TT-388 -- Are lithium batteries safe? ebiz news from Japan

General Edition Sunday, August 27, 2006 Issue No. 388

- What's new
- Services lineup
- News
- Candidate roundup
- Upcoming events
- News credits

Logistics Factility Tours

So Fast Offering Tours of Its Warehouse

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Phone: 03-5753-3101

Logistics tour dates:
Sep 1st through Oct 31st
Times: 8:45a.m. - noon


Back at the end of June (Terrie's Take 380), we carried a news item about a Dell laptop that exploded into flames at a conference here in Japan and which was caught on video.

Little did we know at the time, but this presaged one of the largest recalls of electronics products in history, starting with 4.1m notebooks from Dell and followed ten days later with 1.1m notebooks from Apple.

The batteries were made by Sony Energy Devices, and we're sure that many were wondering just how severe the fall-out would be in terms of Sony's stock price after the two recalls. To be sure, there was a hit on the stock price, but it wasn't as bad as many expected, with the stock dipping just 5% after the both incidents.

This got us to thinking, how is it that a faulty product which could literally bring down an airplane (think fire in an overhead storage compartment) have such a small effect on Sony's shares?

We think there are three main reasons:
1. Although the news was very visible and negative, the battery business is just a fraction of the company's overall sales, and overall Sony appears to be on the mend. Investors have factored in the recall cost and decided the company can get past it.

2. The battery problem can be partially blamed back on to the manufacturers -- on the basis that their design to do rapid recharging of batteries pushes the performance envelope for Lithium-ion cells too far.

3. The quality of PR spin. Sony has put out that although the battery problem is "rare," the company and its partners are concerned about public safety and are playing on the safe side by conducting a general recall.

Let's look closer.

Firstly, we see the small stock market impact of this very negative problem as being an excellent indicator of how well the company is doing again. Clearly if the company was still down on its knees instead of being on the mend, then the doomsayers would be having a field day at the moment.

The fact that they are not shows that the market anticipates that even if Sony has to eat all the potential JPY39.4bn
(US$342m) cost of replacing the batteries, it may still turn a small profit next quarter thanks to booming sales of other devices.

So the markets, it appears, are unphased.

The technical causes of the batteries overheating were well explained in a recent Nikkei interview of a professor at Kyoto University, who is an expert on battery technology.
He points out that there are two possible, complementary reasons for the Dell notebook fires -- one of which offsets some of the blame from Sony.

Firstly, there was the well publicized manufacturing failure, consisting of metal particles that were introduced into the battery electrolyte and which can eventually lead to internal short circuits and thus overheating. Sony takes full responsibility for this.

The second reason, however, is probably not so well known, but allows Sony to share the blame with with Dell and Apple.

Apparently some PC designs by both companies push the Lithium-ion battery technology past its safe point by virtue of the fast recharging cycle the makers have implemented. According to the professor, when Lithium cells are exposed to rapid charging, they can form metal fragments through chemical reaction betwen the electrodes and a high concentration of Lithium atoms.

Once formed, these conductive metallic fragments can penetrate the plastic separator between the positive and negative electrodes, causing major short-circuits and thus catastrophic over-heating. This failure in circuit design is probably why Sony investors are betting that the company won't have to cover the entire cost of the recall.

[Continued below]

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OK, so what about public perception? Aren't people worried about laptops blowing up in their hands? Are they buying less Sony products?

The media has it that the number of batteries to actually combust has been less than 5 units among 5m machines, and thus by inference the level of malfunction is probably acceptable. This almost lets Sony off the hook, but it is worth noting that the company has had overheating problems in its batteries before, due to manufacturing errors, and resulting in a general recall of InfoLithium cells back in
1999 and 2000. In that case also, there was very little negative reaction from the public.

Clearly then, Sony has been doing a great job with its PR and damage control in general.

In the press release put out on Sony's global site, phrases such as, "Sony is committed to the safety of consumers and supports this recall" and "The recall arises because, on rare occasions..." all represent a masterful spin on the fact that even though the fault is there, Sony is going the extra mile to make sure that we the consumers are protected. Of course, the company has NO choice but to recall the batteries anyway since a US federal agency has told them to -- but at least our safety comes first, sort of...

But perhaps Sony's shareholders and customers should not be sanguine. Already a Washington DC personal injury law firm called Schmidt & Clark have on their website an appeal for consumers who have been injured or have suffered losses due to defective batteries in Dell notebooks. The site lists several known incidents which have had the makings of a major damages suit but which were luckily caught in time.

Such an incident was a notebook at a food processing plant which caught fire and required a fire brigade response.
Another was a truck exploding in Nevada after a glove box fire (where the PC was located) ignited gun ammunition which then shot out the gas tank! A third was in February when a UPS cargo plane in Philadelphia caught fire for unknown reasons... but coincidentally the airplane was transporting lithium-ion batteries.

Lithium-ion batteries are used in millions of consumer electronics devices, not just laptops. If it is found that the technology in general is inherently unsafe, especially in the presence of perhaps more unexplained UPS-type fires, then this could have major repercussions for Sony. The problem would no longer be the batteries themselves but the fact that without the dense, compact energy that Li-ion can provide, most modern electronic gadgets won't work.
And that's a problem.

This is not a far-fetched scenario. For example, the Schmidt & Clark website points out that among the products recalled by the US Consumer Product Safety Commission
(CPSC) in the last 6 years were 12 recalls for consumer electronics products such as a Disney children's DVD player.

If the more non-PC devices claims surface now that public awareness has increased, and the US media picks up on the batteries being at fault, then Sony could be headed for another period of turbulence.

