A dispute between the government of Vietnam and renewable energy developers over subsidies is threatening to disrupt power supplies, a move that could hit manufacturers that have moved to the country in droves from China.

Vietnam has become a critical link in global supply chains in recent years as manufacturers, including Apple, Samsung and Intel, relocated as part of a “China plus one” strategy to hedge their operations against geopolitical risk. But the country’s electricity supply has struggled to keep pace with a boom in demand, leading to blackouts and shortages. 

A government decision to abruptly roll back subsidies for renewable energy from January has hit power producers, cutting payments from Vietnam’s state utility EVN for electricity they supply to the grid. Developers allege this is a breach of contracts signed from 2017 for a period of 20 years.