Analyst: Foxconn Fire to Have Limited iPad Impact

AAPLA fire at a Chengdu-based Foxconn plant that left three people dead and several injured has raised concerns about Apple’s ability to meet iPad 2 demand. The disaster, according to UBS analyst Maynard Um, shouldn’t have a major impact on Apple’s iPad 2 supply since his checks show the facility built a smaller number of the multimedia tablet.

“Hon Hai acknowledged a fire at its Chengdu plant, which we believe is a secondary location for iPad production,” Mr. Um said. “Our checks and those of our Taiwanese tech analyst Arthur Hsieh indicate less than 20 percent of iPad volumes are produced at the Chengdu facility.”

The fire and explosion happened on May 20, and Hon Hai subsidiary Foxconn is cooperating with a police investigation into the incident.

Sterne Agee analyst Shaw Wu agreed with Mr. Um’s assessment of the incident’s impact on Apple by noting that the iPad 2 is built in several facilities across more than 30 assembly lines.

“Although the issue is unlikely to help supply issues to meet strong global demand, we see this issue as temporary and note there are few companies in our coverage that have as strong an end demand picture,” Mr. Um added.

Mr. Um is maintaining his “Buy” rating and US$495 target price for Apple’s stock. Apple is currently trading at $331.30, down 3.92 (-1.17%).