updated 11:40 am EDT, Thu June 2, 2011
Fatal accident not factory's only problems
Foxconn's plant in Chengdu, China has finally begun operating again following last month's explosion. The incident killed three people and injured several times that number. In response Foxconn temporarily closed all of its polishing workshops for safety inspections, likely to catch issues related to the combustible dust believed to have caused the Chengdu accident.
The Chengdu factory is devoted almost entirely to iPad production, although it is not the primary iPad assembly site. It is not yet clear to what extent the downtime will affect iPad 2 supplies. Foxconn has also had other problems at Chengdu, which may ironically balance things out, notes Ticonderoga Securities analyst Brian White.
"Our meetings today indicate that the Chengdu facility has been held back by yield issues on certain outside components; thus, the operation may not have reached the optimal utilization rate," he says. "Therefore, the explosion in Chengdu may result in more of an equilibrium situation with certain component vendors, rather than a shortage situation. Netting this all out, we believe the production of iPad 2 will be supply constrained during the June quarter; however, we are not prepared to place the bulk of the blame on the Chengdu operation."
The facility also recently saw a worker commit suicide. Some 14 Foxconn workers have killed themselves since January 2010, the deaths often being blamed on poor working conditions such as low pay, low safety and grueling overtime.