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iPad factory blast may hit sales

By Gao Changxin in Shanghai, and Hu Yongqi and Tuo Yannan in Beijing (China Daily)
Updated: 2011-05-23 12:55

Top: Workers evacuate through smoke from a workshop blast at the Foxconn factory. Above: A handful among 177 newly hired Foxconn workers from Guizhou wait at the Guiyang railway station on March 1 before heading to Chengdu.

Expanding north

The factory was built in a very short time. "The Chengdu project took 76 days to go from construction to operation. It's a new record in Foxconn globally," Foxconn's chief investment officer, Zhuang Hongren, said at a ceremony that marked the start of operations at the plant in October, Chengdu Daily reported.

Gou announced in Chengdu on Dec 24 that he planned to expand the plant's annual capacity from 20 million to 40 million iPads this year and to 100 million in 2013.

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Foxconn will spend five years on making Chengdu its most important base globally, according to the newspaper.

Foxconn has a huge factory complex in Shenzhen, the coastal city in South China's Guangdong province. Since last year, it has been moving north.

Its new factories in Zhengzhou, capital of Central China's Henan province, began production in August. Its factory in Chengdu started operation in October, and construction of a factory in Tianjin started last month.

A likely hit to sales

The blast in Chengdu may be felt globally.

"The explosion will definitely have an impact on Apple's third quarter performance, given the importance of iPad 2," said Tong, the analyst.

The tablet computer is the most important product for Apple Inc globally this year, he said. Earlier this year, Apple cut prices on first-generation iPads to clear its inventory, paving the way for sales of the iPad 2.

Tong figures the market impact of the explosion will be short-term. "What is uncertain is how long the investigation process will take. It depends on how Foxconn and Apple work with the local government.

"The whole Chengdu plant was built in about two months," he said, "so it will not take long for Foxconn to repair the damaged facility."

An analyst with Canada-based investment bank RBC Dominion Securities Inc foresees poor third-quarter results if "Apple is unable to utilize alternatives or get back on stream by June", especially if the popular iPad 2 is produced in Chengdu.

Mike Abramsky made his comments to Atlanta-based Cable News Network (CNN). He also mentioned that if the halt at the Chengdu factory extends into June, lost production could reach up to 2.8 million units - 36 percent of the output planned for the third quarter.