Lithium Ion Batteries: A Profitable Future

[Dave Farber <farber () central cis upenn edu>]

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       ASIAN TECHNOLOGY INFORMATION PROGRAM (ATIP)


REPORT:  ATIP95.33 :  Lithium Ion Batteries: A Profitable Future
To: Distribution
Date: July, 5, 1995
REPORT:  ATIP95.33  Title: Lithium Ion Batteries: A Profitable Future


ABSTRACT.ABSTRACT: Moli Energy (1990) Ltd., formerly based in British
Columbia, Canada, and now owned by Nippon Moli Energy Corp., in Japan, has
developed a high energy Lithium-ion rechargeable battery based on lithium
cobaltite and graphite intercalation materials. This product was designed
to provide a high level of safety and high energy density. Electrical,
mechanical and thermal abuse testing results guided the development
program. Moli's
Lithium-ion battery system has superior performance characteristics over
conventional rechargeable battery systems, including voltage, energy
density, low temperature performance, charge retention and the lack of a
memory effect. Many applications exist for this Lithium-ion battery
technology in today's mobile society.


CONTENTS


1.1  SUMMARY
1.2  Market Overview
1.3  NEC Sets Up Battery R&D Group
1.4  A Commodity Cash Cow
1.5  Conclusion


2.   LITHIUM-ION RECHARGEABLE BATTERY TECHNOLOGY
2.1  Introduction
2.2  Major Cell Components, Assembly and Sizes
2.3  Intercalation Mechanism
2.4  Safety Features
2.5  Performance Features
2.6  Applications
2.7  Summary


1.1  SUMMARY


Nippon Moli Energy Corporation (Molicel) has begun ramping up production
of lithium ion batteries, with production expected to reach 1 million
units a month by the end of 1995.


Small battery cells that are light, powerful and long-lasting are a
crucial element for the success of all portable electronic products.
Until now, nickel cadmium (Ni-Cd) cells have for many years been the
most advanced battery on the market, while a very recent addition has
been the nickel-metal hydride (Ni-MH) cell which has a larger energy
capacity than Ni-Cd cells.


However, rechargeable lithium ion batteries have many advantages over
these early types. For example, the Li-Ion battery is lighter in weight
(about half the weight of Ni-Cd batteries) and 30-50% smaller in volume,
yet has a longer lifespan, perhaps as much as twice than that of a Ni-Cd
battery.


The self discharge for spare idle batteries is also smaller compared to
Ni-Cd cells, which suffer discharge rate of 20-30% over a month, whereas
Li-Ion batteries will only lose about 5% of their charge over a month.
In addition, Lithium ion cells recharge without the need of special
refresh discharge circuitry. Batteries also recharge quickly, with an
80% percent charge in one hour, and a full charge within 2.5 hours.


At this stage, manufacturers of Li-Ion batteries claim up to 500
recharge cycles before any substantial loss of capacity starts to occur.
After 1,000 recharge cycles the capacity of Li-Ion cell will drop to
about 50% of its original rating.


But most importantly, the lithium ion battery has no "memory effect", a
common and extremely serious problem for Ni-Cd batteries. Furthermore,
Li-Ion batteries are not considered a serious environmental hazard due
as the cells do not use lead, cadmium or mercury.


By the year 2000, it is expected that the per watt cost for Li-Ion
batteries will be no than 10 percent above that of Ni-Cd or Ni-MH
batteries.


Manufacturing a lithium-ion cell is a complex task and requires several
production steps. A Molicel battery, for example, has thirty components,
including; two electrodes, a lithium cobalite cathode (positive) and
graphite anode (negative) which are tightly wound about a plastic
separator liner to form what is called a "jellyroll".


The jellyroll is then placed in a can along with a plastic insulator.
The can is filled with an electrolyte solution, and then covered with a
well plate and cap. After sealing, the cell is covered with a hard
plastic wrap and is ready for use.


Measuring 18mm in diameter and 65mm long, the first Molicel line of
batteries is to be called 18650. The voltage output of a single 18650
battery is 3.7 volts, the same as three Ni-Cd or Ni-MH cells.


NEC's subsidiary is the first company to manufacture lithium-ion cells
in North America. However, several other makers have already begun Li-
Ion battery production in Japan, including; Sony Corp, AAT Battery Co,
Sanyo Electric Industrial Co and Matsushita Electric Industrial Co.


NEC will purchase approximately half the production volume of Moli
Energy (1990) Ltd, for use in NEC's products such as notebook computers,
cellular phones and portable fax machines.


Total investment through to January 1996 in Molicel will be $72.3
million Canadian (4.5 billion yen, $US 53 million), enabling construction
of a plant with a monthly capacity of 300,000 units.


NEC will hold a 50.5% stake, with an investment of C$ 36.5 million;
Mitsui & Co. will hold a 43.1% stake, with an investment of C$ 31
million; Yuasa Corp. will hold a 7.7% stake, with an investment of C$
4.8 million. By June 1996, a second line will be built with a capacity
of 1.2 million units/month. Investment details have not been disclosed.


