Explosion Kills 2 at Foxconn Plant

Wall Street Journal ASIA TECHNOLOGY
MAY 20, 2011, 2:19 P.M. E


By JAMES T. AREDDY
SHANGHAI—A large explosion ripped through a Foxconn high-tech plant in southwestern China Friday night, killing at least two people and suspending production at the facility.

Foxconn said the situation has been brought under control by the fire department and the "cause of the explosion is being investigated by local police." The company said it is cooperating with the investigation and production at the site has been suspended until the investigation is completed.

The facility, near Chengdu, has in the past been identified in local media as a manufacturing locatsion for Apple Inc.'s iPad tablet computer. An Apple spokesman wasn't immediately available.

A statement from the Chengdu Municipal government said two people are confirmed dead and 16 injured, including three seriously. The government appeared to rule out foul play, saying the explosion didn't have a human factor.

While it's too early to tell what the exact impact of the explosion will be, it comes at an inopportune time for Apple, which launched its second-generation iPad 2 in March, and is still struggling to meet demand for the tablet device. Analysts following its supply chain said iPad production, though improving, had already been constrained before the incident. On Friday, Apple's website was still showing a shipping delay of one to two weeks.

"Anytime you have an explosion of this nature, you've got to assume that there's some impact on the production line," said Rhoda Alexander, an analyst for IHS iSuppli, though she stressed any impact was likely to be short-term because of the efforts that Foxconn will likely make to quickly resolve the problem.

The Chengdu Municipal government said the explosion occurred in Foxconn's "polishing plant" at around 7 p.m. Experts say it is likely a cleaning stage at the end of the production process after devices are assembled.

Shaw Wu, an analyst with financial service firm Sterne Agee, said he wasn't too concerned because Foxconn has dozens of production lines for the iPad spread across different buildings and sites. "It seems like it should be easy to maneuver around," he said. Shares of Apple were only slightly down from Thursday's closing price of $340.53.

Wall Street currently expects Apple to sell about 32 million iPads in the current year, more than double a year ago.

Details of the explosion are sketchy but video posted to the Internet and broadcast by China Central Television shows black billowing smoke from the massive facility.

A person speaking from a hospital near the plant said injured are being transferred to Chengdu, the nearest big city and the most modern metropolis in that part of the country, as well as facilities in two other places.

"We are working with medical officials to provide treatment to the injured employees and we are working with government and law enforcement officials to contact the families of all employees affected by this tragedy," Foxconn said in its statement, confirming the fatalities and 16 injuries.

The Foxconn plant is located in a large high-technology zone west of Chengdu. Foxconn is the trade name of Taiwan-headquarted Hon Hai Precision Industry Co., the world's largest contract manufacturer of electronics.

A spate of suicides at Foxconn's mega-plants in China last year generated intense scrutiny about its employment practices, and prompted efforts by Foxconn and Apple to ensure workers are treated well.

—Yang Jie and Bai Lin in Shanghai contributed to this article.
Write to James T. Areddy at james.areddy@wsj.com



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