Rechargeable Batteries Taking Control: Study

By Jeff Malester On Sep 29 2003 - 6:00am

Driven by growing sales of high-drain consumer electronics — including 3G wireless phones, digital cameras and camcorders and other multifunction devices that require more powerful, higher priced batteries — annual U.S. dollar volume for rechargeable cells is expected to grow 5.9 percent through 2007, reaching nearly $9.2 billion.

This five-year projected increase in market demand for rechargeable batteries exceeds the five-year annual projected growth of 4.8 percent for disposable cells, or $4.8 billion, as well as overall battery category demand of 5.5 percent, or $14 billion, for the same time frame.

In addition, the growing retail presence of battery rechargers — offering significant time reduction to revitalize cells, compared with earlier rechargers, as well as increased user convenience to compete with disposables — also increases the attraction of rechargeable batteries.

These, and other trends, are presented in "Batteries," a new study available from The Freedonia Group, an industrial market research firm, based here.

In recent years, use of rechargeable lithium batteries has surged, replacing nickel-metal hydride (NiMH) and nickel-cadmium (NiCad) as the chemistry of choice in many higher-end CE products.

Among the rechargeable battery chemistries, lithium cells are expected to become the best seller in coming years, almost doubling dollar volume by 2007. Demand will climb at a 14.2 percent annual rate, to $2.3 billion in 2007. This is the fastest pace of increase for any major battery chemistry segment, whether rechargeable or disposable. U.S. manufacturer shipments of lithium cells should more than double, to $1.5 billion, in 2007.

Despite price cuts in recent years, lithium-based batteries still retain a significant pricepoint premium over competitive rechargeable chemistries, such as NiMH, NiCad and lead acid. Because lithium batteries will remain concentrated in higher end, high drain CE products — including cellphones, notebooks and PDAs — overall demand pace will be slower through 2007, down from the 22.9 percent annual growth rate clocked in 1997 through 2002, according to the study.

Rechargeable lithium battery sales will be fueled by superior performance characteristics, compared with other chemistries, said Freedonia, as well as continuing advances in lithium technology, lower prices and a wider range of applications.

Lithium cells have a low self-discharge rate, can provide a higher output voltage than either NiMH or NiCad cells and can be recharged more than 2,000 times, compared with a fewer than 100 recharges for NiCad cells. Lithium also provides longer run times in high drain products, such as digital cameras and wireless phones, compared with other rechargeable chemistries.

The market for NiMH rechargeable batteries is projected to increase at a 7.1 percent rate through 2007, to $690 million, outpacing overall demand for rechargeables, but well below the double-digit NiMH gains of 1997 through 2002, which reached 14.1 percent. U.S. manufacturer shipments for NiMH batteries will climb 7.2 percent annually, to $445 million, in 2007.

It is expected NiMH battery market gains through 2007 will be limited on the low end by less expensive NiCad and disposable cells, and on the high end by lithium-ion and lithium-polymer types.

The demand for NiMH also will be constrained somewhat by introduction of fuel cell batteries, designed for use in laptops and other portable CE devices, said the study.

Freedonia predicts that price competition for batteries will remain intense in most market segments, slowing overall value gains. Rechargeable battery prices will remain higher than disposables, leading to additional inroads by disposable cells in markets once considered to be the exclusive domain of rechargeables.

Improvements in rechargeable battery design, allowing consumers to recharge cells a greater number of times, also will have a negative impact on replacement demand, and a deceleration in CE hardware spending through 2007 will further impede the pace of increase for rechargeables sales.