Foxconn explosion could mean 500,000 lost in iPad 2 shortage

Foxconn’s factory disaster could lead to a loss of 500,000 Apple’s iPad 2 in the second quarter’s production lines.

That’s the stark warning from IHS iSuppli, which has said that the explosion that occurred at the Chengdu plant means 500,000 tablets could be lost.

Total iPad 2 production capacity at the Chengdu site amounts to about 500,000 units per month. If the explosion means the company is forced to give the green light to a production shutdown until the end of June, a production stoppage of half a million units could be the result.

Should the production suspension last longer, the impact could be even greater.

However, fanboys shouldn’t sweat just yet, as the decision will depend on the outcome of a still-pending investigation.

They’ve also got the reassurance of bigwig Terry Gou, who unsurprisingly has said the explosion will not delay the production of the iPad in the third quarter.

IHS iSuppli isn’t as confident, claiming that the results all hinge on the ongoing investigation into the state of the plant. Whatever the outcome, it says its own research has indicated some impact on production in the second quarter is likely.

This is despite most iPad 2 production taking place at another Foxconn facility in Shenzhen, which has the capacity to produce 7.5 million units in the second quarter.

IHS iSuppli believes that the plant may not be able to compensate for all the lost output in the second quarter at the Chengdu site.

Instead, it warns that to keep up with demand, Foxconn must manufacture a larger quantity of devices, at between 7.8 and 8.1 million units during the second quarter. This means Foxconn’s shipments will fall short of expected levels between 300,000 and 600,000 units in the second quarter. It’ll be a great opportunity for staff to work that well-paid overtime.

IHS iSuppli’s arguments are bolstered by Wall Street analysts, it says. The disaster could in fact lead to production falling by as much as 2.8 million units. Manufacturing could drop by 36 percent in the third quarter, though IHS iSuppli believes this is “too pessimistic”.

Instead, the impact of the disaster will only last in the short term, given that there are more than 10 factories in the Foxconn Chengdu plant, and because the explosion occurred on the third floor of one of the buildings.

Although Apple will get away with it relatively lightly, the spotlight could turn up some interesting ideas on Apple’s corporate responsibility. It’s no secret Foxconn is a model manufacturer.