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China Factory Explosion Could Mean Apple iPad 2 Shortage

The shortfall in iPad 2 production from the explosion in a Foxconn plant in China could be over 500,000 units, but is probably only temporary, according it IHS iSuppli.

IHS iSuppli, an Englewood, Colo.-based analyst firm estimated that Friday's explosion in one of Foxconn's Chengdu, China plant could result in a production stoppage of about 500,000 Apple iPad 2s if production is not restarted before the end of June. Any delays beyond the end of June would increase the shortage, IHS iSuppli said.

Reuters on Monday reported that the death toll from the explosion, which was initially reported as killing two employees, has risen to three, and that Chinese government investigators are saying it was caused by an explosion of combustible dust that had collected in a duct at the plant.

IHS iSuppli said that majority of Apple's iPad 2 production takes place at other facilities in Szechuan, China, which has a capacity to produce up to 7.5 million units by in the second quarter. However, to meet expected market demand, Foxconn will need to ship between 7.8 million and 8.1 million units in the second quarter, leading to the risk of an iPad 2 shortage, the analyst firm said.

However, IHS iSuppli said, the impact on iPad 2 production is expected to be temporary, as Foxconn actually has 10 plants in Chengdu, and the explosion impacted only one of them. At any rate, work at the Chengdu facilities had already slowed due to a shortage of the production of certain components due to the massive March Japan earthquake and subsequent tsunami.

Foxconn is one of the largest outsourced manufacturing companies in the world, and is the primary partner in building many of Apple's best-selling electronics products.

However, the Friday explosion is not the first time that Foxconn has had problems with Apple's production. The company last year had to deal with a string of employee suicides caused by what industry observers said is a high-pressure work environment.

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