The Foxconn Explosion Wasn’t an Accident

Although the Chinese government had previously said that the explosion at the Foxconn factory was an accident, a Hong Kong workers advocacy group is claiming otherwise. The group alleged on Monday, May 23 that the blast was the result of Foxconn management disregarding work safety at the plant.

"The explosion is not accidental," Students & Scholars Against Corporate Misbehavior (SACOM) wrote in a blog post. The blog went on to condemn the conditions at Foxconn’s facilities in mainland China. It also alleged a total lack of inaction on the part of the contract computer and electronic manufacturers including Apple, Hewlett-Packard and Dell.

The explosion at Foxconn’s Chengdu facilities in southwestern China killed three people and left more than a dozen workers injured. The explosion occurred in the factory’s “polishing plant” where the aluminum cases for Apple’s iPad 2 are polished. Reports now seem to be linking the blast to combustible “ultra-light” aluminum dust.

"SACOM pinpointed the problem of the aluminum dust in the polishing department in our report in early May," the advocacy group stated. They are referring to a report that the group released on May 6, 2011. The report condemned the alleged failure of Foxconn and its partners to improve the conditions for the workers at the plant in lieu of the string of worker suicides that took place.

"Regrettably, Foxconn turns a deaf ear to SACOM's findings. After the spate of suicides, the blast also affirms Foxconn puts productivity of [the] iPad before workers' lives," the blog continued.

Apple is the most prominent customer of the factories. Foxconn, which is a subsidiary of Taiwan’s Hon Hai Precision Industry, assembles iPads, iPhones and iPods for the company; however, they also provide products for Amazon (the Kindle e-reader), Acer, Asus, Intel, Cisco, Dell, Hewlett-Packard, Nintendo, Nokia, Sony and Vizio, among a variety of other clients.

In recent years, Hon Hai Precision Industry and its many high-profile customers have been under scrutiny and sparked many controversies with the worker suicide and leaked product design incidents. It was the suicides that really drew attention to the working conditions at the plants, especially its Shenzen plant, which houses more than 420,000 workers inside of the facilities.

After the suicides, Foxconn announced that they would have a series of pay raises that included a 30 percent across-the-board pay hike and a 66-percent performance-based raise for those employees who received good marks following a three-month evaluation. Some of the partners, including Apple, HP and Dell, pledged that they would monitor the pay rate changes at Foxconn to make sure that employees new pay rates, safety and overtime compensation were taken care of.

However, SACOM reported in their May 6 report that these pledges by the partners and the company have not been kept.

SACOM said that when they last visited the Foxconn facilities, there were “anti-suicide nets” in the workers' living spaces, but working conditions and promised compensation allegedly remained completely unaltered.

SACOM also said that Foxconn promised that it would provide adequate personal protective equipment for workers, but the workers do not have this protection and “are not well-informed about the chemical in use.”

SACOM called out Apple in the report that they released May 6 and the blog post that they posted May 23. They alleged that “while Apple commends the measures taken by Foxconn to improve working conditions, SACOM finds [the] predicaments of workers remain.”

"Workers always have excessive and forced overtime in order to gain a higher wage. Workers are exposed to dust from construction site[s] and shop floor[s] without adequate protection. Even worse, they are threatened by [the] potential harm of occupational diseases in various departments. Additionally, a military-styled management is still in practice, characterized by 'military training' for new workers."

According to the International Business Times, Hon Hai chairman Terry Gou said that the explosion will not cause any production delays for the iPad 2.

Close to 30 percent of Apple’s iPad 2 tablets are produced at the Chengdu plant where the explosion occurred; however, the managing director of Ticonderoga Securities said that the production of the iPad 2 will simply move to the Foxconn facility in Shenzhen. This will prevent any supply issues for Apple.

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Apple Predictions After Foxconn Explosion

Recently, there were predictions of Apple iPad shortages due to a lack of parts and manpower at the company’s Foxconn plant in China, but now there will most definitely be a shortage following the deadly explosions at the plant on Friday, May 20.

Analysts have predicted that iPad production could drop as much as 36 percent in the third quarter. Mike Abramsky, analyst at RBC Capital, wrote that iPad production could drop by 22-36 percent or 1.8-2.8 million devices. Citing CNN, Abramsky said that this could impact Apple’s third quarter revenue by $1.1-1.7 billion.

There have been some reports that the Foxconn plant in Chengdu will only be down for about a month. In this scenario Abramsky said that iPad supplies in the third quarter would most likely only be decreased by somewhere around 1.3 million units. This, unfortunately for Apple, is the bright side of things.

The Foxconn factory reportedly had 52 iPad production lines and had the capability to spit out more than 40 million devices a year. That will not be occurring this year though. On Friday an explosion in the facilities “polishing plant” at about 7 p.m. killed two people and injured 16. According to the Wall Street Journal, the government has ruled out the possibility of foul play as the cause of the explosion.

Foxconn has had a wide range of trouble affecting its factories. The incidents range from factory workers that committed suicide in 2010 to charges against three different employees that allegedly leaked the design of the iPad 2 to third-party accessory suppliers. Just in May, the Taiwan-based newspaper DigiTimes reported that there could be shipment delays of the iPad 2 and the iPhone 4 due to labor and part shortages.

Ever since the launch of the iPad 2, Apple has simply not been able to keep up with the demands for the device. In the first quarter earnings call, Apple was forced to report that there was a sharp decline in iPad sales, going from 7.33 million units sold in the previous quarter to 4.69 million. The chief operating officer Tim Cook was calling the iPad 2 issues “the mother of all backlogs.”

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iPad and iPhone Shortages Could Cause Shipment Delays

There could be some definite delays in the shipping of Apple products including the iPad and the iPhone. One of Apple’s key manufacturers, Foxconn, whose factory is in Chengdu, China, is reported to be dealing with a shortage of parts as well as labor.

Digitimes is saying that the alleged shortage could, and most likely will, cause a stall in the shipment of Apple products, particularly the iPhone 4 and the iPad 2. Digitimes also reported that so far Foxconn has not directly commented on the possible issue. The only thing that they have said is that "the company's capacity is being arranged fully at the request of its clients." They refused to comment on whether or not the shortages would delay the shipment of Apple products. The company also went on to say that "it has experience arranging manpower to assist its clients in reaching their goals."

Although Foxconn isn’t speaking up about the problem, recent Apple iPad news seems to indicate that the shipping delay rumors could definitely be true. In Apple’s most recent earning report, they conveyed a decrease in iPad sales. In the first quarter sales slipped from the 7.33 million units that the company sold in the fourth quarter to 4.69 million units. According to Apple’s Chief Operating Officer Tim Cook, the company faced “the mother of all backlogs” with the iPad 2.

Cook even said in the earnings calls, "I wish that we could have made a lot more iPad 2s because there were a lot of people waiting for them."

The Foxconn factory that is struggling with the shortage issues reportedly has 52 different iPad production lines, and it supposedly can produce more than 40 million units a year, but obviously, things are not working out as planned.

One of the reported reasons that there have been iPad 2 supply problems is a leaky touch screen, but this issue has supposedly been fixed. Besides the comments that Cook made during Apple’s earnings report, the company has not commented on anything surrounding the issue.

Hopefully, Foxconn and Apple will figure out all of the shipping issues, and there won’t be big delays on their products; or if there are going to be major delays, I hope that the companies will be upfront and discuss the issues with the public. We’ll just have to wait to see how everything turns out.

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