Brian White, managing director at Ticonderoga Securities said he believed Hon Hai, the parent company of Foxconn, would deflect any production issues by shifting the "25-30 percent" of iPad 2 units produced at the damaged plant in Chengdu, China, back to its main manufacturing facility in Shenzhen.
"Our current view is that this tragedy is likely to have some impact on iPad 2 production; however, we believe Hon Hai has the flexibility to shift manufacturing back to the Shenzhen facility if necessary," White wrote. "As such, we currently don't expect a material impact to Apple's iPad 2 shipments, but we will continue to monitor the situation."
Last Friday's explosion killed two and injured at least 16 at the Chengdu plant, which opened in October to relieve some of the manufacturing pressures from Foxconn's Shenzhen plant at the southern tip of China. According to Hong Kong newspaper South China Morning Post, labor is about one-third cheaper in Chengdu and other interior cities.
Following investigations into working conditions at the Shenzhen plant that were instigated because of a spate of factory worker suicides last spring, Foxconn built the Chengdu facility and was in the process of transitioning some of its iPad 2 production there, White said. Citing DigiTimes, he added that the Chengdu facility produced only 25-30 percent of all iPad 2 units in April. Furthermore, it produced 600,000 iPad 2 units in the tablet's first month and was targeting 3-4 million units in the third quarter (June-September). White said he thought Foxconn was planning to eventually assemble the majority of iPad 2s in Chengdu.
Last Friday, Mike Abramsky of RBC Capital predicted that iPad production would drop as much of 36 percent in the third quarter, due to the explosion. He did not mention the possibility of shifting production back to Shenzhen.
Adding to iPad 2 demand, over the weekend around 300 Apple retail stores around the world were retrofitted with iPad 2 displays. White estimated that the Fifth Avenue flagship Apple store in Manhattan alone uses up 150 iPad 2s for display purposes.