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The Fireworks Factory is a large industrial building located in Gongmen City. It was once a family business run by the Peacocks for the manufacturing of fireworks (which they had invented) to be used in city festivals and celebrations. But after Shen came into power in Kung Fu Panda 2, he took over the family business and turned the factory into a foundry for his cannons, using the powder from the fireworks as firepower for the cannonballs.
As its name suggests, the Factory was used to manufacture fireworks. When Lord Shen returned to Gongmen City and took control, he had his soldiers take the new enormous supply of metal and gunpowder and manufacture dozens of cannons within the Factory, with Shen overseeing the process.
The Fireworks Factory made its next appearance when Shen escaped from the Tower of Sacred Flame after Po and the Furious Five broke out of their chains and destroyed the original cannon. After reaching the Factory via flight, Shen ordered his soldiers to fire his other cannons directly at the tower, aiming to bring it down with Po and the Five inside. They managed to escape, however, and an infuriated Shen ordered his soldiers to prepare the ships and the cannons to begin his conquest earlier than planned. Boss Wolf summoned every wolf in the city to head straight to the factory in order to begin preparations.
The Five later infiltrated the factory, where they saw for themselves just how many cannons Shen had created. Realizing that China would fall should the cannons leave the building, the Five decided to destroy the factory by pushing a cart full of powder kegs inside. Their plan was foiled when Po also infiltrated the factory (despite Tigress' order to stay in Gongmen Jail) in order to confront Shen himself, and the Five were forced to douse the kegs to prevent Po from getting killed in the explosion. During their fight, Shen managed to lure Po in front of his largest cannon, which upon fired sent Po flying out of the factory to his apparent death.
After this battle, Shen had all of his cannons transported out of the factory and onto his ships.