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NEWS > BUSINESS > FATAL EXPLOSION TO IMPACT IPAD 2 PRODUCTION, SALES
FATAL EXPLOSION TO IMPACT IPAD 2 PRODUCTION, SALES
May 24 2011
Chengdu, China – It really is a remarkable thing in the modern world that we are able to produce products on one side of the world and sell them for reasonable process on the other side. A hundred years ago, such a thing would have been unimaginable.
Products were made in the neighbourhood in which they were sold for the most part and anything created in a far off land was either prohibitively expensive or just completely unreachable. Now, virtually everything we possess is made in a far off land.
Of course, the majority of those products are manufactured in China. That country has positioned itself as the centre of the world’s manufacturing industry, utilizing cheap labour and minimal employment standards to produce inexpensive products, and expensive products at cheap prices. That in turn has allowed foreign companies to thrive and generate profits that no one could have imagined before the rise of foreign manufacturing. True, many low end products do come from China, but so do things like iPods and PlayStation 3’s. Virtually everything that can be made cheaply is done so, and most of it in China. Until last week, that meant a lot of money for foreign companies including Apple who has long relied on Chinese manufacturer Foxconn to produce generate it’s billions of dollars. Now though, an explosion at one facility which killed three and injured fifteen, has halted production of the company’s iPad 2, potentially damaging earnings and stock prices.
“We are currently involved in investigating the incident at the Chengdu facility, in cooperation with Foxconn officials and local police. At this stage we are unsure as to the cause of the explosion but we expect a resolution in short order,” said an Apple spokesperson. “Our goal is to make these facilities a safer place to work. While this incident may impact supply in the short term, we do not expect it to damage our bottom line. However, if these types of incidents are not prevented in the future, our earnings could be impacted.”
The entire Chengdu facility has been shut in order to conduct the investigation.
“These types of disruptions are not uncommon with Foxconn but the benefits still dramatically outweigh the deficits. The level of profit Apple can make while manufacturing in China is so much greater than it is in any other country and so they can tolerate the occasional explosion or mass suicide. These are the costs of doing business,” said Scrape TV Business analyst Ken Green. “It’s the investigations that are really causing the problem and if they are able to prevent those they will be able to keep production up, and of course related profits. As for the workers, well there are a whole lot of people in China and it doesn’t take a whole lot of training to get them up to snuff. I don’t imagine it that will impact production once the investigation ends.”
The injured workers are reportedly already back at the facility, resting in their bunks.
“We may see a little dip in stock prices in the wake of this shutdown, but this is not 
the only plant where the company puts together the iPad. They will shift some of that production to other facilities and supply will not be significantly constrained. I don’t think it will impact the bottom line with any significance,” continued Green. “This is one of the many advantages of working in China. Cheap labour, quick investigations, no lawsuits, and all kinds of money. I don’t think it will be long before we see the assembly lines moving again and iPad supply where it is supposed to be.”
Apple’s shares dipped slightly, 0.24 per cent, following the explosion.
William Ashford, Business Correspondent
NEWS > BUSINESS > FATAL EXPLOSION TO IMPACT IPAD 2 PRODUCTION, SALES
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