ESPEC Technology Report Technology Report · Technology Report Ensuring Safety and Business Models for Lithium Ion Batteries ... Samsung SDI (South Korea) Panasonic (Japan) Toray

ESPEC Technology Report

Test Navi Report No. 21 (Issue 78)

Technology Report

Ensuring Safety and Business Models for Lithium Ion Batteries

Dr. Noboru Sato

Executive Adviser, ESPEC CORP.

Visiting Professor, Green Mobility Collaborative Research Center, Nagoya University

Abstract

Business models in the lithium-ion battery (LIB) industry differ significantly between small consumer

batteries, in-vehicle batteries, and fixed batteries, and it is thought that businesses must have detailed

strategies based on an understanding of the differing nature of these various models if they are to increase

competitiveness. In particular, competition related to technology development and business models for

in-vehicle LIBs has been gradually intensifying on a global scale. This report provides commentary on

related market trends, business models, and ensuring reliability and safety.



Technology Report

Ensuring Safety and Business Models for Lithium Ion Batteries

Dr. Noboru Sato

Executive Adviser, ESPEC CORP.

Visiting Professor, Green Mobility Collaborative Research Center, Nagoya University

1. Market trends surrounding lithium-ion batteries

In 1991, Sony became the first manufacturer in the world to mass produce lithium-ion batteries (LIBs).

The LIB business has since been overwhelmingly dominated by Japanese manufacturers, but our position

at the top has been threatened from the mid-2000s onwards.

It is now 23 years since Sony established its LIB business, and the firm's announcement in the second

half of 2012 that it was going to sell off its battery business sent shockwaves through the industry. Sony's

announcement is indicative of the extent to which the Japanese consumer LIB industry has lost

competitiveness. Even Sanyo, which was the industry leader at the time, has been absorbed by Panasonic,

but there is a feeling that even Panasonic itself has been unable to come up with the winning formula (Fig.

1).

Fig. 1 - Changes in global market share (The Nikkei, July 1, 2013)

Item 1st position 2nd position Item 1st position 2nd position

Toyota Motor Corporation(Japan)

General Motors (USA)Toyota Motor Corporation(Japan)

General Motors (USA)

11.7 (1.7) 11.2 (-0.2) 11.7 (1.7) 11.2 (-0.2)Yingli Green Energy Holding(China)

First Solar (USA) Sony JVC Kenwood

7.2 (1.2) 5.6 (-1.7) 44.0 (0.0) 18.0 (3.0)GE Wind Energy (USA) Vestas (Denmark) Canon Nikon15.5 (6.8) 14.0 (1.1) 22.6 (3.8) 20.9 (5.4)Haier (China) Whirlpool (USA) Nintendo Sony Computer Entertainment12.4 (1.0) 12.2 (-0.1) 41.4 (0.1) 41.1 (2.2)

Samsung SDI (South Korea) Panasonic (Japan) Toray Toho Tenax25.1 (1.9) 20.7 (-2.8) 20.9 (0.4) 16.7 (0.3)Samsung Electronics (SouthKorea)

Nokia (Finland) Nichia CorporationSamsung Electronics (SouthKorea)

23.5 (4.2) 19.3 (-5.0) 33.1 (0.8) 10.8 (-7.4)

LG Display (South Korea)Samsung Electronics (SouthKorea)

Sony OmniVision Technologies (USA)

24.6 (2.5) 20.1 (-2.6) 32.1 (0.4) 14.4 (3.7)Renesas Electronics Freescale Semiconductor (USA)

Mitsui O.S.K. Lines (Japan) Fredriksen Group (Norway) 25.6 (-1.3) 9.4 (-0.1)5.9 (-0.2) 5.5 (-0.8)

Applied Materials (USA) ASML (Netherlands) Toyota Industries Corporation KION (Germany)14.4 (1.5) 12.8 (-2.1) 19.1 (0.9) 15.0 (0.2)Western Digital (USA) Seagate Technology (USA) FANUC ABB (Switzerland)44.6 (14.1) 41.9 (10.1) 27.3 (-1.1) 23.4 (3.2)

Mitsui O.S.K. Lines Fredriksen Group (Norway)5.9 (-0.2) 5.5 (-0.8)NYK Line EUKOR (South Korea)16.3 (-1.5) 13.5 (0.4)

*Figures indicate percentage share of market. Figures rounded up to first decimal place. Figures inparentheses indicate percentage point change from previous year.

