An ongoing heat wave in Sichuan, China is already undermining chip manufacturing within its borders – while simultaneously threatening the lives of Chinese citizens. The use of air conditioning has increased due to the severity of the heat wave – which sent average temperatures soaring from an average August 30 degrees Celsius to an arid, low humidity 40 degrees Celsius. The sudden and unexpected increase in demand for electricity, along with record rainfall, means that water supplies powering Sichuan’s hydropower plants are proving insufficient, further compounding the situation. The heatwave that sent temperatures soaring to their highest level in 60 years has led to shortages so severe that local newspapers are calling the situation a “double shortage”.
Result: several factories in the region have been closed in order to favor survival over production.
Intel is just one of the manufacturers in the region whose production has been halted at its facilities. All of the high-efficiency, energy-intensive factories at Saigon High Tech Park in Sichuan have been shut down to preserve energy that can be channeled to combat rising temperatures. Foxconn, Volkswagen, Onsemi, Tesla and Toyota factories will keep operations suspended until at least August 20.
Intel has two factories in the city of Chengdu, Sichuan, CD1 and CD6, which house manufacturing, production, assembly, test and distribution facilities, as well as a warehouse, offices and parking lots. The CD1 and CD6 plants alone were responsible for consuming around 240 million kWh of electricity throughout 2021, as well as 900,000 cubic meters of fresh water. These numbers perhaps help put into perspective the amount of resources consumed by just two Intel installations.
The company had previously planned to spend $1.6 billion on an additional manufacturing plant in the region, only to be stopped dead by alleged pressure from the White House.
It remains to be seen what the real impact of the production shutdown will be on the semiconductor market itself (in addition to other affected companies). Foxconn is a leading supplier in the tech space, providing manufacturing and assembly services to numerous motherboard vendors and consumer tech giant, Apple.
The shutdown of two high-yield manufacturing plants could lead to problems with the availability – and therefore price – of Intel products. Two days may not seem like much, but semiconductor manufacturing and assembly is an extremely sensitive beast. There could already be losses due to the shutdown of the assembly lines – and there is no way of knowing whether the halted production will continue after August 20. Time, as always, will tell.