Do you think it is very yellowish to say that we are in the third world war? Well, let’s analyze some data and put it in perspective: TSMC invests 100 billion in three years to increase production capacity, Samsung 16.5 trillion yen in its foundries, Intel 24,000 million dollars and 10 trillion yen in Europe for 10 years .
Is not sufficient? Ok, let’s look by country: China supports its companies with 15 trillion yen plus 20 trillion in a second tranche until 2025 for its policy «Made in China 2025«. The US injects 52,000 million for semiconductors in Intel and GlobalFoundries, Europe puts 17 billion yen to develop its chip and semiconductor plan and South Korea up to 50 billion in 10 years ahead.
The outcome is uncertain, the outcome simple: whoever loses will be subject to the winner and will depend on their technology to evolve, a kind of 21st century subjugation that condemns the loser to submission.
So why does China have business power outages?
China has reportedly decided to take action on the matter over energy expenditure and CO2 emissions. The president of China Xi Jinping already announced a few days ago that they will not manufacture more coal plants and that his country will source from other sources to be carbon neutral in 2060. Late? Sure, but what is certain is that China is the center of world production and therefore consumes more energy than any other country.
Ending cryptocurrencies and their excessive consumption has been the first step, now they are up to companies and this will bring a lot of tail, mainly because the measure is severe and does not give companies time to implement adjacent energy solutions so that the supply internal is maintained and thus production does not stop.
The reality that China is experiencing is simple: the government has ordered cut off the power supply to certain industrial customers, shopping centers and technology complexes for several days a month. The measure seeks to reduce the CO2 emitted and the great dependence on coal, oil and natural gas, now skyrocketing in price, benefiting local spending, but harming the entire global semiconductor and electronics industry.
Intel, NVIDIA, Qualcomm, Apple, Pegatron or Foxconn lose out
The new reality facing China will have a price and supply consideration for the rest of the world. Companies are considering options, such as working night shifts, buying diesel fueling systems to maintain production during the hours or days of supply outage, or moving volume production to different shifts.
But this is going to do little in the short term, so many companies are shutting down production as they focus on these power outages and launch their strategies. Fortunately, those companies that have a continuous production cycle and 24 hours, which cannot be stopped due to force majeure of demand, will not see these restrictions in their factories. This logically affects TSMC and UMC, for example, but it is of little use that they continue to produce if other smaller companies that supply key components to create the product sit idly by for weeks or days.
The speculations go well beyond the CO2 smoke screen, since it seems that China wants to buy time in the development of certain technologies and taking advantage of the supply situation and its current bottleneck, stopping part of its industry manages to raise prices , slow down the sales of major US companies and create momentary international pressure, since companies will find a way to avoid the energy restrictions imposed and will return to normal production, since they have to fulfill contracts and monthly volumes.
In summary, it is an open war where China wants to curb energy spending so as not to depend so much on other producing countries and incidentally generate an imbalance in the industry, buying them time, developing their semiconductor industry and slowing the expansion of key chips in some months.