Tue, May 24, 2011 - Page 12 News List

Hon Hai shares plummet after Chengdu blast

By Lisa Wang  /  Staff Reporter

Hon Hai Precision Industry Co (鴻海精密) shares yesterday plummeted to an almost two-year low amid concerns that a dust explosion at its facilities in Chenghu, China, over the weekend could disrupt the production of Apple Inc’s iPad 2.

Hon Hai shares tumbled 2.91 percent to NT$100 on the TAIEX, the lowest level since June 29, 2009, when the stock closed at NT$99.6.

Foxconn Technology Group (富士康集團) yesterday confirmed that the explosion at one of Hon Hai’s polishing workshops in Chengdu had claimed a third life.

Fifteen employees were injured in the accident, but six have already been released from hospitals, Foxconn said. It did not say what products were being made at the Chengdu facilities.

“The explosion has raised much concern because Hon Hai’s Chengdu facility is mainly focused on Apple’s iPad 2,” Citigroup analyst Kevin Chang (張凱偉) said in a research note yesterday.

“Given that the explosion did not involve any assembly line or component or finished goods inventory, it is unlikely to lead to any meaningful production disruption,” Chang said, adding that the majority of the final assembly work is still in Shenzhen, China.

Hon Hai is expected to ship about 8 million or 9 million units of the iPad 2 in the current quarter, helped by improvement in the yield rate in recent weeks, beating market expectations of 6 million to 7 million units in shipments, Chang said.

In a filing to the Taiwan Stock Exchange yesterday, the company said it was evaluating the damage from the blast.

Foxconn suspended all operations at the affected workshops and production at all workshops that carry out similar processing, pending the results of a probe, an e-mailed statement said. All other production in Hon Hai’s Chinese facilities are operating normally.

Initial findings by a joint task force of local government and law enforcement officials indicated that the accident was caused by an explosion of combustible dust in a duct, the statement said.

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