12 items for which Japan is No. 1 worldwide10 items in which first position has changed

Product competitiveness increasing

Increased sales in prominent markets

Performance in depressed markets

Products with high level of bulit-in quality and coordinated design

High function materials and components

Automobiles

Solar cells

Wind power generators

Washing machines

Lithium ion batteries

Cellular phone handsets White LEDs

CMOS image sensors

Microcomputers

Industrial vehicles

Articulated robots

Facilities and services supporting manufacturing

Automobiles

Video cameras

Digital cameras

Video game consoles

Carbon fiber

Crude oil shipments

Automobile shipments

LCD panels

Crude oil shipments

Semiconductor fabricationsystems

HDD

*Figures indicate percentage share of market. Figures rounded up to first decimal place. Figures inparentheses indicate percentage point change from previous year.



In addition to these developments, Chinese batteries have been putting pressure on Japan's share of the

premium market segment (volume zone) for low-end products. For example, Apple employs LIBs made by

Chinese firm ATL in the iPhone and the iPad, indicating that Chinese products have achieved a certain

level of recognition. While Chinese batteries compare unfavorably to Japanese and South Korean products

in terms of reliability, they are starting to earn a good reputation in terms of overall performance including

price.

There is a need to objectively and systematically examine the relative loss of competitiveness suffered

by Japan's LIB industry for small consumer products. Based on my experience at Samsung SDI, I think

that the causes behind this loss can be organized as shown in Fig. 2*1.

Fig. 2 - Factors behind decrease in competitiveness suffered by Japanese LIB industry

On the other hand, the strength of Japanese battery manufacturers is being demonstrated in in-vehicle

batteries. One of the topics currently of most concern to the automotive industry is the issue of vehicle

electrification such as hybrids (HEVs), plug-in hybrids (PHEVs), electric vehicles (EVs), and fuel cell

vehicles (FCEVs). These environmentally friendly vehicles look set to change the competitive landscape

of the automotive industry.

Japan is a leader in the field of vehicle electrification, and because this field is driven by high

specifications, the high reliability of Japanese in-vehicle batteries would be advantageous.

By contrast, the battery industry is weak in Europe and the United States. The name to watch in the

in-vehicle battery market is South Korea's LG Chem. LG Chem has been strengthening its business ties

with Hyundai, GM, and Renault. Samsung SDI has business partnerships with BMW and Chrysler.

However, neither company has been able to collaborate with EVs, HEVs, or PHEVs developed by

Japanese automakers.



A feature of the Japanese market is that automakers and battery manufacturers have established

specialized battery manufacturers through joint ventures. Automakers want to get a deeper understanding

of battery tecnologies and features, which is necessary also in order to reduce costs.

For their part, battery manufacturers gain an understanding of how batteries are used in vehicles, and

reflect this in product development. Such cooperative relationships allow both parties to realize each

other's ideas by making compromises. This is a feature that is lacking in the European and US industries,

which have different product development cultures.

It looks certain that Japan will continue to be a driving force in the vehicle electrification. Japan is also

a strong performer in the fields of power semiconductors and power electronics as a whole. Power device

products including batteries will continue to be the core of the Japanese industry in the years to come.

2. Business models for in-vehicle LIBs

2.1 Shift from EVs to HEVs, and battery development

In 1997 Toyota released the world's first HEV, the Prius, and was followed two years later by Honda,

which released the Insight in 1999. The technology cultivated in EVs was clearly applied to vehicle and

battery technology in HEVs, and the two firms attained overwhelming strength in HEV intellectual

property rights.

The Strategic Market Creation Plan, which was prepared as part of the Japan Revitalization Strategy

announced in June 2013, sets targets related to next-generation vehicles (EVs, HEVs, PHEVs, FCVs, and

CNGVs). The plan calls for such vehicles to account for 50 to 70 percent of new vehicle sales by 2030.

