Is "its" ambiguous in "This bucket is produced in a factory overseas. Its capacity is small"?

This capacitor is produced in a factory overseas. Its capacity is very small.

Ans: Yes, it is also ambiguous, wordy, and obscure. The term "Its" can also refer to "a factory overseas" because the word "capacity" can refer to production. However, somebody who is not familiar with electronics may understand that "Its" refers to "This capacitor."

However, the word "oversea" is adjective. It should be "an overseas factory." Right ?

Actually, many sources in electronics use the words Low Capacitance and High Capacitance. They have never used the words “small capacity”, “big capacity”, or “large capacity”.

I prefer the use of “relative clause” as follows.

This capacitor which is produced by an overseas factory has very low capacitance.

With participle phrase, the sentence can be like this.

This capacitor produced by an overseas factory has very low capacitance.

PS. You should study the collocations from the reliable sources like international journals in electronics.

For examples:

If a capacitor has very high capacitance, then a small difference in plate voltage will lead to a huge difference in the number of electrons (total charge Q) on the two plates [1].

Capacitors are also made from thin sheets of mica, with silvered surfaces; these have low capacitance [2].

References

[1] Khan Academy. https://www.khanacademy.org/science/in-in-class-12th-physics-india/in-in-electrostatic-potential-and-capacitance/in-in-circuits-with-capacitors/a/capacitors-article

[2] Elsevier Website https://www.sciencedirect.com/topics/engineering/capacitance

I also believe it's ambiguous. Definitely. The fact is, at least in my mind, that factory could have a small capacity and the bucket could have a small capacity. It's completely unclear to me which one does.

It's not ambiguous, but clearly refers to the factory.

Because: This bucket is produced ... sounds like a generic noun and does not go well with the third person singular. This is often not considered, and therefore the sentence would appear ambiguous and should be reworded.

Because: It is of course perfectly OK to say the dog is the most beloved pet. It is ..., but it is unusual to say ?The dog is carnivorous, if Dogs are would be preferable. The generic definite is really only used to agree in number with the argument, I suppose.

Overall, it makes too little a difference to say This bucket was produced ..., and thus it is overall ambiguous, anyway.

PS: I now read the linked question, which also talks about pronouns. If one expects any reference to the factory require a relative pronoun, one can tell from intonation whether it is relative or rather personal. But this only really works in speech, and probably not without occasional bloopers.

A) The purpose of the capacitor is not to provide energy. Its capacitance therefore does not have to be large.

B) This bucket is produced in a factory overseas. Its capacity is small.

The examples above do no more than demonstrate that the importance of context in English cannot be overstated.

Neither of the example would, in real life, be said on their own: both would have context. We know this as "capacitor" is preceded and modified by "the", and "bucket" by "this". Both determiners indicate prior context.