...The Information Janitors/

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+++ NEWS

- Medical services data to be made public
- Firms line up to buy Ashikaga Bank
- Execs arrested for illegal tech exports
- Iranian connection with Mitsutoyo
- AIM bans Japanese GAAP

-> Medical services data to be made public

The Ministry of Health, Labor and Welfare has said that from next year it will require prefectural governments to post local medical services data online for the public. The data will include doctor's resumes and resources info for local hospitals and dental clinics. Still to be decided is whether to make the data even more specific, including information on law suits, volume of surgery, average length of stay, and patient survival rates. (Source: TT commentary from, Aug 22, 2006.)

->Firms line up to buy Ashikaga Bank

A selection of leading local and foreign banking firms are lining up consortiums to bid for the troubled Ashikaga Bank. Among the interested parties are Nomura, Daiwa Securities, Nikko Cordial, and JP Morgan and Chase. The FSA will begin selection procedures for a buyer early next month and make its final decision in March, 2007. The bank is expected to sell for about JPY350-JPY400bn and the buyer will probably need to inject another JPY150bn to JPY200bn in additional capital to bring the bank up to the BIS minimum of 8%. Ashikaga went under because of bad loans made in the 90's and last year had a negative net worth of JPY387.9bn (US$3.37bn). (Source: TT commentary from, Aug 25, 2006)

->Execs arrested for illegal tech exports

Five executives of the Mitsutoyo company, a precision instruments maker, were arrested this week for allegedly exporting to Malaysia sensitive measuring equipment that could be used for making centrifuge parts to separate uranium for nuclear weapons. The measuring equipment was sold in 2001, without government permission, to Scomi Precision Engingeering, a firm reportedly related to Dr.
Abdul Qadeer Khan, the Pakastani scientist who is said to have sold nuclear technology to Libya in the past. At least one of the Mitsutoyo devices was then on-shipped to Libya on an Iranian flagged vessel. (Source: TT commentary from, Aug 25, 2006)

->Iranian connection with Mitsutoyo

Further implicating the 5 arrested Mitsutoyo execs, the Nikkei reported just yesterday that an Iranian trading company was raided by Tokyo police on Friday for brokering the export of the Mitsutoyo products along with other unauthorized software and hardware useful in the production of nuclear arms. The same firm is suspected of exporting sophisticated optical sighting devices and milling machines suitable for manufacturing anti-tank rockets and guided missile parts. Police are now analyzing a list of companies that the trading house was ordering from.
(Source: TT commentary from, Aug 26, 2006)

-> AIM bans Japanese GAAP

The London Stock Exchange's AIM market has decided that Japanese companies listed on AIM will not be able to use Japanese GAAP accounting as their corporate accounting system, and instead will need to follow International Accounting Standards (IAS), US GAAP, or some other internationally recognized standard. ***Ed: Effectively this puts the kabosh on any more Japanese firms listing on AIM.
The cost of maintaining two separate accounting systems wouldn't be worth the effort.** (Source: TT commentary from, Aug 25, 2006)

NOTE: Broken links
Many online news sources are now removing their articles after just a few days of posting them, thus breaking our links -- we apologize for the inconvenience.

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DaiJob, Inc's executive placement team, Daijob Consulting
DaiJob has great candidates. Contact Andrew Peters at, or Ph: 03-3499-3040 for details.

-> Network operation/maintenance team leader
Male, late 30s, native Japanese and Portuguese, fluent English and Spanish.


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Certifications: MCP(SQL), MCA, Apple

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Female, late 20s, native Japanese, business English


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DaiJob has great candidates. Contact Andrew Peters at, or Ph: 03-3499-3040 for details.

Experience Japanese tradition. See "Noh"

Noh is a major form of traditional Japanese musical drama dating back to the 14th century. Now you can experience Noh first-hand at the Cerulean Tower Noh theatre.

Place: Cerulean Tower Tokyu Hotel
Date: September 3, 2006
Time: 13:00, 16:30
Tickets: S seat (Front) JPY12,000
A seat (Side) JPY10,000
B seat (Corner) JPY8,000
Language: Japanese

Noh Packages: Ask about our traditional Japanese "Ryoutei"
lunch or dinner packages. Accommodation packages also available (email for details).

For ticket information contact Mr. Shozo Kita at

or call Ticket PIA on 0570-02-9988


Entrepreneur Association of Tokyo - September 12th

Speaker: Alex Serge Vieux, Publisher, CEO of Red Herring "Building great companies in the face of adversity"

Mr. Vieux has kindly offered to fly out from California to speak at EA-Tokyo's September seminar. He will be drawing on his extensive expertise as a high-tech journalist, entrepreneur, professor, and advisor to the French government. Mr. Vieux is currently responsible for steering the growth of the organization and guiding the publication's vision.

Date/Time: September 12th 7:00 pm
Location: City Club of Tokyo - Maple Room (Canadian Embassy)
Language: English


ICA Events - Sep 21

Speaker: Andrew Perons, Manager, Risk & Compliance, Strata Works K.K.
Topic: "Corporate Governance - Changing Regulations
and Implications"

Details: Event details at (RSVP)

Date: Thursday, Sept 21, 2006
Time: 6:30 Doors open, buffet dinner included
Cost: 3,000 yen (members), 5,500 yen (non-members) Open to all - Location is Foreign Correspondents' Club

IT events announcements are priced at JPY50,000 per week.
For more information, contact


Tyler Foundation Event

Tyler Foundation for Childhood Cancer presents:
Sports Extravaganza 2006, September 29 through October 1.

Cricket and rugby celebrities from the UK, South Africa, India, Australia and New Zealand will come to Tokyo for 3 days of sport, fun and fundraising!
Sports Dinner at the Grand Hyatt, Golf Day and Celebrity Cricket match. All proceeds benefit children with cancer in Japan.

Shine On!
For more information on Sports Extravaganza 2006, please see:


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Written by: Terrie

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