Fig. 3 shows one aspect of the Chinese market in 2013, where the situation with regard to fine particle

(PM2.5) counts as well as air pollution is extremely serious. In light of this state of affairs, the Chinese

government has introduced environmental regulations. Alongside the US's ZEV regulations and Europe's

CO2 regulations, more stringent environmental regulations such as China's CO2 regulations are acting as a

driving force behind the development of next-generation vehicles.

Fig. 3 - Worsening air pollution in Zhengzhou, China, and draft regulations



2.2 Business initiatives by battery industry firms

Some firms such as Mitsubishi Heavy Industries (MHI) have pulled out of the battery business

altogether. Despite having spent around 10 billion yen on completing battery production facilities at its

Nagasaki Shipyard & Machinery Works in 2010, MHI withdrew as a regular member of the Battery

Association of Japan in March 2014, and plans to sell the business to a Taiwanese firm.

The business has production capabilities of 66,000 kWh and can manufacture 400,000 mid-size, 185

Wh-class cells annually. Although MHI had invested heavily in LIBs for EVs, the sale of the business was

triggered by lackluster sales of EVs themselves.

Meanwhile, as evidenced by the example of startups like US firms EnerDel and A123 Systems, both of

which failed in 2012, survival in the battery industry is not easy. A123 Systems was bought by China's

Wanxiang Group for around 25 billion yen, and has now transformed itself into a Chinese firm. Generally

speaking, one factor behind the demise of these firms is the large number of battery manufacturers around

the world, but in the end, the key to success lies in overall competitiveness in terms of performance, price,

reliability, and safety.

Amidst all this, NEC has decided to buy Wanxiang's large-capacity energy storage systems business

targeting power companies for around 10 billion yen. According to NEC, the global market for large-scale

energy storage systems looks set to grow to 600 billion yen by 2020. It would appear that NEC took its

recent decision in response to this prediction.

Eying the expansion of vehicle electrification in China, Samsung SDI has built a new factory in Xian,

which is expected to be operational from 2015. The firm will base its business model on the existence of a

Samsung Electronics smartphone manufacturing plant in Vietnam.

This move has been taken in response to the Chinese government's strategy to rapidly expand the

vehicle electrification, and is the result of significant consideration of the scale of the market. In April

2014, Samsung SDI established a joint venture with a Chinese auto parts maker, Anqing Ring New Group,

and at some stage during the year plans to start construction of a new factory, which is expected to be

operational in 2015. The new business will operate in a site adjacent to a Samsung Electronics

semiconductor factory.

Although Samsung SDI and Bosch established a joint venture in 2008, the business was dissolved in

September 2012 due to differences in opinion between the two firms. Meanwhile, Lithium Energy and

Power, a joint venture between Bosch and GS Yuasa started in 2014.

3. Maintaining reliability and ensuring safety of in-vehicle LIBs

3.1 Development of components and creation of technologies to ensure LIB safety2)

Recently in China, the number of chemical engineering papers related to batteries has increased, and

more and more effort is also being put into research and development. While Japan is a leader when it

comes to cutting-edge research, its market share will change unless material manufacturers are able to

come up with ways to reduce costs associated with low-end products.

Behind this situation lies the fact that South Korean material manufacturers have improved their

technical capabilities and enhanced their cost competitiveness in conjunction with the gains made by LIB

manufacturers.

Under such circumstances, maintaining and improving the cost competitiveness of Japanese materials

and components going forward will require (1) the acceleration of cutting-edge technologies to further

enhance high-end materials, (2) research and development activities aimed at discovering how to achieve

low costs in the premium market segment (volume zone) for low-end products, and (3) strong growth

strategies involving partnerships with LIB manufacturers.

Approaches related to LIB safety are influenced significantly by materials used, particularly the



chemical structure of positive electrode materials. An easy-to-understand example of battery safety is

presented in Fig. 4. In the case of LiNiO2, which forms a layered structure, because lithium moves toward

the negative electrode as the charge state continues, it breaks away from the positive layers. If charging

continues until the battery is overcharged, depending on the circumstances in which the lithium has broken

away, a breakdown in crystal structure occurs.

