Panasonic to Expand Battery Production in China

APRIL 25, 2011 THE WALL STREET JOURNAL

By JURO OSAWA
TOKYO—Panasonic Corp. plans to build a lithium-ion battery plant in China and boost capacity for such batteries at its existing Chinese plant next year as the Japanese company competes with Samsung Electronics Co., a person familiar with the matter said.

Panasonic, the world's biggest supplier for lithium-ion batteries used in consumer electronics, will build the new factory in the eastern Chinese city of Suzhou. The company also will add facilities at subsidiary Sanyo Electric Co.'s existing plant in Beijing, the person said.

Production of lithium-ion batteries at Sanyo's Japanese plant in Hyogo Prefecture, in western Japan, will move to the new Chinese facilities, the person said Saturday. The Sanyo factory recently stopped production of the batteries but won't close, since it produces other items as well.

Panasonic turned majority-owned Sanyo into a wholly owned unit on April 1 and is realigning production to benefit from the integration. When Panasonic acquired a majority of Sanyo in 2009, the latter's strength in lithium-ion batteries used in consumer electronics was one of the main reasons.
But Korea's Samsung, the world's second-largest producer of such batteries, has since increased its global presence, threatening Panasonic's position. Cost has been a major issue for Panasonic, and the combination of a strong Japanese yen and a Korean weak won has made the competition even tougher.

Panasonic's Chinese production plans come as Japan's March 11 earthquake and subsequent disruption to Japan's supply chain is causing some Japanese manufacturers to review their production systems and consider shifting production overseas permanently. The person familiar with Panasonic's China plans said they were under consideration before the earthquake as part of discussions on how to integrate Sanyo's operations. The person said the earthquake hasn't changed the plans.

China will start taking up a much larger portion of Panasonic's output in a few years, as the company expects a 50% rise in the group's capacity for lithium-ion batteries for consumer electronics by 2015, the person said.

Write to Juro Osawa at juro.osawa@dowjones.com