It's difficult to even contemplate the extent of destruction in Japan after the earthquake, tsunami, and nuclear crisis. The loss of life and livelihood is horrifying. There will undoubtedly be a long recovery process for infrastructure and industry, and there is a long discovery process for the implications on businesses large and small.
While the effect on the global vehicle market has been well publicized, there has also been a great upheaval in the electronics industry since Japan is the world’s third largest economy and one of the highest volume producers of electronics goods and components. Japan is a crucial site for the manufacture of many parts for lithium-ion (Li-ion) and other battery packs. Historically, most cells have been made in Japan.
Many parts in batteries are unique and rarely dual-sourced, so the industry has several weak points in the supply chain and the potential for massive shortages if any one part is unavailable. Everything from parts inside the individual cell to full large-scale electric vehicle packs are manufactured in Japan, so the effect on the battery industry and end products like consumer electronics will be far reaching.
Sony’s situation is probably the best publicized and the most notable. Sony, Sanyo, and Panasonic make up a very large part of the Li-ion cell supply. Two factories that produce Li-ion rechargeable battery cells in Fukushima belong to Sony Energy Device, and they were immediately shut down after the earthquake. These factories probably manufacture about 3 million cells a week.
The decrease in battery cell supply may lead to a rise in battery price on the global market, which could translate into more expensive prices for everything from medical equipment to laptop computers. The battery industry has seen the effect of halted production before—after a fire at a Panasonic cell factory a couple years ago, and after the very public laptop fires a couple years before that.
There are only a few large cell manufacturers, and the effect of having one of them lose capacity is far reaching. The laptop fires led to concern about supply and the allocation of large amounts of cells to the top tier customers. Since most cells are used by large volume consumer electronics, the effect on smaller customers, like those with military, medical, and industrial applications, was worse than higher prices—overall availability was a large concern after Dell and HP bought up most of the cell supply. We have yet to see this effect from the Japan disaster, but it is a possibility.
Key electronic components in smart battery packs, the fuel gauge, and its accompanying safety chip are also manufactured in Japan. Texas Instruments (TI) is the biggest supplier of these chips. TI’s Impedance Track line of gas gauges, manufactured by the company’s analog devices group, has a corner on the modern smart battery market.
TI announced on March 14 that the earthquake in Japan badly damaged the company's semiconductor fab in Miho, about 40 miles northwest of Tokyo. This fab produced about 10% of TI’s output as measured by revenue in 2010, of which more than a third was digital light projection (DLP), but the remainder was analog devices. There are not plans to return to full production at this plant until the middle of July at the earliest.
Those familiar with the battery industry know that it is not uncommon to have the silicon on allocation; 26-week lead times were already common for many parts, so this natural disaster has the potential to lead to an even more challenging supply chain.
While much of the Li-ion cell and battery pack manufacturing has been moved to China from Japan, many of the key materials within the cell, such as the anode and cathode powder, the separator, electrolytes, and binders are still almost exclusively made at specific plants in Japan. This could be the bigger problem.
For example, Kureha has a 70% share of the global market for an anode binder used in Li-ion batteries. The only place where Kureha makes this material is at its Iwaki plant in Fukushima prefecture, an area greatly affected by the earthquake, tsunami, and radiation leaks. The plant has been shut down since the quake. In an interview with The Wall Street Journal, Takao Iwasaki, Kureha’s chief executive, said the disasters would accelerate the company’s plans to move more of its production overseas.
Rolling blackouts are still an ongoing concern. Tokyo Electric Power Company (TEPCO), Japan’s largest electric utility, and Tohoku Electric Power Company, based in Sendai, have structured rolling power cuts throughout their areas of coverage because of reduced supply with the shut-down nuclear facilities. TEPCO supplies electricity to Tokyo and seven surrounding prefectures with relatively large populations, including Kanagawa, Saitama, and Chiba.
TI announced it plans to restart production at its plant in stages, beginning with several lines in May. However, the company stated that the schedule could be delayed if the region’s power grid is unstable or if further complications prevent the restart of sensitive semiconductor equipment. Efforts to get the battery industry back up and running at full capacity depend on the unfolding nuclear crisis.
The Big Picture
Japan is facing its worst crisis since World War II and one of the worst natural disasters ever. Almost 28,000 are dead or missing and the government estimates the material damage alone could top $300 billion, making it by far the world’s costliest natural disaster. Li-ion battery manufacturing for consumer electronics is a relatively small problem given the scope of other issues. But when one considers that there are probably many niche industries being affected similarly, it seems that the world will have a long and complicated recovery.