Foxconn explosion: Apple iPad supply impact unclear, dangers of combustible dust

Foxconn explosion: Apple iPad supply impact unclear, dangers of combustible dust

Summary: Combustible dust appears to have been a trigger for the explosion at Hon Hai, which makes Apple's iPad.

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An explosion at a Hon Hai plant on Friday killed three and may impact Apple iPad supplies, according to analysts.

The Hon Hai---also known as Foxconn---explosion was at a plant that builds iPads for Apple. Analysts have been handicapping the impact on Apple's supply chain and thus far it's unclear. Short-term there's likely to be little impact. In the long run, however, regulation may force plant changes as Hon Hai retools and cleans up its operations.

The biggest reason why regulation may become an issue is the cause of the explosion. The blast was reportedly traced to combustible dust that gathered in a polishing workshop. Hon Hai has suspended polishing operations in its factories.

In 2008, 60 Minutes did a story on combustible dust and examined why things weren't regulated better. An excerpt and video from that story:

Since 1980, there have been at least 350 such explosions in the U.S., killing 133 people and injuring hundreds more. There are at least 30,000 factories in the nation vulnerable to dust explosions, and yet, some top federal safety officials tell 60 Minutes the government agency whose job it is to protect workers is ignoring a tried-and-true way to prevent those explosions.

The fix is to focus more on simple housekeeping and improving shop floors. There's a set of Occupational Safety and Health Administration (OSHA) standards that companies fail to adhere to in many cases.

How does this impact China? Let's say the Chinese government begins a crackdown on combustible dust. If Foxconn wasn't clean enough other contract equipment vendors probably aren't either. These equipment vendors may have to shut down and retrofit as needed. At the very least, these plans will have to clean up.

Given the supply chain for components is already tight, production could go well beyond Apple. It's not like Hon Hai only manufactures Apple goods. China is the factory for the world.

In the short term, analysts are mixed on the Hon Hai impact. Morgan Stanley analyst Jasmine Lu wrote:

While the impact on supply appears manageable given the Chendu plant is not the main site, this may tighten supply of iPad 2 production to meet high target. As Hon Hai only recently opened its iPad production line in Chendu back in late 4Q10, we estimate the monthly run rate could be below 400k or less than 20% of total production year to April and less than 30% from mid 2Q while the main production stays in Shenzhen. We believe the ramp-up of Chendu plant will play a key role in supporting iPad 2 volume in 2H11 especially as Apple iPad 2 has been under tight supply owing to unsatisfactory yield at the early stage of ramping up.

Barclays Capital analyst Kirk Yang wrote:

Even in a worst-case scenario in which there are significant iPad 2 production disruptions in Chengdu, in terms of either metal casing component shortages or assembly line shutdown (which we do not believe is likely), we expect Hon Hai's original facilities in Shenzhen could quickly make up some of the shortfall from Chengdu by ramping up the idle capacity. The worst case scenario could negatively impact iPad 2 shipments in 3Q11 if the Chengdu plants were to shut down for more than 2-3 months, which again we do not believe is likely.

Daiwa analyst Calvin Huang downplayed the Hon Hai explosion's impact on iPad supplies. Huang said supplies will remain tight for another reason:

For now, the major bottleneck for iPad production remains IPS panel supply. The weaker-than-expected iPad shipments in 1Q11 were due to supply constraints. As the constraints are continuing, we forecast 7-8m units of iPad shipments for 2Q11 and expect very back-end-loaded shipments of the iPad in 2011.

Topics: Software, Apple, Enterprise Software, Government, Government US, iPad, Mobility

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  • Message has been deleted.

    Naryan
    • Message has been deleted.

      dwcfastrice
    • Message has been deleted.

      DDERSSS
    • re: Since we're on the subject

      @Naryan

      While I'm sure the conditions are terrible. Blaming Apple alone, is misleading. Many manufacturers use those parts. And I'm sure all of them put pressure on the company to produce the parts at the lowest cost possible. You'd like to think there was a point that these companies would say enough is enough. But as long as these companies keep making their billions, perhaps there isn't.
      Badgered
      • It is not even "Apple alone"; Apple has nothing to do with maintaining ...

        @Badgered: ... air conditioning of these facilities. <b>Apple does not own or operate any facilities in China</b>; it's Foxconn's business.

