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Exclusive-Apple supplier Foxconn among firms asked to cut power use in Vietnam, sources say

Published 05/21/2024, 01:49 AM
Updated 05/21/2024, 10:47 AM
© Reuters. FILE PHOTO: The Foxconn logo is seen in this illustration taken, May 2, 2023. REUTERS/Dado Ruvic/Illustration/File Photo
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By Francesco Guarascio and Ben Blanchard

HANOI/TAIPEI (Reuters) - Vietnamese officials have called on Apple (NASDAQ:AAPL) supplier Foxconn to voluntarily reduce power use by 30% at its assembly plants in the north of the country where there were electricity outages last year, two people familiar with the matter said.

The request for energy-saving measures, which two other industry sources said was sent to multiple manufacturers, is precautionary and aimed at averting a repeat of last summer when power shortage led to over a billion dollars in lost output.

The request to Foxconn was "an encouragement", not a requirement and has not had any impact on production, one of the people said.

Vietnam is increasingly welcoming multinational companies, some spreading their risk from traditional manufacturing base China amid rising trade tension with the U.S. Last month, Apple promised further spending in the country where over the past year it has raised its number of suppliers to 35 from 25.

The southeast Asian nation relies on foreign investment for economic growth and has been trying to attract energy-intensive industries, such as semiconductor manufacturing.

However, a heat wave last May and June triggered a power shortage that interrupted business in the north, causing $1.4 billion worth of loss, or 0.3% of gross domestic product, World Bank preliminary estimates showed.

In March, Prime Minister Pham Minh Chinh pledged to foreign investors that power shortages would not happen again.

The government has asked coal-fired power plants to delay maintenance to meet higher electricity demand in the hottest months, one of the people said.

The people did not specify who sent the requests, when the request to Foxconn was sent or for how long the voluntary cut in electricity use would be needed. One person said the request was open-ended.

All sources asked to remain anonymous because the matter was not public. Apple did not respond to a request for comment.

COORDINATION

Foxconn, formally Hon Hai Precision Industry, is the world's largest contract electronics manufacturer. It has half a dozen plants in northern Vietnam including in Bac Giang province where local authorities said it assembles Apple MacBooks and iPads.

State-owned provincial power distributor Bac Giang Power Company (BG PC) said in March it had asked industrial parks and authorities "to coordinate in implementing electricity savings," showed a statement on the website of power regulator ERAV.

BG PC Deputy Director Do Binh Duong, in a separate statement, said "adjustment of power loads, adjustment of production plans and electricity saving implementation of enterprises will have a great impact on the power system".

The Ministry of Industry and Trade and state-owned power provider Vietnam Electricity (EVN), of which BG PC is a unit, did not respond to requests for comment.

Energy-saving measures appear to differ nationwide. An official at an industrial park in another northern province said manufacturers have been asked to reduce power consumption on some days this month.

© Reuters. A woman carrying an umbrella walks past the logo of Foxconn outside a company's building in Taipei, Taiwan October 31, 2022. REUTERS/Carlos Garcia Rawlins/File Photo

Weather conditions are less challenging than in 2023 but authorities have boosted imports of coal and encouraged energy-saving to avoid shortages.

In March, foreign chambers of commerce urged the government to guarantee power supply, with South Korean's KoCham saying semiconductor companies had delayed investment decisions because of power supply risk.

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