As an extreme example, if we consider a scenario in which the lithium moves completely to the

negative electrode, the eventual crystal structure of the positive electrode will be NiO2. This material

cannot exist stably. If we try to stabilize it, an excess of oxygen occurs and the material releases surplus

oxygen.

Fig. 4 - Differences in safety stemming from differences in crystal structure of positive electrode

Eventually, there is a mechanism whereby the surplus oxygen that is released reacts with electrolyte

components and the battery enters combustion mode. Accordingly, it is necessary to design positive

electrode materials carefully depending on the application.

When considered from a similar point of view, it is also possible to explain the stability of manganese

spinel LiMn2O4 on the right side of the Fig.4. Even if the battery was overcharged continuously and the

lithium moved to the negative electrode, the crystal structure ultimately remaining would be Mn2O4, or

manganese dioxide, making it chemically stable.

While LiNiO2 provides more power per unit mass, its poor chemical stability makes it difficult to apply

to large LIBs such as in-vehicle batteries and fixed batteries.

In contrast, while manganese spinel LiMn2O4 does not provide as much power per unit mass, its

excellent safety properties mean that it is often applied to large LIBs.

The LIB manufacturing process consists of multiple processes including mixing of active materials,

conductive materials, and additives; coating of aluminum and copper foil on current collectors; rolling;

drying; winding; and aging. These processes share the same technological domain as various painting

processes. Settings and factors that need to be managed in these processes are wide-ranging and include

controlling particle size in active materials, managing coating thickness, and ensuring uniform drying

conditions. The automation of processes to prevent contamination by foreign matter is also quite advanced.

Contamination by foreign substances is a dangerous factor that inhibits safety, and is an aspect of process



management to which utmost care should be paid during the electrode manufacturing process. For this reason, many manufacturers employ systems that attract foreign matter by installing powerful magnets in the process.

Moreover, the addition of a binder to the active material produces functions that improve the efficiency of the electrochemical reaction and control the degradation itself of the active materials. Thanks to such advantages, binders are right on the verge of establishing a position as a functional material. For example, it has been confirmed that manganese can leach out into the electrolyte and cause deterioration if manganese spinel is applied to the positive electrode, but technology has also been developed that inhibits deterioration by applying an appropriate binder.

Until now, positive electrode materials that are expected to increase power and output by achieving high voltages have been OLO, an over-lithiated positive electrode material, and 5V LMO active materials (Fig. 5).

Fig. 5 - Chemical structure and thermal stability of LMO positive electrode materials

However, while these materials are promising, there are problems with the decomposition voltage of electrolyte components, and practical applications will not be realized unless there is coordinated development of technology to improve the decomposition voltage of the electrolyte. Because such materials are unfavorable in terms of safety, ensuring reliability and safety is a significant challenge.

Similarly, new silicon oxide materials are in the process of replacing conventional carbon materials, particularly graphite, in negative electrodes. However, it has not yet reached the point where it is possible to replace all graphite negative electrodes with silicon oxide negative electrodes, and a mixture of graphite and silicon oxides is still used.

This is because although the silicon oxide structure is capable of absorbing sufficient amounts of lithium during lithium intercalation to provide a large power capacity, it is placed under load by the expansion and contraction of the electrode during charging and discharging. If the volume of the structure expands too much, capacity deteriorates and battery life is shortened.

When originally commercialized by Hitachi Maxell in 2010, silicon accounted for 3 percent of the negative electrode, while the remaining 97 percent was graphite. Since then the ratio of silicon oxides has increased and now accounts for around 7 to 10 percent. A focus of development activities going forward will be to investigate the extent to which the percentage of silicon oxides can be increased. Ensuring reliability and safety is a challenge when applying such materials to in-vehicle LIBs and increasing the ratio of silicon metal oxides.