        Putting even partial blame at Apple for this situation is as stupid as blaming any of iPad buyers for what happened.

        Or as stupid as blaming Foxconn for coal mine incidents that might have happened for the coal to be delivered to power stations that generate electricity for Foxconn's facilities.
        DDERSSS
      • RE: Foxconn explosion: Apple iPad supply impact unclear, dangers of combustible dust

        @denisrs

        Actually you're wrong. Since they are subcontracting to Apple, as well as Dell and many others they are also responsible. If I paid someone to go to the grocery store and they robbed it I would also be responsible. I should have checked their background, made sure they weren't unhinged. This is the same thing.

        Apple is notorious for NDAs (proving they have control over the factory to a larger extent than you give them credit for) and they tout that their corporate culture is among the finest in the world (this would show that really they're just like every other corporation), and yet this isn't the first time they have had problems with suppliers manu processes. Remember the toxic fumes? That incident alone places blame on their shoulders. They should be inspecting the facilities themselves. After all their name is now attached to an explosion that killed 3 people. Think what you like but public opinion sets precedence. Remember Nikes child labor issues? How is this any different? Bottom line, any company that contracts out to another company needs to insure that the company they're working with maintains the same level of safety and quality that they would themselves. It's unethical to do any differently.
        ariesghost
      • RE: Foxconn explosion: Apple iPad supply impact unclear, dangers of combustible dust

        @Badgered

        So true, you can't blame any one company that buys a product from another who manufactures it. The Manufacture essentially is responcible for Work environments not the buyers!! Foxconn or any other company can say hey to bad you want this or that you pay befcause our employees are more important to you and the company. No employee's not product, no product no customer. The only person you can blame is Foxconn. Effectively any agentcy controlling anything is suggestions, the company chooses to follow them. They don't have to par the Suggestion they could go above and beyond like adding more fans. Cost of additional Precautiosn are %'s of the whole building, or law suites. Good For Foxconn, one less building to worry about. Lets hope they can learn from tehre Greedy mistakes.

        Imma Capitalize here and take my Custom PC sales to higher levels and profit while I can. I will not be compromised by this event as all my providers are american, at least my Primary suppliers! Sucks to be in shopping for OEM's now that is for sure. Manufactures liek HP Dell or any provider who uses Asus, Foxcon or ECS are gonna have some problems, thats for sure!!
        Ez_Customs
      • RE: Foxconn explosion: Apple iPad supply impact unclear, dangers of combustible dust

        @ariesghost

        Your ignorance is mis leading you talk smart but you know little. Apple has no blame in this. All Apple can do or anyOEM Buyer can do is make suggestions and ask that a manufacture of there parts do this or that. Foxconn did this to themselves, Apple Dell HP, none of these companies had anything to do with it, except that there hardware was probably being built at the time of the explosion, YIPPIE!!

        Hey if you bought Food for the your Neighbiors Cat, and it winds up in the tree, is that your fault the Police can't get it out of the tree, and if that Cats owner can't get it out of the tree before it starves or dies from a fall, are you responcible for that cats Death? This is teh same thing. It is the owners compelte fault for not carign about that cat enough. That owner knew when they bought the cat that they climb tree's and or anything for that matter. Or maybe someone buy's a cat for the house, and that cat Scratches up the Couch, you dont' go buy them a new couch because the cat you bought them ruined there couch. Your probably gonna tell them hey you problem should have protected your couch with a Scratch pad or something!!!!

        Your Blame is totally inaccurate
        Ez_Customs
      • RE: Foxconn explosion: Apple iPad supply impact unclear, dangers of combustible dust

        @Ez_Customs

        Your cat argument is completely incoherent. Try again when you can type. Until then the point still stands: Apple is responsible. So is Dell. So is anyone else who contracted out to use that plant and *inspected it*. No one contracts with a company to make millions of unit of product without having a liaison to protect their interests look over the facilities.

        If you think otherwise you're a moron and I will contract with you to make 500000 space shuttles for 6$ a piece.
        ariesghost
      • Pure loony tunes.

        @denisrs
        "Putting even partial blame at Apple for this situation is as stupid as blaming any of iPad buyers for what happened"

        Wow. Unimaginable that anyone could still think this way in this day and age. First off, a consumer purchase by a lone consumer is nothing even close to being like a multi national corporation ordering multiple millions of components from another multi national corporation. Nothing like it.

