SK hynix unaffected, other Korean makers face disruption from power cut

Production disruption has become inevitable for South Korean manufacturing bases in China due to an unprecedented power crunch in the second largest economy, while SK hynix with major chip facility contends business to stay as usual.

Lee Seok-hee, chief executive of SK hynix, told reporters on Tuesday that its production site in Wuxi is unaffected by China’s power crisis.

“We hear no reports of any disruption in operation. They (Chinese authorities) must be making an exception for chip production,” Lee said.

SK hynix’s fab with full monthly capacity of 180,000 wafers of 10nm-class DRAM chips has been operational since late 2020.

Local production facilities in China have been experiencing disruptions due to shortage in power supply caused by tight coal supplies and toughened emissions standards.

The squeeze has begun to affect Korean production sites like Orion and Posco.

According to multiple industry sources on Tuesday, confectionary maker Orion halted operations of its production site in Shenyang, capital of Liaoning Province in China, from Monday.

The company has decided to stop operations until Thursday after it was informed by the Chinese authority of a cut in power consumption, an official said.

Orion plans to minimize product supply setback by establishing a cooperation system with four other operation sites in Beijing and Shanghai.

Leading steelmaker Posco has also partially suspended operations of its stainless factory in Jiangsu Sheng from September 17.

An unnamed company official said that it stopped operations of its large steelmaking and hot-rolled lines that consume more power. It is hoping operations resume in October.

The impact on smaller producers has been greater.

A Korean company in Jiangsu Sheng that asked to be unnamed was notified by the provincial government to stop production between September 27 and 30. The company is considering reducing national holiday period in early October to minimize production setback.

Another Korean company producing components in Qingdao is also at risk of halting operations.

A company official said that a power monitoring staff visits the site every day and informs to reduce power use but it is difficult to suspend factory line. The official added that the company is trying other ways by reducing power consumption at non-production facilities like office and in-house restaurant.

According to Bloomberg, almost half of China’s 23 provinces are under pressure to curb energy use. Regions hardest hit are those where manufacturing plants are clustered like Jiangsu, Zhejiang, and Guangdong. These areas are industrial cities that account for one third of China’s annual gross domestic product.

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