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Apple's iPad Supply in Question After Foxconn Explosion

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DEADLY BLAST
DailyFeed
Last week, an explosion rocked the Foxconn's year-old manufacturing facilities in Chengdu, China and resulted in three deaths and numerous injuries. It's now been confirmed that the blast was caused by combustible dust which had collected and ignited within a "polishing workshop" duct of building A5 -- which is said to contain the production for Apple's iPad 2.

As those who tragically lost their lives are mourned and the damage continues to be assessed, the company as well as analysts question if business could be affected.

Although M.I.C. Gadget reports that the Chinese government has imposed a press blackout, China Times alleges that Foxconn has told suppliers that iPad assembly has not been affected. (MacRumors offers the translation.)

"Sources said the explosion at Foxconn Technology Groups Chengdu plant did not affect the assembly line of iPad. Foxconn assured major suppliers at an online meeting yesterday that under the principle of orders placed and goods delivered as usual, the production of iPad 2 would not be delayed and related iPhone devices and new iPad products would still be in mass production in the third quarter."

MacRumors' Arnold Kim surmises that "related iPhone devices and new iPad products" could possibly include the next iPhone which is slated to launch in September.

The news from China Times seems to echo recent statements made by a company spokesperson to Bloomberg. According to Foxconn and Hon Hai spokesperson Edmund Ding, there is sufficient inventory to maintain normal production as the plants are shut down for safety checks.

But despite Foxconn's optimism, analysts like Gokul Hariharan of J.P. Morgan Chase & Co. aren't so sure. Speaking with the Wall Street Journal, Hariharan noted the rumors that Foxconn had already been facing shortages in both labor and materials in Chengdu.

"The supply of iPad 2 has been running tight due to manufacturing yield issues and component shortages," he told the Journal. "This is likely to accentuate [the iPad] shortage in the near term, at least in the second quarter."

Shares for both Foxconn and Apple took a hit following the explosion, with shares for the former dipping as much as 5%. Apple is currently down $4.30 since today's open.

(See also: Apple Could Suffer from iPhone, iPad Shortages and Apple Staffers Planning a Revolt)
POSITION:  No positions in stocks mentioned.

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