Apple supplier Pegatron hit by China plant blast
Mon Dec 19, 2011 2:56pm EST
By Clare Jim and Argin Chang
TAIPEI (Reuters) - Apple Inc supplier Pegatron Corp's plant in Shanghai was rocked by an explosion over the weekend, the latest in a series of incidents that spotlights safety concerns at factories in China.
The explosion at the plant, which belongs to Pegatron subsidiary Riteng Computer Accessory Co and is located in Shanghai's Songjiang industrial park, injured 61, including 23 workers who had to be hospitalized, according to Pegatron.
"The factory has not started operations yet. Part of the facility is still under pre-operation inspection and part is running trial production," Pegatron Chief Financial Officer Charles Lin told Reuters on Monday.
The accident brings the spotlight back onto safety concerns over factories in China that make most of the world's computers and other electronic devices, and over Apple's supply chain, which has come under criticism from the Chinese government and labor and environmental groups.
This is the third explosion in the last 15 months in Chinese factories of Apple suppliers. Hon Hai Precision Industry Co Ltd, Apple's top manufacturing partner, has had two incidents at China plants this year.
In May, a large explosion rocked a Foxconn factory in the western Chinese city of Chengdu that is linked to Apple's iPad 2 production, killing at least three people and injuring at least 15 workers.
The Pegatron plant was slated to produce back panel parts for the iPad 2, according to China's Yi Cai Daily. Pegatron declined to disclose details of the plant's customers but a source with knowledge of the matter said the facility would be partly used to make products for Apple.
But the risk of disruption to Apple's supply chain due to the explosion in Pegatron's factory is minimal, Shaw Wu, analyst with Sterne Agee said.
"It's a setback but it's relatively minor," Wu said, adding that Pegatron was a third-tier supplier for Apple. "The Foxconn (Chengdu) explosion was a much bigger deal but still they were able to work around it fairly quickly."
Apple said it was investigating the explosion.
"Our hearts go out to the people who were hurt in Songjiang. We are working closely with Pegatron to understand the cause of this accident," Apple spokeswoman Carolyn Wu said.
SAFETY RECORD UNDER FOCUS
The safety record of factories making parts in China has been under the microscope of various nongovernmental organizations.
Apple's main contract manufacturer, Foxconn, especially has come under heavy scrutiny. Apart from the accident in Chengdu, another of Foxconn's plants in the eastern Chinese city of Shandog caught fire last September but caused no casualties.
The supplier also had a rash of suicides at its plants last year, blamed by labor groups on overwork and poor conditions.
Chinese state broadcaster CCTV aired a program on Oct 16 in which its reporters visited suppliers that Chinese environmental groups had said in August were thought to be doing business with Apple and had lax environmental standards.
The August report, by a coalition of Chinese environmental organizations including Friends of Nature and the Institute of Public & Environmental Affairs, said 27 companies thought to be Apple suppliers had severe pollution problems from toxic gases to heavy metal sludge.
Taiwan's Catcher Technology Co Ltd, a casing supplier for Apple, was ordered in October to close a plant because of complaints about pollution.
But the companies are not the only ones to blame.
"I don't think the international corporates are doing any better or worse than the local companies," said labor activist Han Dongfeng of China Labor Bulletin, a nongovernmental organization in Hong Kong.
"It's the many shortcomings in the Chinese labor laws and institutions that lead to poor welfare of the workers."
Pegatron said over the weekend that there was some damage to machinery but it could make adjustments to the facility to minimize the impact on operations and revenue.
Riteng Computer declined to comment.
The Shanghai city government said the explosion occurred at about 3:40 p.m. on December 17 at a workshop on the fourth floor of the facility. It put the number of injured at 57, of whom 23 had burns and were hospitalized for further observation, but none had life-threatening injuries.
Shares of Pegatron ended down 1.71 percent on Monday, trimming losses from a 6.7 percent decline at the open. The broader market fell 2.2 percent.
Pegatron CFO Lin said resumption of operations would depend on the government's decision, and an investigation report by the Shanghai city government was expected later on Monday.
(Additional reporting by Poornima Gupta in San Francisco, Samuel Shen in Shanghai; Editing by Jonathan Standing, Phil Berlowitz)