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Working Paper 05–01

II. Rationale for Li-ion Case

United States scientists have long spearheaded research and development in various battery chemistries, and U.S. battery manufacturers have maintained dominant positions in the primary battery market. North American researchers provided many of the critical technology breakthroughs needed to establish Li-ion battery feasibility. Yet today, the dominant secondary (rechargeable) battery manufacturers are abroad, and U.S. manufacturers appear only in niche markets and boutique applications.

U.S. Activity in Li-ion R&D

A National Electronics Manufacturing Initiative (NEMI) study pointed out the advantages of the Li-ion technology in the mid 1990s. This study designated Li-ion as a critical technology in the development of portable electronic devices. In 1998, the NEMI, which is made up of the major U.S. electronic manufactures and suppliers, stated:

The rechargeable battery technology has long been a critical bottleneck in development of improved portable electronic products for communications and information sectors. While the United States is a leader in advanced battery research concepts, it is vertically integrated foreign competitors that have come in the 1990s to dominate the two new rechargeable battery technologies: Ni-MH (employed in mobile computing since 1993) and Li-ion/liquid electrolyte batteries. In 1998, the National Electronics Manufacturing Initiative (NEMI) laid out a technical roadmap (1) with targets that, if achieved, would result in performance significantly improved over today's batteries:

  • Gravimetric energy density: 250 Wh/kg
  • Volumetric energy density: 475 Wh/l
  • Cycle life: 2000
  • Cost: $1/Wh. 1

Today, typical cells have exceeded the Wh/l goal (500 Wh/l) and the cost target ($0.30/Wh) and are approaching the 250 Wh/kg goal. In addition, research results on new materials offer the possibility of doubling the energy goals. For the first time, a rechargeable system has greater energy storage capability than the standard alkaline cell. This will have strong implications for the future of primary batteries, as the cellular telephone and notebook computer have taught the discipline of recharging the battery in a device on a regular basis.

Over the past few years, the battery industry has seen a major shift in the technology for portable power applications. Li-ion batteries, which did not come into existence until the early 1990s, have become a standard for high-energy rechargeable battery technology and have captured the bulk of the portable device market. They have four times the energy and twice the power capacity of nickel cadmium (Ni-Cd) batteries, do not experience memory effect (where partial discharge before recharge reduces length of next cycle), and have a 50 percent longer life cycle. Compared with nickel-metal hydride (Ni-MH) batteries, they have twice the energy, and they can be produced at a much lower cost. They are environmentally friendly, and their high average voltage of 3.6V make them ideal for powering a new generation of low-power 3-G electronics. These factors all have contributed to this relatively new battery technology's complete domination of the note-book computer and cellular telephone markets.

Without the Li-ion battery, introduced a decade ago, portable electronic products-from mobile phones and video cameras to notebooks and palmtops- would have remained brick-like objects best left on the desk or at home. But the innovation would have floundered had electro-chemist researchers in the U.S. and England not teamed up with a Japanese firm.

The development of the lithium-ion battery is an object lesson in how pure and applied research driven by commercial interests, can generate incremental improvements in a technology that are necessary for transforming it into a useful product. In this case, intercalation compounds were an offshoot of pure research into superconductivity. They were then picked up by Dr. Goodenough and other researchers working on battery technology; and the final pieces of the puzzle were supplied by Asahi Chemical and Sony. (Dr. Goodenough, who did his original research at Oxford [and later work at University of Texas-Austin ], says battery firms in the West rejected his approaches). 2

The United States has been, and is, a very fertile ground for developing new technologies for application in the advanced battery arena. North American researchers provided many of the critical technology breakthroughs required to establish Li-ion polymer battery feasibility.

Prominent in the historical narrative, Dr. John Goodenough invented lithium cobalt oxide cathode materials while at Oxford University. His technology was used in the first commercial Li-ion battery, launched by SONY in 1991. More recently, at the University of Texas, Austin, Dr. Goodenough patented a new class of iron phosphate materials with potential to replace the more costly cobalt materials. In 2000, he received the prestigious Japan Prize for his discoveries of the materials critical to the development of lightweight rechargeable batteries.