        When a person goes into a store to purchase an item like an iPad, typically no further agreements are entered into beyond the fact that the purchaser agrees to give up some of their cash for a product that the manufacturer provides with the understanding it will be fit for the purposes it was manufactured for. At best we typically would not expect a person to research a product beyond its qualifications as a product the consumer thinks might fit their needs and at a price they can live with. Expecting the average man on the street to investigate the products he buys beyond that would obviously be to burdensome a task, think of the products each person buys each week, it would be more then time consuming.

        A multinational company purchasing millions of components from a supply manufacturer is a completely different story, most particularly where those components are high tech and have to be manufactured to very tight spec's, and often to a very tight schedule. As the multinational ordering those multiple millions of parts you have an extreme vested interest in the operations of your suppliers and typically when you order like Apple does you can have a say in those operations or you find a supplier who will do things the way you want.

        Companies like Apple know far more intimate details about the day to day operations of companies they deal with then the average consumer and rightly so. They need to know certain things will be working a certain way in order to have the confidence required to entrust another company with supplying those millions of components to spec and on schedule. Its only smart business, to do otherwise is dumb business, and I suggest one thing Apple is not, is "business dumb".

        In the final analysis, even where a company like Foxcon may have been able to hide certain shortcomings they had, once they become evident, then the fact is that shortcoming is evident and it should be considered in the decision making process. In many cases it should give rise to further concerns and inquiry.

        A company with Apples clout has way way more sway over the practices of a company like Foxcon then even a million consumers put together. Apples clout comes right from the word go when deliberating which company will produce their components, well before any product hits the shelf. They can choose not to use specific companies and choose to use others that are more in tune with Apples idea of how a business should be run and how employees should be treated.

        Of course, maybe they did just that.
        Cayble
      • RE: Foxconn explosion: Apple iPad supply impact unclear, dangers of combustible dust

        @Badgered Why is this different than anything else? Just because it's Apple is no reason to say it's OK. If I knowingly support a business by buying from them, yet I know they use illegal, dangerous, or immoral practices (child labor, for example), but choose to buy anyway because they offer the best price, am I not assisting them by supporting them? And don't I get at least part of the responsibility because I did support them despite their practices?<br>I get really tired of this "Apple can do no wrong" attitude from its apparently-brainwashed followers. No, Apple is not at fault for this, but you can bet they knew exactly what the manufacturing processes were and how they were implemented.
        I don't buy Apple products because I consider their business model, especially their attitudes toward employees and business partners to be mercenary and wrong, and I'm not going to support a company with such practices; by buying their products, I would be giving my approval, and having worked with one if their business partners in the late '90's, I know how backstabbing and disloyal they can be to their once-faithful partners, particularly when run by Jobs, patterned by his own personal attitude toward others.
        garyleroy@...
      • RE: Foxconn explosion: Apple iPad supply impact unclear, dangers of combustible dust

        @ariesghost [i]If I paid someone to go to the grocery store and they robbed it I would also be responsible.[/i]
        You really have no clue what your talking about do you?

        [i]Apple is notorious for NDAs (proving they have control over the factory to a larger extent than you give them credit for)...[/i]
        An NDA proves that you have control over a factory? Man, I apparently have a lot of control I didn't realize I had since I have NDAs from TI, Micron, Atmel and a number of others. Maybe I need to tell them what to do, think it will work?
        non-biased
      • RE: Foxconn explosion: Apple iPad supply impact unclear, dangers of combustible dust

        @garyleroy@... The main problem with your argument is that you jump to conclusions. You assume that Apple knows everything that goes on in another companies facilities. You assume that the situation that caused the explosion is an everyday common practice situation. You assume that those who say it's not Apples fault are saying that they believe Apple can do no wrong. All of your assumptions are just that with nothing to back them up so they mean nothing.
        non-biased
    • Yeah, since we ARE on the subject...

      @Naryan

      Oh of course, why didn't we see it before? This is ALL Apple's fault!!! My God, they are such an evil company to have Foxconn make the iPads and of course they also got rid of all the safety regulations in the plant... Oh then Apple MUST have some hand in how the factory is run? Oh wait, Apple found some issues with how the factory is run during one of their audits and has warned the factory management to bring the factory in line with what Apple expects - i.e. no child labor, no long hours, etc. Hmmmm, interesting. But let's move on.

