Foxconn Factory Explosion Unlikely to Affect iPad 2 Production

Apple iPad 2 production is unlikely to be affected long-term by the explosion at a Foxconn production facility that killed three workers, according to an analyst.

An explosion at Foxconn’s production plant May 20 killed three workers and raised questions over whether production of the iPad 2 and other Apple products will be affected.

Early reports cited combustible dust in the plant’s polishing workshop as the cause of the explosion, which also injured 15 workers. Foxconn manufactures iPads and iPhones for Apple, among other products. Its production plant is based in Chengdu, a city in southern China.

“Our current view is that this tragedy is likely to have some impact on iPad 2 production; however, we believe Hon Hal has the flexibility to shift manufacturing back to the Shenzhen facility if necessary,” Brian White, an analyst with Ticonderoga Securities, wrote in a May 23 research note sent to media. “As such, we currently don’t expect a material impact to Apple’s iPad 2 shipments.”

Apple has faced its share of Foxconn-related issues in the past. In 2010, it launched a high-level investigation into 12 suicide attempts that look place at the Foxconn facility throughout the first half of 2010, complete with Apple COO Tim Cook visiting in June 2010. Apple also claimed it commissioned an independent team of suicide-prevention experts to survey Foxconn workers about their quality of life.

Throughout 2010, Apple completed first-time audits of 97 suppliers and repeat audits of another 30, for an apparent total of 288 supplier facilities audited since 2007. Much of the company’s probing seems focused on weeding out underage workers, protecting the rights of migrant workers, and mapping the use of potential conflict minerals such as tantalum and tungsten; however, it also cites improperly maintained machines and violated engineering controls.

“Foxconn is not a sweatshop,” Apple CEO Steve Jobs said in June 2010. “You go in this place and it’s a factory but, my gosh, they’ve got restaurants and movie theaters and hospitals and swimming pools. For a factory, it’s pretty nice.”

Apple’s mobile devices helped buoy the company’s revenues to $24.67 billion for the fiscal 2011 second quarter, with a net profit of $5.99 billion. Apple sold 4.7 million iPads during the quarter, which saw the release of the iPad 2. Though Apple commands the lion’s share of the tablet market and continues to maintain a healthy presence in smartphones, it finds itself increasingly challenged by a variety of manufacturers pushing devices loaded with Google Android.

Apple is expected to issue a new iPhone and iOS later in the year, along with Mac OS X 10.7 “Lion,” the next version of its operating system for Macs.

“Demand on iPad 2 has been staggering,” Cook told analysts and media during an April 20 earnings call. Despite that demand, however, he expressed confidence that “we can produce a very large number of iPads for the coming quarter.”