Other U.S. scientists working in this area abound. The work of Dr. Philip Ross at Lawrence Berkeley Laboratories using ab initio calculations gives great insight in identifying electrolyte components and additives to improve Li-ion performance. Dr. Stan Ovshinsky's team at Energy Conversion Devices has provided many of the concepts driving Ni-MH battery technology.

U.S. Manufacturing of Li-ion Batteries

There are many other examples of work by U.S. researchers that directly affected advanced battery systems. However, the United States has no large volume manufacturers, with only a few firms producing small volumes for specialty and military applications. U.S. companies, although global leaders in primary battery production and technology, were unable to take advantage of this early technological success. Their Southeast Asian counterparts have captured a dominant position in Li-ion battery manufacturing. Huge investments have been made in Japan, Taiwan, Korea, China, and other countries in Southeast Asia by both companies and government friendly policies for investment in competitive efforts to capture glob-al market share for rechargeable batteries for telecommunications, wireless, and computer products.

The two major U.S. battery manufacturers, Duracell and Eveready (now Energizer Holdings), began R&D efforts in Li-ion technologies around 1992, with the intent of ultimately manufacturing Li-ion batteries.

According to several senior staff interviewees, Duracell and Energizer both initiated programs for production of Li-ion batteries. In 1997, Energizer built a manufacturing facility in Gainesville, Florida outfitted with state-of-the-art equipment to produce Li-ion batteries, with production slated to start in 1999-2000. They licensed a Goodenough patent from Sony and built on their own advantaged IP positions in several areas. They had several years of experience with manufacturing Nickel Cadmium (Ni-Cd) and Ni-MH cells in Gainesville for several cellular phone and notebook computer companies. They prepared to establish a sales and marketing group in Japan to have access to the market, knowing it would take 5 years to be accepted. When the Gainesville Li-ion plant was in the "prove-in" stage, nearly ready for production, the world market price for Li-ion cells abruptly declined. The company reassessed the profitability of their investment and found it was marginal at the low cell prices. They could buy cells from Japan at a lower price than their manufacturing costs. The decision to exit Li-ion manufacture followed swiftly. The news of the low return to manufacture of Li-ion cells spread to Duracell, and they stopped their project. (Energizer sold its Gainesville facility to Moltech Corporation in 1999 after it sat idle for two years. In 2002, Moltech sold the plant to U.S. Lithium Energetics, which is seeking capital to enter production.)

Small U.S. companies and start-ups have continued to pursue innovative R&D with early-stage R&D funding from Defense Advanced Research Projects Agency (DARPA), the Advanced Technology Program, the Small Business Innovation Research program, and other federal programs. Novel Li-ion chemistries have helped carry them forward toward commercial targets. These new ventures have been most successful in niche markets (military and medical applications). New ventures have had little success in the development of significant, sizable new markets for their products. Without economies of scale, their costs of production remain high. Venture capital-funded companies tend to look off-shore for their production to mitigate the high cost of automated production equipment. Some U.S. companies with larger-scale applications have also moved offshore.

Several ATP-funded companies illustrate a spectrum of successes and failures. While large battery companies have been reluctant to enter medical markets due to liability concerns, Quallion and its joint venture partner Valtronic are develop-ing Li-ion technology to power implantable medical devices. The company is on a steep growth path.

U.S.-made Li-ion battery powers tiny implants that aid neurological disorders

Early batteries for medical microelectronic devices were large, had short lives, and were not rechargeable. As a result, only a few implantable devices, such as cardiac pacemakers, have come into patient use. With assistance from its Advanced Technology Program award in November 2000, Quallion and joint venture partner Valtronic are developing a Li-ion technology for a battery to power implantable medical devices. The goal is to be able to recharge the battery from outside the body with no physical connections.

Alfred Mann, chairman and co-founder of Advanced Bionics Corporation, started Quallion LLC after being unable to find a company to make tiny Li-ion batteries to power the injectable neuromuscular stimulator he was developing in the late 1990s. With a size no bigger than a grain of rice, the tiny Li-ion battery had to have a 10 year life, be rechargeable thousands of times over, be hermetically sealed for safety reasons, and have the capability to remain dormant for long periods of time without losing its power.

