Monday, May 23, 2011

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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