Tuesday, May 24, 2011

iPad Production Adversly Affected By Foxconn Explosion

According to iHS iSupply, last week’s explosion at the Chengdu Foxconn plant may in fact lead to a loss in production of 500,000 iPads.

Last week, an explosion at the Foxconn manufacturing plant in Chengdu caused 3 deaths and 15 injuries. Apple and Foxconn have stated that they are prioritizing the welfare of the victims and that they are involved in the investigation on the cause of the explosion. Early signs suggest the cause of the explosion to be highly explosive aluminum dust produced the polishing of electronic parts. Inadequate ventilation in the plant caused a build-up of this highly explosive dust which led to its combustion.

According to the WSJ, Foxconn closed all of the workshops handling the polishing of electronic pars until the completion of further inspections. A Foxconn spokesperson mentioned that his tests could last up to two days, and "the workshops could be back online as soon as they pass the tests."

The Chengdu manufacturing plant polishes products in one of the final stages of their production. Although neither Foxconn nor Apple have confirmed it, Chinese media has reported that the said plant also produces iPads and iPad components and accounts to the production of 30% of iPad 2s.

Shaw Wu of Sterne Agee believes that it would be unlikely that the supply of iPads would be effected as the Shenzhen Foxconn plant would quickly pick up the drop in production, but iHS iSupply believes that the Shenzen Plant would struggle to make up the loss of production.

Mike Abramsky, of RBC Captital Markets speculated that the impact could be as large as a deficit of 1.8-2.8 million iPads. However, this claim was made last week before more information on the explosion and the state of the plant was released. The California-based research firm El Segundo said that would cause Apple to miss iSupply's foretasted 7.4 million iPad 2 shipments for the next quarter.

At the moment, it seems unclear as to whether or not the overall production of iPads will be affected. Although it is certain that there will be a gap in manufacture caused by the Chengdu plant, there is a possibility that Apple augments the production if other factories to keep up with demand. iPads are already scarce, and with the purchase of thousands of iPad 2s to upgrade it's stores, let's hope that Apple can keep their lines short.

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