Wed, May 25, 2011 - Page 12 News List

Blast could cut iPad 2 production by 500,000: iSuppli

Bloomberg and CNA, with Staff Writer

Apple Inc could face a production loss of 500,000 iPad 2 tablets after the explosion at Foxconn Technology Group’s (富士康) plant in Chengdu, China, according to research firm IHS iSuppli.

The drop in manufacturing will depend on how long the plant is closed following the explosion on Friday, which killed three people and injured at least 15, iSuppli said.

The estimated production loss could rise further if the suspension of operations at the facility lasts longer than a month, iSuppli said.

Another Foxconn factory in Shenzhen that produces iPads might not be able to make up for the lost output, iSuppli said. The manufacturing breakdown could lead Apple to miss iSuppli’s forecast of 7.4 million iPad 2 shipments in the quarter ending in June, the research firm said.

Mike Abramsky, a technology analyst with RBC Capital Markets, speculated last week that the impact could be larger.

If Chengdu is where Apple’s iPads are mainly manufactured, instead of the Shenzhen factory, the blast could lead to lost production of 1.8 million to 2.8 million iPads, he said.

Abramsky had predicted 8 million iPad shipments during the period.

By contrast, Shaw Wu, an analyst with Sterne Agee in San Francisco, said in a report on Monday that the concerns were “overdone” and that production at other facilities was being ramped up to make up for the shortfalls.

He expects Apple to sell 6.8 million iPads in the quarter ending June.

In Taipei trading, Hon Hai Precision Industry Co (鴻海), which sells its products under the Foxconn brand, saw its share price rise 3 percent to NT$103 yesterday, following a 2.91 percent decline on Monday. The stock got a boost after the firm said it has a week of inventory, allowing it to continue operations as it completes safety checks following the Chengdu explosion.

“Knowing that production won’t be affected gave the market confidence today,” said Calvin Huang (黃文堯), an analyst at Daiwa Securities Group in Taipei, who rates Hon Hai “buy.”

“Previously, the company hadn’t said anything about the situation” regarding production and inventory, he said.

TLG Asset Management (台壽保投信) analyst Arch Shih (施博元) said Hon Hai’s dive on Monday was simply a knee jerk reaction to the explosion on fears that the company’s iPad 2 production for Apple would be seriously affected.

“But, after Apple remained resilient on Wall Street overnight, many investors seem relieved and started to think the impact from the explosion could be limited,” Shih said.

Goldman Sachs said it did not expect any material impact from the explosion as the plant in Chengdu was not the major production line for iPad 2.

Hon Hai is expected to continue to increase its supply to Apple, with possible adjustment of the production schedule, Goldman Sachs said.

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