UN environmental conference in China next month, or because strong demand has raised coal prices and maxed out power production, the Chinese government is mandating that certain provinces take steps to reduce power consumption.    One city that has been affected by the restrictions is Kunshan, a city of over 1.7m and home to a considerable number of key manufacturing facilities.  Businesses in Kunshan have received notice that power will be shut down for what we believe will be ~64 hours. 

Companies such as Eson Precision (5243.TT), a provider of light guides and a variety of other components to major CE brands, and ASE (3711.TT), an OEM and semiconductor packager, (both are Taiwanese companies with production un Kunshan) have been notified that their power will be of during the above period and care should be taken to limit the problems associated with the power reduction.  This obviously entails limiting production pre-outage, and while both company’s expect ‘little impact’ from the restrictions, despite the forewarning, reductions in production will collectively add up.  That said, such restrictions will also have an effect on decisions companies will make about moving into or out of China, especially companies that are involved in products that have extended processing times, such as semiconductors.  It is hard to imagine China as an environmentally friendly environment, especially one that puts the environment ahead of business, but we expect that much of the current restrictions are to present a positive face to the world without doing too much damage to the Chinese economy.  That said, with the number of fab fires, storms in Texas, and power outages across the globe, a few coordinated shutdowns will likely seem like typical days at work for semiconductor engineers.

Here’s the note to customers from ASE:

“We are very sorry to inform you that due to the strengthening of the implementation of the double reduction of energy consumption policy by the Chinese government, our company received an urgent notice from the local government at 00:00 on September 26, power restriction will last from 8:00 on September 26 to 24:00 on September 30,2021.

We have negotiated with the government departments to get a 1 day window the production of WIP, and the period of power restrictions will be adjusted to 8:00 on September 27, 2021 to 24:00 on September 30, 2021.  During that period, there will be no output in the factory, PP staff will contact you to inform you of the detailed impact on product delivery; we will follow the quality control requirements for online products.
​
We will keep track of the power restriction related policies after October 1, 2021, and will inform you if there’s any latest development during the period of power restriction.  If you have any questions or special requirement, please contact our PP-AC or BUM counterparts in time.  We are sorry for the trouble caused to you.  Thank you for your understanding!”