As lithium-ion batteries are a new product, they will attach a premium
price for some time to come. In the immediate period the market is
expected to remain small - about 20 billion yen ($210 million), 7-9
million units a year for the next two years. However longer term, the
market is projected to grow 10-15 fold by the year 2000, creating a
market that some analysts estimate to be worth more than 300 billion yen
($3.3 billion). Of this, Nippon Moli Energy Corporation, is planning to
win a 20% market share.


1.2  MARKET OVERVIEW


Several major Japanese battery makers announced plans to set up large
scale Li-Ion battery production lines in Japan.


(see Kahaner report li-ion.94 - available at
<http://schooner.cs.arizona.edu:5605/cgi-bin/mfs/01/kahaner.reports/li-
ion.94> ).


As a quick overview, Sony Corp now produces 1.5 million units per month
at a factory in Koriyama, Japan. A&T Battery Co., based in Kawasaki, is
producing 400,000 units/month and is planning to increase production to
1.6 million by the end of 1995.


Sanyo and Matsushita both plan to be producing 1 million units a month
respectively, by mid 1995. According to reports, Ultralife Batteries and
Valence Technology of the United States are also about to enter the
market.


1.3  NEC BEGINS R&D


Unlike most major Japanese electronics makers, NEC Corp, has until now
not manufactured batteries within the NEC group - directly or indirectly
through its affiliates. In fact, the company says it has not conducted
any research programs in the energy storage area at all until 1993.


An NEC official said the only aspect of the battery business that
interested NEC was as a major user of battery products for various
portable electronics products, "and we wanted the best price possible."


But in 1993, an opportunity to invest in a battery maker, with leading
edge technology, presented itself, when the small Canadian company Moli
Energy 1990 Inc began searching for a major international partner to
assume control of the company.


Unfortunately for Moli Energy, the company began selling its Li-Ion too
early, as a serious fire was sourced to a product containing a Moli Li-
Ion battery, resulting in legal action against the company and
eventually leading to the company's bankruptcy.


As a result, Moli Energy and the regional government of British
Columbia, Canada, where Moli is based, began looking for a major
international company that could assume control of Moli and continue the
company's efforts to develop a high performance battery.


Of course, the BC government was hoping any new owner of Moli Energy
would build production facilities in BC for making the new battery.
After looking at the various possibilities, the BC government entered
discussions with the Japanese trading company Mitsui & Co, which since
the early part of the century had operated various primary industry
businesses in British Columbia.


Following various machinations, that keenly highlights the breakdown of
the traditional industrial (keiretsu) loyalties of corporate Japan,
Mitsui & Co and NEC Corp (a member of the Sumitomo group) began
discussions in 1993 to assume control of Moli Energy - along with any
outstanding debts of the company.


Initially, the BC government hoped to maintain the R&D work related to
the project in BC, but NEC successfully argued that it would be better
to establish a battery development group at one of NEC's R&D facilities
in Japan. The BC government accepted this argument, and in July 1993,
NEC established its first R&D group in the field of battery technology,
and the rest is profits.


1.4  LITHIUM ION BATTERIES: A COMMODITY CASH COW


The search for higher performance batteries that can extend operation
time for portable electronics equipment remains an on-going struggle for
the electronics industry.


No matter how fast a company develops new batteries which offer higher
voltage and longer life, product engineers make use of them and in the
process test the limits of portability. Bigger screens, faster chips,
sound cards, CD-ROMs - anything that will add more value to portable
products and hence more margin.


According to an analyst with the Gartner Group, the basic measuring
stick for a rechargeable battery is, "can it power my notebook on a
flight from New York to Los Angles, without running out of power over
the Rockies?"


With nickel cadmium or nickel-metal hydride (Ni-MH) batteries this is
almost impossible to achieve - unless you want to add a few kilos of
extra battery cells to an already heavy battery pack. The only solution
is Li-Ion.


In general, batteries are a commodity business, with only small profit
margins for technology-mature battery products. But there are times
during the business cycle of a new technology such as Li-Ion batteries,
when the potential for a large return on only a small capital investment
is extremely attractive.


In the opinion of this analyst the investment by NEC and Mitsui in Moli
Energy highlights the importance of establishing profitable commodity
operations within large high technology companies.


Overall, the size of NEC's investment in Moli is very small, when
compared to its investments in LCDs and semiconductors which can easily
reach the $1 billion level for a new fab. However, the rate of return
will be very fast, with profitability possibly higher than that of its
LCD business.


Although, NEC has an officially stated policy of shifting the company
away from an over reliance on commodity products such as memory chips,
the company remains keenly aware that commodity products can be very
profitable. For example, since late 1992 when the PC boom started, NEC
has watched its profits from DRAM production rise beyond all
expectations, providing the company with a very healthy cash flow as the
company struggles through Japan's worst economic period in 50 years.


=====================END OF REPORT ATIP95.33a===========================