OVERHEAD:
Despite soaring demand, the lithium-ion battery supplier said it would not make a profit this fiscal year due to the high cost of shifting from sea to airfreight
Demand for Murata Manufacturing Co’s lithium-ion batteries is so strong the Japanese firm cannot make enough of them for its own use. However, inflated freight costs mean the business is likely to record a loss this year, yet another victim of the ongoing supply chain chaos.
The battery unit is unlikely to report a profit this fiscal year, after Murata resorted to transporting its products by air, president Norio Nakajima said in an interview.
The company had previously pledged to turn the division around by March, ending a string of losses since it bought the business from Sony Group Corp in 2017.
Still, Murata is seeing rapid growth and plans to accelerate investment to beef up production capacity, Nakajima said.
“It might still be possible that our battery business posts a profit this term, but I believe I will probably need to apologize for a loss,” Nakajima said. “We are being forced to use airfreight to deliver our batteries because ships are unavailable, and that costs an outrageous amount of money. If we were able to use sea routes, we should be able to make a profit.”
On top of inflated base cargo fees fueled by high demand, batteries shipped via air incur extra handling charges because they are a fire hazard. The Kyoto-based component maker’s transportation woes are yet another sign that the global supply crunch affecting holiday deliveries is not likely to ease any time soon.
The emergence of the Omicron variant of SARS-CoV-2 might push up container rates further next year if the mutation triggers Chinese port closures like those this year, Bloomberg Intelligence analyst James Teo said.
Despite the likely loss, Nakajima said the company is optimistic about the outlook for the batteries business and plans to step up investments to boost production.
Murata plans to spend more than ￥640 billion (US$5.63 billion) to increase total output during the three-year period from April next year, with the battery unit set to receive the second-largest share after the company’s flagship multilayer ceramic capacitor products, he said.
“The speed of the transition to battery-equipped vacuum cleaners, tools and garden equipment from conventional power sources has been much faster than what we had anticipated,” he said.
Murata posted record operating profit of ￥313.2 billion in the previous fiscal year and forecasts higher earnings in the current term, thanks to robust demand from cars and smartphones.
Tight supply of components, especially for cars, is likely to persist next year, as the wafer output would not increase, and ships and aircraft should remain busy, Nakajima said.
“Car companies are working on decreasing the number of chips required per vehicle, but that will take some time,” he said. “What they can do for now is just place orders ahead of time, and given the supply of wafers isn’t changing much, I don’t think that would lead to drastic improvement of the ongoing situation.”
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