Battery Recalls to Cause Global Shortages
October 16, 2006 3:56 PM
comment(s) - last by
And prices to rise
Over the last several months, a number of top tier companies have been asking customers to return batteries for replacement due to safety concerns. If you have been following the news on
a total of roughly 8 million batteries have been recalled worldwide
, all of which are manufactured by Sony.
However, there is good news and now there is bad news. The good news is that
consumers are being protected from hazards
that could cause severe damages or even life threatening situations. Some batteries were found to set laptops on fire. Fortunately, companies were quick to take action and batteries were swapped rather quickly. The bad news is that so many batteries were recalled and not enough were replaced, causing a global shortage of batteries.
Analysts are saying that battery supply is currently at critically low levels on a global scale. Despite being the world's largest lithium cell manufacturer, Sanyo does not have the capacity to supply replacement orders. Samsung SDI Co. also manufactures lithium cells but it too is running low on supply. Nexcell Battery, a Taiwan-based battery manufacturer that produces batteries from cells supplied by Sanyo and Sony said that cells are now very difficult to come by. Eric Lai, manager at Nexcell Battery said "if we ask for small amounts, we might be able to get supply, but if we order large amounts of more than 2000 cells then you can forget about it."
Because of the global shortage, battery prices are also on the rise. According to analysts, prices have jumped as much as 15 percent. IBM, Apple, Lenovo, Hitachi, Toshiba, Dell, Fujitsu, Sharp and many other companies worldwide announced recalls over the last several months. In fact, it's reported that Sony is in the process of destroying over 43 million cells as part of the overall recall. This is as much as 10.8 million batteries said Eric Yu, manager at ETI Pack in Taiwan.
Sony itself has not revealed publicly how many companies in total have recalled batteries that used its cells, and the company is also tight lipped about how much money this recall is costing. So far however,
Sony has budgeted at least $251 million
for the recall project. Sony now faces stiffer competition from rivals. LG Chem Ltd., South Korea's largest battery manufacturer gained several new customers that were previously ordering from Sony. Celxpert Energy Corp., a supplier for Acer and HP said "we originally bought 30 percent of our battery cells from Sony but have lowered that to almost zero because of quality concerns."
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RE: $251 mil a little low?
10/16/2006 5:45:07 PM
The 10% rate probably applies to a typical recall, but the battery recall has been so highly publicized that the return rate will be much higher. Just like the Firestone tire recall for the Ford Explorer almost certainly had far above 10% return rate.
It probably also doesn't hurt that a battery and tires are fairly high cost items that wear out over time, so we're always glad to jump at the chance of a free replacement for something that would have to be bought soon. If the clock on my microwave were to occasionally reset then I wouldn't bother with a recall fixing it, even if it were annoying, because the microwave will probably work just fine for a long time more.
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