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Apple Battery Debacle Could Be Big Blow to Sony

By Gene J. Koprowski MacNewsWorld ECT News Network
Aug 30, 2006 4:00 AM PT

The PR nightmare for Sony -- maker of the infamous batteries used in notebook computers recalled last week by Apple -- continues. The Japanese government on Tuesday issued a report, from Tokyo, that indicated there was at least one reported case of a fire in an Apple iBook G4 computer, using the Sony lithium-ion battery, in that country. The government is now probing the matter, raising further troubles for Apple and for Sony, the latter once perceived as one of the world's top-quality consumer electronics makers.

Apple Battery Debacle Could Be Big Blow to Sony

The fire caused a burn to the user's finger. It happened in April when the notebook computer overheated and caught on fire, the Japanese trade ministry said. Elsewhere and earlier, there had been reports of fires with Dell computers using the Sony batteries, but no injuries were reported. Apple said last week that it will recall 1.8 million lithium-ion notebook PC batteries that use battery cells made by Sony.

Battery Pack

The Apple recall follows an even larger one earlier this month by top PC maker Dell. Dell recalled 4.1 million laptops with lithium-ion batteries that employ Sony cells, the primary part of the overall battery pack, said Apple spokesperson Michiko Matsumoto.

Tokyo-based electronics and entertainment conglomerate Sony said the two recalls would cost between US$171 million and $257 million.

Sony had learned of the manufacturing problems with lithium-ion batteries ten months ago, according to Sony spokesperson Rick Clancy. However, the electronics maker staved off recalling the products until the design flaws were connected to real-world fires, said Clancy.

Apparently, small metal particles had contaminated the lithium-ion battery cells, causing batteries to fail and, in some cases, overheat.

Earlier this year, Sony made changes to its manufacturing process to reduce the amount of these particles in its batteries. The company did not think the older batteries were dangerous, however.

"We didn't have confirmation of incidents until relatively recently," said Clancy. "We received reports, but didn't know if these were environmental situations not related to the systems themselves. Different measures were taken to ensure that there were as few of these [contaminant] particles [in our batteries] as possible, and that they were as small as possible."

The bad public image from this PR nightmare may last for a long time, as Sony tries to recoup its high-quality brand name.

Not Optimistic

"It's difficult to take an optimistic view of the medium-term impact on Sony's battery business," said Yuji Fujimori, an analyst with Goldman Sachs, the investment bank. "PCs account for 50 percent of the lithium-ion battery sales on a value basis for Sony. PC batteries are considered a particular area of expertise for Sony."

Sony, Sanyo and Matsushita are the leading brands in the lithium-ion market, and if the latter two companies can overcome current capacity constraints, they could open up a huge market share lead over Sony in the long-term, said Fujimori. What's more, there is also concern that consumers in the U.S. and elsewhere will shy away from Sony batteries, in the short-term, for fear of personal injury as a result of using the products.

The primary issue, internally, for Sony, is now quality control, said Fujimori. This is a concern at a number of leading Japanese brands today, as the Japanese try to cut costs in order to compete in the global market, now that China and Taiwan have established such a huge presence in the electronics world.

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