      Oh wait, Apple does NOT run the plant? So Apple could not have gotten rid of the safety regulations governing combustible dust. Hmmmm, interesting. So then who does run the plant? Foxconn? So then this would be the fault of Foxconn ignoring or not having safety regulations in place then rather than Apple?

      Then surely Apple owns one of the Chinese media companies, right? They MUST control the news there... No? The Chinese media is regulated by the communist government there? Really.

      Then Naryan by all means please enlighten me as to how any of this is Apple's fault. Go ahead, I'll wait.
      athynz
      • RE: Foxconn explosion: Apple iPad supply impact unclear, dangers of combustible dust

        Another Apple disaster! No Windows phone factories have blown up. Of course its only 3 guys in a garage making them.
        john_gillespie@...
      • RE: Foxconn explosion: Apple iPad supply impact unclear, dangers of combustible dust

        @athynz

        And yet Foxconn was still making parts... Maybe Apple should have flexed that muscle and cancelled the contract.

        Or maybe it was just easier to 'note' the problems then promptly ignore them. Like they did with the toxic fumes manufacturer. Think what you like Apple shares blame in this. If they weren't buying parts and ignoring the conditions then the explosion wouldn't have happened. All they had to do was start to cancel, Foxconn would have fixed it from there. But what does Apple care about 3 dead Asian workers?
        ariesghost
      • RE: Foxconn explosion: Apple iPad supply impact unclear, dangers of combustible dust

        @athynz

        I am on page for this Defense Athynz. Peopel are forgetting that Foxconn is the biggest OEM manufacture in teh world of Electronic. Most eh Cell phoens you people use have Board built by Foxconn, Dells Hp's Apples, Compaq, eMachines, microwaves. You knwo this blame at apple just hbecause it was listed in the report Foxconn, Apples biggest supplier of iBlah hardware, Blew up. These People are pathetic. Keep there cats out of the tree's, becuase if you looked at that Tree it is yoru fault that Cat Fell!!!!

        AriesGhost has a personal Hate on Apple. Listen Aries, Applee simply buys OEM parts. I suppose that it is also the peoples fault who bough anythign from Apple that has Foxconn branded on it Aries is pathetic. Sorry for the insult but it is so true. 80% of electronics hardware out there has Foxconn's name on it somewhere, but somehow this is all Applese fault, not nokia's, or Motorola, or blackberry, Just Apple's. not Even HP who uses Foxconn's then also has there clones they use on HP specific Prorietary hardware.
        Ez_Customs
      • BS

        @athynz

        Simple fix... Have the "American run" business of Apple, manufacture their products in America. Nuff said. You suck.
        MindWarpMedia
      • Dumb as toast.

        @athynz
        "My God, they are such an evil company to have Foxconn make the iPads and of course they also got rid of all the safety regulations in the plant"

        Are you truly mad? Do you really have ZERO clue as to how big business works? Lets have a quick lesson.

        1. A company like Apple decides they are going to manufacture a particular product, they design it then go looking for suppliers for the components and assembly.

        2. When they find a particular company that appears to be able to do the work they need done, the company like Apple goes and INVESTIGATES the company to ensure that at least three particular things would happen if they use that company. Firstly, that they can in fact produce or assemble the products required according to their specifications. Secondly, that the company is not likely to fall prey to the numerous pitfalls that can befall a company in this kind of situation and cause undue delays in the process, such as going broke, labor dispute, equipment breakdown, political unrest, transport problems, and PLANT EXPLOSIONS. Thirdly, and something that often drives a company to foolishly turn a blind eye to some of the things that might have come to their attention in their investigations, and thats costs.

        So dont wait forever as to figuring out how this is an issue relating to how Apple does business, it is and its obvious.
        Cayble
      • You read but intentionally do not comprehend.

        @ariesghost Scroll down and read some more... you'd be surprised. Bottom line here is that the conditions at the plant are the responsibility of the owner. If they weren't working on something for Apple they would have been working on something for Dell, Toshiba, Nintendo, or someone else... but because it's Apple it's okay for you ABAers to bleat about how it's Apple's fault.
        athynz