I think management chose to switch from cellphone to laptop production on line 1 for at least two reasons: (1) Remember that line 1 was supposed to initially produce about 4 million cellphone batteries/yr, presumably at $ 8.00 - $ 10.00 per battery. The line was never able to produce at that amount, and I believe management felt that it would have fewer problems if run at a slower rate. 3 million cellphone batteries would result in what I am guessing is a marginally profitable line.
(2) As I indicated in earlier posts, the gross margin on, say 2.0 million laptops out of line 1 rather than 3-4 million cellphone should be substantially higher to the company, should they ever be able to produce at that rate. Laptop batteries should sell well in excess of $ 20.00 per battery, so even 2.0 mm laptops would allow for greater gross margins and manufacturing than 2x that number of cellphones.
(3) The laptop industry (ie, notebooks and laptop computers) continues to grow at healthy rates without margin compression, unlike the continued "giveaways" on cellphone units - remember that cellphone suppliers can cut their margins to razor thin levels as long as cellphone usage accelerates - that's what has been driving that industry, minutes talked over the cellphones.
(4) I have a feeling that if line 1 were able to produce laptop cells on a larger format, which no one in the industry has done yet, ie, 8" x 10", they could very well simplify the lamination and cutting process on the production lines, thereby increasing production yield of high quality batteries. (This is only a guess, but it's certainly what I would do if I were VLNC management and trying to make something work on line 1.) Anyway, it's a reasonable explanation for the crossover from cellphone batteries to laptops on line 1.
Regarding where lines 3 and 4 are sent and what configutation they will be, I'm as confused as everyone else. I originally thought that the 2nd Italian line, the 3rd overall, was going to Ireland, and the 3rd Italian (the 4th overall) was going to Korea. Not so sure at all now.
Bottom line remains the same, more perceived risk than before I knew of the poor performance of line 1. |