The success of the Quallion battery is due to an advanced Li-ion chemistry that provides a useful life-time significantly greater than lithium batteries that are commercially available. The ever smaller implantables will need ever smaller batteries to power them. Potential solutions are coming from the research labs and startups like Quallion, and not the large battery companies. The large companies have been reluctant to enter this market because of the technical risks in developing an implantable that will function properly in the body and the legal ramifications following a life-threatening battery failure.

Potential uses include treatment of chronic pain, epilepsy, sleep apnea, and restoration of limb control for stroke victims. Feasibility trials are currently under way on patients suffering from urinary tract incontinence. The cost of the battery by itself is initially running around $400, according to Quallion's president Werner Hafelfinger. It is recharged from outside the body through a special pad attached to a belt or placed on a seat or bed.

Starting with only 2 scientists in 1998, the Sylmar, California, company more than doubled in size every 6 months, and today Quallion employs over 100 people.

Sources: Argonne News Release, " Battery powers tiny implants that aid neurological disorders (September 19, 2003) on Argonne National Laboratories website; and Small times, "When lives are at stake, the batteries better work" (June 26, 2003 ) on their website.

PolyStor, a spin-out of the Lawrence Livermore National Laboratory, developed state-of-the-art Li-ion technology, but the company failed following unsuccessful efforts to market its product for cell phone applications in the face of severe price competition between Japanese and Chinese battery companies seeking market share.

Small U.S. company takes foot steps in Li-ion battery production

Polystor Corporation, a privately held company based in Livermore, California, developed and manufactured rechargeable Li-ion and Li-ion polymer batteries in small volumes for mobile devices and portable elec-tronic products. Polystor developed a nickel cobalt oxide cathode that delivered the highest capacity and energy density in the industry at one point.

The firm was founded in 1993 to bring to the market technology that was developed by its founders while at the Lawrence Livermore National Laboratory. The firm pursued development of Li-ion technologies for the Strategic Defense Initiative program. In the 1990s, with assistance in R&D funding from a TRP grant, sev-eral SBIR grants, and a grant from the U.S. Advanced Battery Consortium, the company sought to spin the technology out for commercial use.

PolyStor's Li-ion cell was tested by Motorola and other major manufacturers and reached production by 1996. PolyStor made the cell components in the U.S. and shipped them to Korea for assembly.

In 2000, PolyStor won an award from the Advanced Technology Program to help develop a safe, ultrahigh capacity next-generation rechargeable battery based on Li-ion polymer gel technology.

After suffering a sharp decline in demand for its products in 2001, tied to a global decline in the demand for cell phones, PolyStor ceased operations in 2002.

Source: Steve Peng. "Mold to Fit Battery." Edgereview.

PolyPlus, with joint venture partners Eveready (now Energizer Holdings) and Sheldahl, received ATP funding to develop lithium-sulfur battery technology spun out of Lawrence Livermore National Laboratory. The partnership among small and large companies failed to see the anticipated commercialization path-ways when the project encountered technical difficulties and Energizer exited the market for rechargeable batteries.

Small U.S. company continues to obtain financial assistance for lithium-sulfur rechargeable battery R&D

With its ATP award in 1999, PolyPlus Battery Company (Berkeley, CA), in a JV with joint-venture partners Sheldahl, Inc. (Northfield, MN) and Eveready Battery Company, Inc. (now Energizer Holdings, Westlake, OH), aimed to develop and test recharge-able, long-life lithium-sulfur batteries that offered increased energy density, reduced size and manufacturing cost, and enhanced safety as power sources for mobile technologies such as notebook computers and cell phones.

PolyPlus was to develop processes for depositing the layer of glass and specifying the battery chemistry. Sheldahl's role was to develop the protected lithium metal electrode (with assistance from subcontractor Sidrabe), and Eveready was to develop the glass electrolyte and cathode and construct test batteries.

Eveready Battery Company, Inc., incorporated in 1986 by Ralston Purina Company to acquire the long established battery products business of Union Carbide Corporation, became a leading manufacturer of primary batteries and battery-powered flashlights. In 2000, Ralston-Purina spun off Eveready as Energizer Holdings, Inc., an independent company, and sold Eveready's OEM rechargeable battery business to Moltech Corporation for manufacture and assembly of battery packs for a variety of battery-powered devices and tools.

