China's Sichuan region's Contemporary Amperex Technology Co. Limited (CATL) and Intel facilities are shutting down owing to a heatwave-related power shortage, which is also hurting the factories of Tesla, Apple, Toyota, and other companies.
CATL and Intel Are Shutting Their Sichuan Plants
According to CNN and Bloomberg's reports cited in The Verge, CATL and Intel are among the prominent companies suspending their plants for six days in China's Sichuan region as a consequence of a power deficit brought on by the heatwave. CATL is the world's largest maker of electric car batteries.
Businesses including Toyota, Texas Instruments, Volkswagen, Onsemi, and Tesla's battery supplier CATL as well as Apple's and Foxconn Technology's facilities, are affected by the move.
China ordered all Sichuan businesses to cease operations until August 20 in order to ease the pressure on the electrical grid after the country experienced its worst heatwave in 60 years, which resulted in a surge in the demand for air conditioning. Temperatures reportedly soared to more than 104 degrees Fahrenheit in several locales, as CNN reported.
According to Sichuan Daily, a state-run news website in China, Sichuan is experiencing the "most acute and severe time" in terms of power supply. Due to its dependence on power, the region is particularly susceptible to heatwaves and drought, which may cause hydro dam reservoirs to dry up.
Sichuan is important for semiconductors and solar panels. Manufacturers throng the area with abundant mineral resources in quest of raw materials like polysilicon, which is used in solar panels. The province is a crucial source of lithium for batteries used in smartphones and electric cars.
A temporary pause might raise the price of polysilicon and lithium as the supply falls, according to some analysts. Prices for polysilicon rose two days following the delay, but some don't anticipate any disruptions.
Foxconn, a nearby manufacturer of iPads, told Bloomberg that the dryness had not affected them yet. On Monday, Volkswagen said it didn't anticipate significant delivery delays.
Since Nasdaq 100 Index bottomed, Tech Firms Recovered Except Intel Corp.
Technology companies have had a solid comeback since the Nasdaq 100 index bottomed in June, but Intel Corp. has been conspicuously missing.
The largest processor maker in the world is one of just six companies in the tech-heavy index whose shares have fallen since June 16. In the meantime, the index rose by 21% as investors bought up expensive IT companies in an effort to contain inflation.
The disappointing results demonstrate that investors did not support Pat Gelsinger's (18-month) initiative to revive Intel's chip manufacturing capacity. Nvidia Corp. and Qualcomm Inc. haven't seen their shares crash despite a lower-than-anticipated earnings and sales estimate in late July. Since mid-June, the shares of both firms have increased 17%.
Even if Gelsinger is successful, the stock performance of the firm indicates a protracted recovery. Older devices' market share loss might cause Intel to report even worse profits in the future. Without addressing these problems, it won't develop.
Wall Street analysts reduced their firm profit forecasts following Intel's disappointing second quarter results release. According to information compiled by Bloomberg, projections for EPS in 2023 have dropped by 28% during the past month.
As a result of the lowered profit forecast, Intel is now more expensive as compared to anticipated earnings. At around 15 times profits over the next 12 months, Intel is priced at close to the highest level in the previous 10 years.
After losing its leading position in semiconductor process technology, Taiwan Semiconductor Manufacturing Co. and other companies passed Intel. By making tens of billions of dollars in investments, Gelsinger promises to recover the company's status as a pioneer in advanced manufacturing.
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