SAN FRANCSICO—The explosion that ripped through a Foxconn Technology Co. Ltd. plant in Chengdu, China, late last week—killing three—could result in a production loss of 500,000 Apple Inc. iPad 2 tablets in the second quarter, according to a report by market research firm IHS iSuppli.
Total iPad 2 production capacity at the Chengdu site amounts to about 500,000 units per month, according to IHS. If the explosion results in a production shutdown until the end of June—which may or may not happen, depending on the outcome of the still-pending investigation—a production stoppage of half a million units could result, the firm said.
Should the production suspension last longer, the impact on production could be even greater, IHS added.
In addition to the three workers that were killed, 15 more were injured when the explosion ripped through the Chengdu plant at 7:20 p.m. local time on May 20, according to reports. The cause of the explosion was reportedly a combustible dust mixture in a duct.
A workers' rights group based in Hong Kong said Monday (May 23) it had pinpointed a problem with aluminum dust in the plant's polishing department in a report published in early May. The ultra fine dust is the result of polishing the cases of Apple products to make them shiny, according to the group.
Previously some analysts said the explosion would have limited impact on iPad 2 production. The Bloomberg news service reported Monday that Vincent Chen, head of Greater China technology research at Yuanta Securities Co., said the Chengdu facility is mostly for computer assembly and described iPad production there as a pilot program.
Foxconn chairman Terry Gou reportedly said that the explosion will not delay the production of the iPad in the third quarter. But IHS said its analysts believe this view is dependent on a return to full production pending the results of an investigation. The firm said its research indicates there likely will be some impact on production in the second quarter.
While most iPad 2 production takes place at another Foxconn facility in Shenzhen, that plant may not be able to compensate for all the lost output in the second quarter at the Chengdu site, IHS said. The Shenzhen facility at present has capacity to produce 7.5 million units in the second quarter, and IHS forecasts that 7.4 million iPad 2 units will be shipped out during this period.
To support these shipments, Foxconn must manufacture a larger quantity of devices, at between 7.8 and 8.1 million units during the second quarter, IHS said. This means that Foxconn’s shipments will fall short of expected levels by between 300,000 and 600,000 units in the second quarter, according to the firm.
Apple should ensure worker safety at contract manufacturers for their own benefit. With the razor thin margins Foxconn make, they may not be motivated much to spend on safety.
Apple, even before the explosion couldn't meet the demand of iPad2. At the place where I live, its sold out in most of the shops.
Not to sound like a union symphatizer but this is a tragic consequence of world ecomony. America is moving jobs overseas where lack of environmental regulation and worker safety is prevalent. Loss of human life is the price of that consequence.
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