Manufacturers

24Sep 2014

For those of you who are not familiar with ARPA-E, it is an acronym that stands for Advanced Research Projects Agency – Energy. It is an agency of the U.S. Department of Energy, and was formed in 2007 by the America COMPETES Act with the intent to emulate the success of its counterpart, DARPA, at the Department of Defense. Its charter is to promote advances in sciences related to energy, translate discoveries and inventions into innovations, and accelerate advances that industry is not likely to undertake.

From its early days, ARPA-E identified energy storage, and in particular battery technologies, as an area of focus and investment. Since 2009, ARPA-E has invested tens of millions of dollars into this research area, of which significant funds went to support research into new battery materials. In 2009, the White House announced that they would make $2.4 Billion in grants available for the development of batteries and power drive components for electric vehicles, installation of charging stations and other programs aimed at advancing the US EV industry.

Several programs benefited from this funding over the past five years. We see far more EVs on the road, especially here in California, than we ever did in the past. It helps immensely that the State of California has offered an additional set of incentives in parallel.

However, the one area that showed little progress if any despite the flow of funds is the promise of new and affordable batteries with longer driving range, in other words, larger capacity. If one were to assess a return on investment by the US government and other US-based entities, private or public, we find that we have little to show for. There are no breakthrough materials on the horizon; there is little if no hope for a meaningful manufacturing base of batteries in the US – contrary to what the White House and ARPA-E would like us to believe; and there is a long list of US-based startup companies developing batteries and battery materials that are struggling against fierce competition from the Asia battery giants such as Samsung and LG Chem in Korea, and ATL, Lishen and several others in China.

Let’s face it, the US cannot be a manufacturing base for batteries. Our cost structure is incompatible with the economic and financial constraints of battery manufacturing. Battery manufacturing requires billions in capital yet has to live on very thin profit margins. So let’s stop investing our tax dollars in funding research in new battery materials so that Asian companies can then use the intellectual property for their own benefit (or purchase it for a dime on the dollar).

Instead, the US should focus its investments on system-level innovation. Tesla purchases batteries from Panasonic. These are similar batteries used in your notebook PC with a cost of about a buck or less each. Not an exciting business. Yet, Tesla integrates these batteries into a more complex system with far better margins – and far more difficult for Asia to copy. Tesla is only one example; the same concept applies to mobile devices, and industrial or grid-level energy storage.

21Sep 2014

Several years back, as we were doing our initial fundraising round for Qnovo, lithium-ion batteries were the craze! A123 had just gone public at an insane valuation. Gas prices were through the roof and GM announced the all-exciting electric Chevy Volt. Tesla Motors had their Roadster and was promising the then new Model S. Promises of innovations that can make electric vehicles part of the mainstream were abound. Apple introduced the iPhone which for the first time in history had an embedded battery (one where the user could not remove). These were exciting times! With this background, you can then appreciate our surprise when one investor with ample experience in this space uttered a deep skepticism of the battery ecosystem. There seem to have been plenty of broken promises and certainly, as I learned later, opaque specifications that seemed difficult to verify. “There were liars, damned liars and battery suppliers,” continues to resonate in my head, and after several years, seems to be more often true than not.

This blog is not meant to bash battery manufacturers. They do provide an immensely useful product and underlying technology that has proved very central to a mobile society. Not many of you remember the first mobile phones (not even smartphones) some 15 or 20 years ago when the battery, back then made of NiCd or NiMH, was the size of a brick….and it lasted too little. Rather, I want to use this blog to clarify who are the main manufacturers and what challenges they are facing.

There are over 6 billion lithium-ion batteries that are manufactured every year. Big numbers! Mobile devices account for nearly 75% of this volume. The rest go into electric vehicle and bicycles, camcorders, cameras and other items such as power tools. Less than 10 companies account for this worldwide volume. They tend to be large chemical conglomerates based in South Korea, Japan and China. Samsung SDI and LG Chemical are based in South Korea and are subsidiaries of Samsung and LG, respectively. In Japan, Panasonic, Sony Energy and Hitachi Maxell are the prominent ones. Panasonic is well known as the primary supplier of batteries to Tesla Motors. Then there are a number of fast-growing manufacturers out of China, primarily, Lishen, ATL, BAK and BYD. Lithium-ion batteries made in China tend to be of lower quality. They are widely used in China but mobile device manufacturers outside of China have generally preferred to use batteries manufactured by South Korean or Japanese companies. 

The US has a few small battery manufacturers that tend to be specialized, say for medical or aerospace applications. There are also several innovative and promising startup companies in the US that are pushing the envelope in terms of new materials, new designs and cost-effective ways to build batteries. 

Battery manufacturers face a slew of challenges, both technical and economical. First and foremost, batteries including lithium-ion batteries tend to be inexpensive. A battery in a typical smartphone costs in the neighborhood of $1 to $2. Profit margins in batteries tend to be very thin. Battery manufacturing is a very capital-intensive business. Safety concerns also plagued the industry in the past decade. Yet, it is a very competitive space, and the new Chinese manufacturers are only adding  increasing economic pressure on the established players.

Technically, the primary challenge is that battery manufacturers are not keeping up with the insatiable demand by the mobile and electronics industries. We hear of Moore’s Law in electronics; it is driving the mobile industry. Moore’s Law is the observation made by Gordon Moore at Intel in 1965 that electronics double in capacity every approximately 2 years. In contrast, batteries have doubled in capacity every 15 years!  This is a serious gap and growing problem.

Additionally, there is immense knowledge around electronics. High-tech companies have great talent around designing and manufacturing electronics with superb quality. In contrast, battery talent is limited. Companies that build mobile devices also have a great ability to understand electronic components and designs, yet surprisingly, many of them fall far behind in their knowledge of batteries. The result is that batteries and their specifications tend to be an obscure topic, and innovation in general has lagged. And to make matters worse, electronic and software engineers, the backbone of the mobile industry, simply don’t like to deal with chemistry!

That is changing, gradually. It has to change. Batteries, their manufactures and the entire ecosystem needs to catch up to the operating standards and levels of innovation that the electronics and mobile industries have set forth.

16Sep 2014

1. JUST A SIMPLE INTRODUCTION.

If you are a consumer who has wondered why your lithium-ion battery in your mobile device fails your expectations, this blog is for you. If you are technically savvy but you are not a chemist, and often wondered how this lithium-ion battery works the way it does, then this blog is for you. If you are just curious about how to get more out of your lithium-ion battery, then again, this blog is for you.

You have searched the internet for information on the battery inside your gizmo, how it works, how you should take care of it, what the fancy technical terms really mean, and what the manufacturer is promising you and what you are really obtaining….and I am sure you often felt frustrated because, well, little of it made sense to you. You are not alone.

The fact is batteries have for a long time been a forgotten corner of technology. Before mobile devices became anchored in our daily lives, the battery meant that blackbox under the hood of our cars. Batteries did not evoke “clean” or “high-tech.” We wanted a low-cost battery that cranked our engines even in the coldest days of winter.

Then came mobile devices, and now electrified vehicles… and things got more complicated. Everyone had an opinion, or a theory. “No, don’t discharge to empty!” or “Beware, it has a memory effect.” The fact is most of this advice is not based on real science and has little merits. True battery experts are hard to find…universities don’t graduate enough of them, and they are in high demand.

This blog is intended to be read either as individually independent posts, or collectively as one continuous reading. The titles are summarized in the Table of Contents on the right hand side. Start with whichever topic you would like depending on your fluency level.

In the next post, we will start with the basics: What the terms really mean when one describes a battery.