Battery explosion 'not serious' for LG

The share prices of LG Electronics and affiliated battery maker LG Chemical fell last week after Korean TV channels broadcast video of the event. Neither share price has returned to its previous level.

"LG Chemical's share price plummeted on 9 January, weighed down by an incident involving the explosion of one of its rechargeable batteries," said Hyundai Securities analyst Daeyong Park in a briefing to investors shortly after the event.

"Given the tight supply of cylinder-type batteries for notebook computers, however, the incident is not likely to lead to a suspension of production and a recall that would result in large-scale losses."

The video appears to show an LG Electronics notebook PC in flames after its battery overheated.

The incident was not serious for LG Electronics, Korean analysts said, because notebook PCs are a relatively minor product line for the company at fewer than 750,000 annually.

LG Chemical is one of the world's five largest rechargeable battery manufacturers, with a market share of approximately 10 per cent by shipment volume. Market leader Sanyo holds almost a third of the global market.

LG ships 20 to 30 million rechargeable battery cells per month. The company has doubled its output over the past two years, achieving a significantly faster growth rate than its larger Japanese competitors.

LG's battery division was expected to help drive a recovery in profits at the company in 2008, according to a report published by Korea Investment and Securities Co in November.

The cylindrical lithium ion batteries have an operating profit margin of 15 per cent, according to Hyundai Securities.