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Electronics Production | May 24, 2011

Foxconn stops polishing process across all China sites

EMS-giant Foxconn has temporarily stopped its polishing process activities in all manufacturing facilities across China.
Foxconn's manufacturing facility in Chengdu (China) was hit by an explosion and a subsequent fire yesterday (May 23, 2011) killing 3 workers and injuring 15 more. The explosion is said to have occurred in a polishing workshop.

For safety reasons, Foxconn has now - temporarily - suspended such activities in all of it manufacturing facilities across China, reports DigiTimes.

Production of 500'000 iPads at risk from Foxconn plant explosion

The explosion at Foxconn’s plant in Chengdu, China, could result in a production loss of 500'000 Apple iPad2 tablets in 2Q/2011, reports IHS iSuppli. Total iPad2 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.

While most iPad 2 production takes place at another Foxconn facility in Shenzhen, that plant may not be able to compensate for all the lost output in the second quarter at the Chengdu site. The Shenzhen facility at present has capacity to produce 7.5 million units in the second quarter—iSuppli forecasts 7.4 million iPad 2 units will be shipped out during this period. To support these shipments, Foxconn must manufacture a larger quantity of devices, at between 7.8 and 8.1 million units during the second quarter. This means that Foxconn’s shipments will fall short of expected levels by between 300'000 and 600'000 units in the second quarter.

One Wall Street analyst predicted that owing to the Chengdu disaster, iPad2 production could fall by as much as 2.8 million units and manufacturing could drop by 36% in the third quarter. IHS iSuppli believes this outlook is too pessimistic. The impact of this disaster will only last for the short term, given that there are more than 10 factories in the Foxconn Chengdu plant, and because the explosion occurred on the third floor of one of the buildings.

Chengdu just recently commenced production of the iPad2 at the start of 2011, with the plant recently accounting for approximately 20% production of the iPad series. Furthermore, the shortage of raw components due to the Japanese earthquake in March already had slowed down the production ramp at the Chengdu plant.

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