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Earlier, a pair of analysts said that they felt the Foxconn Chengdu plant’s explosion would have little impact on iPad 2 production, as the main production line was in the older plant in Shenzhen, not in the Chengdu plant. However, they probably weren’t counting on Foxconn shutting down polishing operations at all its plants.
Foxconn’s parent company Hon Hai Precision Industry Co., which is the world’s largest contract electronics maker by revenue, said on Monday that all of its workshops that handle polishing for electronic parts and products in China are closed for inspection. Foxconn had earlier said that while the investigation was ongoing, preliminary results indicated the blast occurred due to to combustible dust that had collected in a “polishing workshop” duct in the Chengdu plant.
It is troubling to note that an earlier report by SACOM, the Hong Kong-based group Students and Scholars Against Corporate Misbehaviour, issued two weeks before the blast, said the following:
Workers in the polishing department also complain that the department is full of aluminium dust. Even though they have worn gloves, their hands are still covered by dust and so is their face and clothes. Some workers comment that ventilation on the shop floor should be improved.
However, a Foxconn spokesperson told Bloomberg that it has more than a week’s supply of polished cases on hand; assembly using those can continue while it completes the safety inspections.
The blast, which occurred Friday night, puts Foxconn in the spotlight once again. It had previously been made infamous in 2010 when a rash of suicides of Shenzhen workers occurred. Assuming the inspections are completed quickly, most feel that Shenzhen could increase production in the case that Chengdu, which is estimated to build 20 percent of iPad 2s, remains closed.
Barclays Capital analyst Kirk Yang said in a research note issued Monday that,
“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, 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.”
However, for the stressed workers in Shenzhen, an increase of production will also mean an increase in stress, something that based on various reports would hardly be welcome.
According to the website M.I.C. Gadget, which first posted the news about the blast, the Chinese government has imposed a news blackout. Most of the information coming out of Chengdu is via Taiwanese television and the Internet.