There is no choice for Korean battery manufacturers to maintain battery cell price with sacrificed market shares. The battery price of Korean manufacturers has decreased for three straight quarters in order to obtain the market share and compete with Japanese manufacturers. However, they could not avoid changing their pricing strategy, especially when capacity shortage occurred because of the quake. Based on the survey from EnergyTrend, a research division under TrendForce, cylindrical battery market trend in 2Q11 is summarized as below.
Due to the Earthquake in Japan, Demand for Battery Cell Inventory Stocking Has Risen
It is estimated that cylindrical battery cell market demand reaches around 700 million units per year, following prismatic cell for the mobile phone application. Korean manufacturers started to launch a series of price competition strategies starting 2010 in order to obtain the market share. Therefore, Samsung has become one of the biggest battery cell suppliers for the NB market, and Japanese manufacturers’ market share has been affected. However, Korean manufacturers have adjusted their business strategies to focus on profit margin since 2011. In addition, part of battery material supply was affected by the Japanese earthquake. Hence, system manufacturers increased their demand for low-cost inventory and raise the inventory.
Chart 1. Battery Industry Development in Response to the Japanese Earthquake
Low-cost Inventory Attracted Manufacturers
Taiwan’s battery module suppliers play a very important role in the NB market supply chain. Also, it is estimated that Taiwanese battery module manufacturers have at least one-month inventory in stock, and the increased demand from the quake has made them key suppliers of the supply chain. According to EnergyTrend’s estimation, the battery pack shipment of Taiwanese manufacturers for the NB application has increased by 15%~40%, which outperforms the traditional slack season in the second quarter. (Chart 2)
Chart 2. Cylindrical Battery Module Supply in 2Q11
Product Strategy Starts to Change
After adjusting the pricing strategy, Korean battery manufacturers not only increased battery cell price by 5%~10%, but also changed their product focus from the customer product area (from 95% to 70% at most) to the power product area (Chart 3). Popularity of Japanese manufacturers has risen due to stable price, leading to sales growth in the NB market which Japanese manufacturers have long harvested in. To sum up, Korean manufacturers decided to increase their focus on power products, in order to ensure satisfactory profit margin, while Japanese manufacturers chose to support NB products, in order to maintain their customer relationship and obtain high capacity utilization rate.
Chart 3. Japanese and Korean Manufacturers’ Product Strategies in 2Q11
In summary, EnergyTrend believes in 2Q11 that:
1. Cylindrical battery market price has increased in April and May, but spot price in June is still unsettling between buyers and sellers. The market dynamics in June will determine the market development for the 3Q11.
2. Korean battery cell manufacturers tried to maintain the profit margin, while Japanese manufacturers obtained market share in 1H11. Brand vendors’ business strategies are to become the key factor for market development.
3. Due to high profit margin in the power battery field, the focus is to see how Korean manufacturers weigh trade- offs between profit margin and market share.