Foxconn explosion may lower iPad manufacturing by 500,000 units

Tue, May 24, 2011


A Foxconn manufacturing plant in China last week was rocked by an explosion that ultimately left 3 people dead and approximately 15 wounded. The specific building affected happened to be where iPad 2 production was taking place, prompting some to wonder if Apple’s ability to churn out iPad 2 units would be affected.

Tackling that very question, a new report from IHS iSuppli estimates that iPad 2 production will be lowered by approximately 500,000 units as a result. The affected building, Foxconn’s A5 building to be specific, was responsible for approximately 25-30% of all iPad 2 production.

Total iPad 2 production capacity at the Chengdu site amounts to about 500,000 units per month. 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. Should the production suspension last longer, the impact on production could be even greater.

Foxconn chairman Terry Gou reportedly said that the explosion will not delay the production of the iPad in the third quarter. However, IHS iSuppli believes this view is dependent on a return to full production pending the results of an investigation. IHS iSuppli research indicates there likely will be some impact on production in the second quarter.

The majority of Foxconn’s iPad 2 production takes place in Foxconn’s Shenzhen plant. While Foxconn will inevitably try and ramp up production there to compensate for lowered production at Chengdu, iSupply is skeptical that the functional plant will be able to adequately make up for all of the lost units.

“Until more information is available about the cause of the explosion and deaths of three Foxconn employees, the report state, “its unclear how this disaster will impact the relationship between Apple and Foxconn. Apple is the final authority for all decisions regarding production, component suppliers and other aspects of production. From a process and quality point of view, Apple must have deemed the Chengdu facility acceptable.”

Controversy surrounding Apple and Foxconn is of course nothing new. Foxconn in early 2010 was plagued by a number of employee suicides which prompted a number of discussions about employee pay and opressive working conditions.


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