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iPad Supply to Fall Short After Factory Explosion
IPad stocks are expected to fall short after an explosion at supplier Pegatron, raising concern over Apple‘s ability to meet demand for its tablet.
The cause of the explosion at the Shanghai plant, which injured 60 workers, is under investigation, but preliminary results suggest it was caused by aluminum dust. Shanghai authorities reported 27 workers were hospitalized after the incident, but none had life-threatening injuries.
The explosion will likley affect supplies of Apple’s top-selling tablet, the iPad 2. This is not the first disaster this year to hit the Cupertino, Calif.-based device maker’s supply chain. A major earthquake in Japan this spring led to a shortfall in iPad components, as did a similar dust explosion earlier this yearat Foxconn, a Chengdu, China-based plant that also manufactures the company’s devices.
Apple looked to broaden its manufacturing base this year to meet high demand for its tablet, reportedly striking a deal to build an iPad plant in Brazil that was set to start producing devices as soon as this month.
The company slashed orders from manufacturers in its iPad supply chain to ensure adequate parts for the device and considered manufacturing iPads outside China for the first time.
The tablet market is heating up, with new competitors such as Amazon’s Kindle Fire and Barnes & Noble‘s Nook emerging as iPad contenders. Sales of the iPad surged nearly 70 percent as this year’s holiday sales season kicked off, showing the device is still a dominant contender, but the new devices’ arrival underscores increasing competition.
With other tablets encroaching on its market share, Apple can ill afford a supply-chain disruption. The Pegatron explosion is likely to raise morequestions about worker conditions at the company’s China-based factories as well, potentially tarnishing Apple’s reputation in addition to hurting its bottom line.
The Pegatron plant is a subsidiary of Ri-Teng Computer Accessory, which also makes components for HP, Dell and Asus. The factory was not yet fully operational, but Ri-Teng was reportedly expanding it to compete with rival Foxconn in the making of device casings, including back panels for the iPad.
The explosion caused minor damage to the factory’s automation equipment and is expected to have a minimal effect on the plant’s production, according to Pegatron. Apple reports it is investigating the incident.
Article from: http://www.forbes.com/sites/mobiledia/2011/12/20/ipad-supply-to-fall-short-after-factory-explosion/
