Opinion is divided on whether a blast on Friday at a Foxconn factory in Chengdu, China will affect the production of Apple’s iPads
Research firm IHS iSuppli warned that if production at the factory is disrupted until the end of June, it could result in a production loss of about 500,000 units of the iPad 2 in the second quarter.
Friday’s blast occurred at an assembly plant in Chengdu operated by Taiwan-based Foxconn Technology Group. Three workers died, while 15 others were injured in an explosion that the company said was caused by “combustible dust in a duct.”
A key issue is whether Foxconn’s other factories in China can pick up the slack from the Chengdu factory.
“We estimate it will be a very small scale impact because the (Chengdu) factory just started production,” said Gartner analyst Amy Teng. Most of the production of the iPad is based in other factories in China, she added.
The Chengdu factory makes less than 1 million iPads a month, according to Teng. In contrast, iSuppli estimated production at the facility at 500,000 units a month.
Neither Foxconn nor Apple have so far cautioned about a disruption in production.
The Chengdu factory is still in operation, but the polishing facility where the blast occurred has been temporarily shut down. Foxconn has also suspended operations at the polishing workshops at its other factories in China. On Tuesday, the company declined to say when the suspension would end.
Foxconn’s Chengdu factory began operation this year and is still under construction.
“Not all the facilities are up and running, and improvements need to be made to the production yield,” Teng said. “At this moment, most of the iPad production is at Foxconn’s other factories in Shenzhen. So we expect the impact to be small.”
But production at Shenzhen may not be able to compensate for all the lost output in the second quarter at the Chengdu site, iSuppli said.
Foxconn is currently working with Chinese authorities to investigate the root causes of the explosion. Apple is also involved in the investigations, but the U.S. company has declined to offer further comment on the blast.
Foxconn has been a key supplier to Apple and other companies like Motorola and Hewlett-Packard. It has come under scrutiny for its working conditions, particularly after a string of worker suicides at the company’s Shenzhen factory last year.
The Chengdu factory explosion has yet again put the Taiwanese company under a negative spotlight. A Hong-Kong based watchdog group Students and Scholars Against Corporate Misbehavior (SACOM) said in a statement on Monday that the incident was not accidental, but due to the company’s negligence in the area of work safety. Foxconn responded by saying SACOM “is seeking to capitalize on the tragic accident.”
News of the explosion has raised questions over whether Apple may try to find another supplier to build its iPad products. But Teng said this won’t be possible, at least for the short term. For now, Foxconn remains the only supplier with the production capacity and the work force to build the iPad on a large scale, Teng said.
“It requires a huge amount of capital in equipment and people to support the eco-system to build the iPad,” she added. “We don’t think Apple can find another substitute that easily.”