Apple iPad 2 production has almost certainly been affected by a recent explosion at a Foxconn facility that killed three workers, according to an analyst note.
The recent explosion at a Chinese manufacturing plant owned
by Foxconn could disrupt Apple iPad 2 production to the tune of 350,000 to
400,000 units, according to a new report by market research consultancy
A May 24 research note from the firm cites damage to the
facility's A05 plant, which produces the iPad 2's back cover, as a cause behind
the disruption. "Given existing back cover production capacity, the total
production disruption will be approximately 550,000-700,000 units," wrote Ricky
Park, senior analyst at Displaybank, "but
since current inventory is about 200,000-300,000 units, actual production
disruption will be about 350,000-400,000 units."
The May 20 explosion at the plant, based in the southern
Chinese city of Chengdu, killed three workers and injured 15 others. Early
reports cited combustible dust in a polishing workshop as the cause. Almost
immediately, analysts focused on the accident's potential to affect production
of Apple's bestselling mobile products, in particular the iPad.
The degree of impact, however, is a matter of dispute by
those outside groups.
"Our current view is that this tragedy is likely to have
some impact on iPad 2 production; however, we believe Hon Hal has the
flexibility to shift manufacturing back to the Shenzhen facility if necessary,"
Brian White, an analyst with Ticonderoga Securities, wrote in a May 23 research
note sent to media. "As such, we currently don't expect a material impact to
Apple's iPad 2 shipments."
At the moment, shipping time for a new iPad ordered from Apple's
is one to two weeks.
Apple has faced some Foxconn-related issues in the past. In
2010, it launched a high-level investigation into 12 suicide attempts that took
place at the Foxconn facility throughout the first half of that year, complete
with Apple COO Tim Cook visiting the facility that June. Apple also claimed it commissioned an
independent team of suicide-prevention experts to survey Foxconn workers about
their quality of life.
Throughout 2010, Apple completed first-time audits of 97
suppliers and repeat audits of another 30, for an apparent total of 288
supplier facilities audited since 2007. Much of the company's regular probing
seems focused on weeding out underage workers, protecting the rights of migrant
workers, and mapping the use of potential conflict minerals such as tantalum
and tungsten. At the same time, however, the company also cites improperly
maintained machines and violated engineering controls.
Apple's mobile devices helped buoy the company's revenues to
$24.67 billion for the fiscal 2011 second quarter, with a net profit of $5.99
billion. Apple sold 4.7 million iPads during the quarter, which saw the release
of the iPad 2. Though Apple commands the lion's share of the tablet market and
continues to maintain a healthy presence in smartphones, it finds itself
increasingly challenged by a variety of rivals pushing devices loaded with