The ATP-funded project encountered technical difficulties in the second and third years of the project, particularly in protected anode development. By the end of the ATP project, Eveready/Energizer announced it did not plan to pursue the technology. By 2000, Eveready/Energizer had essentially exited the market segment where lithium-sulfur technology would best fit. Energizer currently estimates it has a 30 percent share of the U.S. alkaline battery market. It has not announced any revolutionary changes in its battery technology.

PolyPlus continues to pursue leading-edge lithium battery research and development and to conduct the independent research upon which the company was founded, both on contract research and in joint development projects with battery manufacturers and others, with financial support from individual angel investors, venture capital, and large companies Energizer and Samsung.

In 2002, Moltech Corporation sold the Li-ion facility acquired from Energizer to U.S. Lithium Energetics LLC. Moltech continues as a small but fully integrated provider of rechargeable battery solutions for many applications. Now called Sion Power, the company is concentrating on developing and commercializing its own thin-film, lithium-sulfur rechargeable battery technology.

Source: ATP Project Brief, project number 99-01-6015; Abstract 53, IMB 12 Meeting, Electrochemical Society; Hoover 's Online.

PowerStor, a subsidiary of PolyStor, received ATP funding to develop aerogel capacitor technology licensed from Lawrence Livermore National Laboratory. More successful than its parent company, PowerStor illustrates the movement toward offshore production for larger-scale applications.

Offshore manufacturing enables small company to manufacture without capital investment in production facilities

PowerStor, a subsidiary of PolyStor, licensed aerogel capacitor technology from Lawrence Livermore National Laboratory. PowerStor overcame financial barriers to constructing production facilities by manufacturing its aerogel ultracapacitor products by hand in Malaysia. This approach required minimal capital and quickly resulted in product sales. More than 10 million of these devices have been sold in Asia, Europe, and the United States, with new applications emerging monthly.

Microsoft uses the capacitor to power the clock in its new gaming console system. Several aviation equipment manufacturers install the device in aircraft displays to maintain continuous voltage when switching from one electrical bus to another. Other applications include low-tech toys, valve actuators, and insulin pumps.

Cooper Electronic Technologies acquired PowerStor when the parent company, PolyStor, folded.

Source: Missile Defense Agency 2003 Technology Applications Report: Electrical, Electronic, and Magnetic Devices.

Other examples abound.

  • Valence Technology is a U.S.-owned, Austin, TX-based producer of Li-ion polymer batteries. Following R&D in the United States, Valence set up battery manufacturing operations in Northern Ireland because of financial incen-tives by Invest Northern Ireland. Its production is small in scale compared to Sanyo or Sony. It has mounted an extensive campaign to sell its lithium vanadium phos-phate cathode batteries for notebook and cellular phones. The Valence battery is available through their web site and distributors, but sales have been disappointing. After two years in the market, sales were less than $5 million per year. Valence announced in 2003 that the company would move its production from Northern Ireland to China to take advantage of lower production costs there than in Northern Ireland.

Ultralife and Eagle Picher Industries were joint-venture recipients of ATP funding to develop polymer Li-ion batteries for portable electronics devices used in commercial space applications. Eagle-Picher has developed Li-ion production capability in Canada targeting the U.S. military market, as did Yardney. Ultralife is now largely concentrating on the niche markets in smoke detectors and military radio applications using its lithium manganese primary cell platform.

  • With a twist in this off-shore strategy, Long Island-based Brentronics buys cells from Japan and China for use in military packs. After assembly into battery-packs in the United States, they are marked "Made in USA."

This study seeks to identify and analyze the reasons for the specific decisions by the two largest U.S. battery companies to cancel plans for Li-ion production. At the same time, the study establishes the business environment facing smaller companies and examines key factors affecting their success or failure.

1. NEMI Technology Roadmap, December 1996, p. 117.

2. "Hooked on lithium," Economist Science Technology Quarterly, June 20, 2002.

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Date created: July 21, 2005
Last updated: January 3, 2007

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