Explosion at China’s Apple Factory and What It Means for iPad’s Future

Posted: 12 Jun 2011 09:48 AM PDT

apple_logo

Thanks to Apple's multiple factory sites, the recent explosion at the Hon Hai Precision Industry Company a subsidiary of Foxconn (one of the world's largest electronics manufacturers) in Chengdu, Southwest China will most likely not affect Apple's bottom line. It will, however, slow down some of the ongoing production as facilities shift to other nearby plants particularly in the city of Shenzhen which, oddly enough, some report was in the process of moving to Chengdu before the explosion occurred.

Other reports state that the Shenzhen facility is slated to increase its production from four to five million units per month to nine to ten million. The DigiTimes, an Asian tech-blog, reported that Foxconn was responsible for approximately twenty-five to thirty-percent of the iPad2 shipments within the last month. It is also responsible for parts production of the iPhone and other high end products including those for Hewlett-Packard, Sony, Asus, Kindle, Dell, Acer and Nokia.

Accident or Neglect

The explosion took the lives of three workers and injured approximately fifteen. Preliminary reports state that the accident occurred in the 'polishing plant' duct where a special flammable dust is used to clean the iPad screens. Others have indicated that apparently a worker was smoking too close to the dust which in turn ignited the explosion. This, however, may not be the actual cause as information regarding the explosion is changing daily including the deplorable working conditions.

Students and Scholars Against Corporate Misbehavior (SACOM) recently posted that the explosion was no accident due to authorities, including contract companies such as Apple, neglected a May 6th report citing hazardous and unsafe working environments within the factory. Foxconn currently stated that the explosion did not affect the production lines and that it was confined to a storage site which contained chemicals and the specialized iPad2 coating formulas. This statement is suspect due to the fact that Foxconn's stock dropped five percent during recent Asian trading. The explosion does not help the reputation of Foxconn which has been struggling with on site suicides. It has been so much of a problem that they have actually had to construct netting to prevent jumping off of the high walkways; set up counseling and even offered entertainment to boost morale.

"The Mother of All Backlogs"

Apple has been trying to keep up with the overwhelming demand for the iPad2 which was launched this past March. There has been a one to two week delay for online orders and some customers have described back orders of up to one month in postponement. However, analysts report that this explosion is a temporary hiccup in production and that other production solutions were immediately put into action. In fact, Foxconn almost immediately reported that inventory is a week ahead of itself enabling a full shut down and safety inspection to minimally affect production.

RBC Capital analyst Mike Abramsky is quoted as stating that the explosion may temporarily decrease production by about a one million unit setback. Even though this is temporary it will not sit well with existing orders as well as potential new ones. The already termed "mother of all backlogs" for the iPad2 distribution has caused some consumers to look elsewhere for their tablet fix including Samsung, Blackberry and Verizon designs. These unfortunately still pale in comparison to Apple's superb touch screen technology that still has consumers wowed and willing to wait however long it takes to enter the iPad2 world.

The Next iPad

As far as development of the next iPad goes, currently there does not seem to be any long term problems associated with the Foxconn accident. This incident was so close to the iPad2 launch that any available new technology is not even going to hit the production line for at least nine months to one year if not longer. However, rumors circulating around Hollywood are touting the next iPad to be the iPad3D. This will be a glasses-free 3D screen currently being researched and designed for a possible late 2012 market. This is most likely due to the already successful 3D launch by slight competitor Nintendo. In the meantime expect to see more and more of a push from entertainment and gaming studios for iPad compatible 3D content. It is also not such a far-fetched notion of the iPad3D being able to take and/or assimilate 3D photos with a new camera and capable screen. However, these are rumors, but Foxconn has been notorious in spreading technological rumors that have more often than not come to fruition.

Simple supply and demand has been keeping Apple products in constant flux and this explosion is no exception. If design and capability of Apple products remain ahead of their competitors most consumers will not worry much over weather, technical or accidental disasters that may temporarily slow down production.