Abstract
LG Chem's battery cell factory in Ochang, Korea, suffered a fire in early March, 2008. Losses caused by the fire and schedule for the factory to resume operation are still being estimated; however, one thing for sure is that the accident will affect supply and demand in the worldwide notebook PC market for 2008. This report analyzes and forecasts notebook PC supply for the full year 2008 on the basis of worldwide leading battery cell suppliers' production strategies and worldwide notebook PC demand.
Impact on Worldwide Notebook PC Shipment and Vendor Profits
Shortage of notebook PC battery cell supply and the LGC factory fire will cause battery supply to fall short of demand in 2008, expect for the third quarter. In order to ensure shipment to the end market, some brands or contract makers are likely to shift orders from Japanese and Korean battery makers to Chinese makers. However, as battery packs need quality certification and makers have to prepare material ahead of production, shifting orders will have few benefits for brands' shipment in the second quarter.
When battery cells are ready, they are usually shipped directly from the plants to battery pack makers by air transport. Due to the fact that such a supply model will result in a low secure inventory level, the fire at LGC's factory in early March has affected shipment in March.
Although shipment by air transport reduces delivery time, it has increased transportation costs. As the price of cobalt, the main material for battery cells, has doubled since February 2007, prices of batteries have also increased by 10%.
Further Delay in Low-price Mini Notebook PC Shipment
Looking back to 2007, there were panel supply shortages, and panel prices were rising continuously. As many application products featuring small- and medium-sized panels increased shipments during the peak season, including consumer electronics products such as digital photo frames and personal navigation devices, panel makers tended to supply to these consumer electronics vendors. Low-price mini notebook PC vendors, despite having landed orders from their customers, felt an impact on their shipment.
With panel makers continuing to enhance small- and medium-sized panel utility rates, shipment delay resulting from panel supply shortage in 2007 was expected to come to an end in 2008. However, the fire at LGC's factory in March has disturbed low-price mini notebook PC vendors' product strategies, casting a shadow on their shipment schedule. As low-price mini notebook PCs use the same battery cells as mainstream notebook PCs, it is expected that mainstream notebook PC shipment delay caused by cell supply shortage will worsen low-price mini notebook PC shipment as low-price mini notebook PCs tend to be placed at a lower priority by battery suppliers.