By Poornima Gupta
SAN FRANCISCO (Reuters) – Apple Inc is investigating an explosion that killed two people and injured 16 at a Foxconn factory said to produce the popular iPad 2.
The official Xinhua News Agency reported a large explosion rocked the Hongfujin Precision Electronics plant in a high-tech industrial zone west of Chengdu, the capital of Sichuan province, on Friday evening.
Local officials are also looking into the cause of the blast. Apple shares closed down 1.56 percent at $335.22 on the Nasdaq, which saw a broad sell-off on euro-zone debt worries.
The explosion in a key factory owned by Foxconn International Holdings Ltd -- Apple's main manufacturing partner -- could affect the supply of iPads and investors were watching closely. Apple spokesman Steve Dowling said the company was assessing the situation.
"We are deeply saddened by the tragedy at the Foxconn plant in Chengdu and our hearts go out to the victims and their families," he said. "We are working closely with Foxconn to understand what caused this terrible event."
Foxconn representatives did not immediately respond.
Ticonderoga Securities analyst Brian White said Foxconn's Chengdu factory makes a lot of iPads because some production had been shifted to that facility from factories in the southern Chinese city of Shenzhen.
Apple's iPad 2 commands 80 percent of the burgeoning tablet market in which Motorola Inc and Samsung Electronics Co Ltd also compete.
Apple sold 4.69 million iPads last quarter and is scrambling to meet staggering demand for the mobile device, but is heavily backlogged. Executives had expected production to ramp up during the present quarter to meet demand.
The plant explosion is the latest setback for Foxconn, the world's largest contract manufacturer and an affiliate of Taiwan's Hon Hai Precision Ind Co Ltd.
The Taiwanese company made headlines last year after reports emerged about poor working conditions at factories in southern China, which critics say may have helped drive several employees to suicide.
The company pledged to improve employee welfare.
Facing higher wages in the southern China manufacturing belt, the scene of labor disputes last year, some Taiwanese manufacturers have opted to shift some operations to the country's interior, where costs are lower.
Foxconn also has plants in North America and Mexico, as well as in European countries, including Slovakia and Poland.
(Reporting by Poornima Gupta; editing by Edwin Chan, Lisa Von Ahn, Richard Chang and Andre Grenon)
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