Battery makers to gain from Dell recall

Simplo Technology confirmed last week that it had received an urgent order from Dell, while DynaPack International could also be in line to supply the firm

While the global battery recall announced by Dell Inc last week was not expected to have much impact on Taiwanese consumers, it will benefit domestic notebook battery makers, industry watchers said.

"There will be more business opportunities for local battery makers after the recall," said Albert Chen (陳立恆), an analyst with research firm Market Intelligence Center (MIC, 資訊市場情報中心).

Dell, the world's top computer maker, used to purchase batteries mainly from Japanese makers such as Sony Corp. But after the company announced the largest-ever safety-related battery recall in US history, Dell will turn to Taiwanese suppliers, Chen said.

One apparent beneficiary will be Hsinchu-based Simplo Technology Co (新普科技), the world's second-largest notebook battery maker after Japan's Sanyo Corp.

Simplo confirmed last Tuesday that it had received an urgent order of 400,000 battery packs from Dell after the US firm issued a recall notice last Monday for 4.1 million lithium-ion batteries used in its Latitude, Inspiron and Precision laptops.

The orders will be shipped within two months, and will boost Simplo's shipments in the current quarter, which the company last month said would increase by 20 percent over the previous quarter.

Simplo counts Dell as its second-biggest customer, after Hewlett-Packard Co.

Simplo last year shipped 111 million battery packs, commanding a 20 percent share of the global market.

The company said it aims to boost its market share to 24 percent this year, and expand it to as much as 35 percent within three years.

Smaller player DynaPack International Technology Corp (順達), whose battery packs received Dell's certification this year and will start to churn out shipments this month, might also benefit, market watchers said.

The batteries affected by the recall showed a tendency to overheat and burst into flames. They were sold from April 2004 until last month and were made by Sony in Japan and assembled in China. The batteries were sold individually for US$60 to US$180.

Analysts said the recall would affect up to 2.7 million laptops sold in the US and 1.4 million sold overseas.

Dell's public relations office in Singapore told the Taipei Times it did not have the figures for Taiwan regarding the breakdown of how many battery units were affected or how many consumers had approached them for a replacement.

However, observers said the recall would not jeopardize its brand image here, as Dell had acted swiftly.

"The recall will certainly have a short-term impact on its image, but it depends on how the company deals with the crisis. In this case, Dell is safe," said Amy Teng (鄧雅君), an analyst at Gartner Inc's Taiwan office.

Dell's small user base in Taiwan is another reason that the company will not be affected much, she said.

Dell's major clientele for notebook computers are enterprises, not general consumers, and it has ranked outside the top-five in terms of sales locally.

The company sold 2,100 notebook computers in Taiwan in the second quarter, accounting for a 1.3 percent market share, according to International Data Corp's (IDC) data.

This is a far cry from closest rival Sony, ranked No. 6, which sold 7,100 laptops and had a 4.5 percent share during the same period.

For the whole of last year, Dell sold 14,700 units, compared with 24,000 sold by Sony, and 254,000 by the No. 1 player Asustek Computer Inc (華碩電腦), according to IDC data.

"Taiwanese and most Asian consumers prefer to shop in brick-and-mortar stores to chat with retailers and negotiate bargains," Chen said.

At the Taipei Computer Applications Show -- the largest summer computer products fair -- early this month, Dell had booths to showcase its latest offerings but did not create a strong bond with buyers, Teng said.

"We could see most buyers pushing trolleys and carrying home their purchases right away, but those who order Dell's products have to wait seven to 10 days," she said.

In contrast to major local rivals such as Asustek or Acer Inc, Dell applies its direct-sales model here, as it does in its major markets in the US and Europe.

"The direct sales business model might not suit every market but Dell is sticking to its strategy here, which has affected its performance," Teng said.

source: Taipei Times