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Another Explosion at Apple Supplier Plant

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In all of the distractions leading up the Christmas holiday in the U.S. and other countries, readers may have missed the headline regarding another explosion occurring at an Apple supplier plant.

Reuters reported that an explosion occurred on December 17 at a manufacturing facility of Ri Teng Computer Accessory Co., a subsidiary of Pegatron Corp, located in Shanghai’s Songjiang Industrial Park.  According to a statement from Pegatron’s CFO, 61 workers were injured with 23 having to be hospitalized.  Reuters noted a report from the Shanghai city government noting that the explosion occurred at about 3:40pm on December 17, at a workshop on the fourth floor of the factory. The facility was designed to manufacture backplanes for upcoming Apple’s iPad products.

The facility itself was reported to under pre-operation inspection and had not started high volume production support operations for Apple.  According to China’s Yi Cai Daily, the Pegatron facility was slated to produce back panel components for the iPad. As reported by Reuters, the incident involves the third explosion in the last 15 months involving Chinese factories belonging to Apple suppliers.  A previous incident in May involved Apple’s prime contract manufacturer, Foxconn, when an explosion killed three people and injured 15 others.  Similarly, the explosion involved the igniting of aluminum dust particles, a byproduct of the manufacturing process.

While some reports speculate a disruption of supply, the real open question is whether this facility was destined to support new product ramp-up for Apple’s pending release of the new version of the iPad.  Pegatron officials report some damage to production equipment but further indicate that adjustments will be made to minimize any disruption. We would concur with other industry analysts that the impact to Apple supply chain flows should be minor.

The explosion however is sure to ignite even more concerns regarding Apple’s supply partners and their track record concerning both worker safety and the safe control of hazardous production processes, and will fuel more legitimate concerns from worker safety groups regarding overall workplace safety.  Apple provides a very high profile target for these efforts.

Apple’s sourcing and procurement teams will no doubt remain busy over the coming weeks in following-up with supplier inspections including reviews of worker safety and handling of hazardous processes. Having been recognized as one of the top global supply chains comes with a responsibility to have teeth to policies directed at supplier responsibility, worker safety and code-of conduct.

Bob Ferrari

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