Due to aggressive capacity expansion previously by battery makers, notebook battery cell production is running in excess of demand by 20-25%. With flat growth expected for notebook sales in the fourth quarter of 2010, oversupply and falling prices will likely persist.

The main cell suppliers are Sanyo Electric, Samsung SDI, Panasonic and LG Electronics, with Sanyo and Samsung SDI each grabbing more than a 20% share of the worldwide market. Panasonic and LG Electronics are ranked third and fourth.

Compared with panels and semiconductors, investments required for setting up cell production lines are relatively low, and hence it is not difficult for larger players such as South Korea's Samsung SDI and LG to quickly and aggressively ramp up capacity, according to industry sources.

A high-speed production line can roll out roughly 7 million cells monthly, which translates to about 1.1 million six-cell notebook batteries. Sanyo and Samsung SDI each has approximately 30 production lines and Panasonic and LG are equipped with 20 each as well, the sources said, adding that other manufacturers also have plans to expand capacity.