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China’s Worst Heatwave in 60 Years is Forcing Factories to Close

China has ordered all companies to close for six days to alleviate a power crisis in the area as a sweltering Heatwave sweeps the nation, the Sichuan province. The power restriction will affect firms owned by some of the largest electronics manufacturers in the world, including Apple (AAPL) suppliers Foxconn and Intel. Sichuan is a vital semiconductor and solar panel industries (INTC) production site. According to analysts, the stoppage could increase the raw material price because the province is also China’s hub for mining lithium, a crucial component of electric car batteries.

With temperatures above 40 degrees Celsius (104 degrees Fahrenheit) in numerous places, China is experiencing its most intense Heatwave in the past 60 years. The intense heat has increased the demand for air conditioning in homes and businesses, straining the electrical grid. The amount of electricity generated by hydropower facilities has decreased due to the drought’s effect on river water levels.

An “urgent notification” issued on Sunday by the provincial government and the state grid instructed 19 out of 21 cities in the region, including Sichuan, one of China’s largest provinces with 84 million residents, to halt all factory operations from Monday through Saturday. Lithium and polysilicon, two essential raw materials for the solar photovoltaic and electronics industries, are abundant in Sichuan’s mineral resources. Sichuan is home to factories for many major semiconductor firms, including Texas Instruments (TXN), Intel, Onsemi, and Foxconn.

Additionally, the area is home to manufacturing for the Chinese lithium battery juggernaut CATL, which provides Tesla (TSLA) with batteries. Closing facilities for the week would restrict the supply of polysilicon and lithium and raise costs, according to experts at Daiwa Capital. The Sichuan power outage has prompted warnings from several Chinese businesses, including Sichuan Haowu Electromechanical, a producer of auto parts, and Sichuan Lutianhua, a producer of chemicals and fertilizers.

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