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Analyst: Foxconn explosion could lead to iPad shortages
- — 22 May, 2011 03:44
The tech world is abuzz again with worries about shortages of popular products, this time because of an explosion at a Chinese factory that killed two people.
An industry analyst says Friday's horrific explosion at the Foxconn Chengdu plant will lead to shortages of Apple iPads. Foxconn Technology Group also makes Apple's iPhone and other consumer electronics for companies including Sony and Hewlett-Packard.
The full impact of the disaster on manufacturing is not known. The Associated Press reports that a company official said a fire sparked by the explosion, which appears to have been caused by an accident in the plant's polishing workshop, had been quickly put out and that operations at the factory would not be affected.
Still, some in the industry believe there could be manufacturing hiccups.
Analyst Mike Abramsky of RBC Capital said in a research note that was picked up by several news organizations that the worst-case scenario is that iPad production will be reduced by 2.8 million units -- a drop of 36 per cent for third-quarter production against an estimated production run of 8 million units. The best scenario is that production will be reduced by less than 1.3 million units as Foxconn makes repairs, according to Abramsky.
There could be other long-term impacts, too. Industry observers have noted reports of poor working conditions at Foxconn.
A string of worker suicides forced Foxconn to move to improve conditions at its plants last year.
News of the explosion comes as Apple has recently completed international launches of the iPad 2, raising demand for the second-iteration of the popular tablet device. Apple is currently showing shipping times of up to two weeks for iPad 2 online orders.
The explosion also comes on top of the impact from the Japanese earthquake. That disaster created a component shortage for tablet devices, affecting everything from glass screens to memory and power amplifiers, although there's no evidence this has affected production of Apple products.
Time will tell whether Apple enthusiasts are swayed in their purchasing decisions by the developments abroad. The company is lucky this didn't happen during the holiday season, when there is a crush of people snapping up consumer electronics.
The company's stock price slipped 1.6 per cent following Friday's news. It's still trading near a 52-week high.