According to an article on Comcast.net, there was an explosion this past Friday at the Chengdu, China factory of Foxconn Technology Group \u2013 Apple\u2019s contract manufacturer of the iPad. The blast killed three employees and injured another 15.<\/p>\n
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Though the Chengdu factory is one of two Chinese plants that manufacture the iPad, the article notes that production was suspended both at that Foxconn facility as well as \u201cin workshops that do similar work at its other factories in China.\u201d At this point, the length or consequences of the shutdown are not clear, with industry analysts estimating the effect of the blast ranging \u201cfrom minimal to up to 2.8 million units in lost output.\u201d<\/p>\n
Though the iPad is the leader in the newly mainstreamed tablet computer market, a significant supply chain disruption could help competitors such as Blackberry close the gap. Apple is already struggling through what it called \u201cthe mother of all backlogs\u201d in trying to keep up with high demand for the iPads. It is not clear whether that backlog is due to delays of Apple suppliers or an inaccurate forecast from Apple, but it will be interesting to see if Apple\u2019s leading brand cachet will overcome consumers\u2019 love of instant gratification and immediate availability.<\/p>\n
Though the article discusses the pros of a diversified supply base, I reject any notion that Apple wasn\u2019t smart enough to know these. The benefits of single sourcing, such as leveraged volume for minimized cost plus \u201cquality and consistency,\u201d were likely considered worth the risk for supply continuity. It\u2019s a gamble. So far, it is paid off handsomely for Apple.<\/p>\n
Time will tell if last week\u2019s explosion changes Apple\u2019s philosophy. Stay tuned.<\/p>\n
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