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

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.

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.

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.

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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