Back to list

Fire at Foxconn plant may tighten iPad 2 production: Morgan Stanley

2011/05/23 12:38:37

Taipei, May 23 (CNA) Morgan Stanley said Monday it sees ashort-term risk in possible supply disruption of Apple's iPad 2tablet computer after a fire occurred in Taiwanese electronicsmanufacturer Foxconn Technology's factory in China's southwesterncity of Chengdu.

The iPad 2 assembly line in one of Foxconn's Chengdu plantsexploded last Friday, killing three people and injuring 15 others.The situation was brought under control within two hours, butproduction at the site has been halted pending an investigation.

Foxconn, the name used by Taiwan's Hon Hai Precision Industry China, is the world's biggest contract manufacturer of electronicsproducts, including top brands such as Apple and Dell.

While the impact on supply appears manageable given the Chengduplant is not the main iPad 2 production site, this may still tightensupply of iPad 2 production, the brokerage said in a research note.

As Hon Hai only opened its iPad production line in Chengdu backin fourth quarter of 2010, Morgan Stanley estimates the monthlyoutput of the plant was less than 400,000 units, or less than 30percent of production from mid-second quarter to now. Most iPad 2sare still made in Shenzhen, China.

It is possible Apple might seek to diversify its sourcing toreduce single-supply risk after this incident, though this may notoccur in the near-term since Apple must find another reliable sourceable to match Hon Hai's time to market, volume and competitivepricing, according to the brokerage.

Dealers said that second source could be Taiwan's Quanta ComputerInc. or Pegatron Corp., which are both currently Apple suppliers.Quanta makes the MacBook laptop, while Pegatron churns out the CDMAversion of the iPhone.

(By Jeffrey Wu)