At any rate, the key to the development of new materials lies with Japan's chemical material manufacturers. These companies are a big presence in the industry, with firms like Shin-Etsu Chemical



producing silicon oxides and Mitsubishi Chemical Corporation producing general component materials. US firms 3M and DuPont are also promoting materials development, but have not quite been able to make inroads into the business. Both companies have high technical potential, but both are also affected by the lack of a battery industry in the U.S. to give them traction.

As Japanese materials manufacturers already understand the specifications that battery manufacturers require, and have development activities that are focused several years into the future, it is hard for other firms to enter the industry. In light of these considerations, there is a high probability that any new materials developed in the future will originate from Japan. Research is conducted by a variety of parties throughout the country including the private sector, universities, public research institutes, and national projects managed by NEDO. No other country is undertaking such comprehensive efforts as Japan, and in this sense, the future looks promising. 3.2 Development process for ensuring safety technologies

When all is said and done, increasing the durability, reliability, and safety of batteries is an essential part of technology development. This is because automobile manufacturers have caused automotive accidents attributable to batteries, and ensuring safety in the future is the industry's most pressing challenge.

The conceptual process of evaluation test items that are required before a technology is applied to in-vehicle batteries is shown in Fig. 6. The manufacturer must be able to adequately ascertain the suitability of a given technology for use in battery pack systems.

This area is also extremely important when it comes to the relationship between automakers and battery manufacturers because any kind of omissions can lead to defects or accidents. In Japanese product development culture, automakers and battery manufacturers both employ a cooperative working style so that such omissions do not happen.

Fig. 6 - Development process for ensuring battery safety

■ Evaluation steps required before product can be used as in-vehicle battery



There has been discussion from time to time regarding the development of international standards for

in-vehicle storage batteries, and amongst such standards battery safety evaluations and criteria are

especially important. These standards apply in particular to immersion tests, crush tests, vibration tests,

impact tests, and battery life test methods, and cover a wide range of fields if charging systems and the

like are included.

Fig. 7 indicates evaluation modes used for finished vehicles. The figure shows safety and reliability

validation tests, but all conceivable evaluation methods must be introduced and substantiated.

(a) Immersion test (b) Impact test

Fig. 7 - Validation of EV safety and reliability

(From AESC and Nissan's AABC Asia 2014 proceedings)

Processes aimed at reducing the burden of evaluation on automakers, and business models involving these processes will be effective. A variety of such businesses can be envisioned. For example, cases where automakers directly conduct evaluations and produce results in evaluation facilities that they have installed themselves; cases where automakers obtain results and reduce costs in terms of time and manpower by outsourcing evaluation work to companies that have evaluation outsourcing functions such as ESPEC; or cases where outsourcing firms provide particular automakers and battery manufacturers with laboratory functions, thus providing outsourcers with a place they can use as though it were their own laboratory.

Because automakers that are proactively promoting vehicle electrification by expanding the range of models under development have to deal with an increasing number of battery types, the aforementioned business models are effective for both parties. At the same time, automakers for whom it is not easy to roll out evaluation facilities can improve the efficiency of product development through the proactive use of outsourcing firms.

In addition to the obvious time improvements, ESPEC is able to offer solutions that go the extra mile,



for example, by providing know-how concerning evaluation methods and by identifying and making proposals regarding technical challenges related to evaluation results. Accordingly, it is hoped that this kind of new business model will be rolled out in the future.

One point that also applies to the battery industry as a whole is that when considering the possibility of collaborating with many automakers, the same kind of thing can be said due to the fact that the specifications of each automaker differ. Going forward it is hoped that the building of relationships and collaboration between outsourcers and outsourcing firms will become a trigger that improves the competitiveness in the development of in-vehicle secondary batteries.

In November 2013, ESPEC established the Energy Device Environmental Test Center in Utsunomiya. The center allows ESPEC to provide customers with a true full-scale outsourcing business that contributes to the development of the automotive and battery industries. As indicated in Fig. 8, the Toyota, Kariya, and Kobe test centers also provide similar functions.

Fig. 8 - ESPEC's test centers and evaluation systems

ESPEC's Energy Device Environmental Test Center is home to the world's first external short circuit testing system for battery packs. Furthermore, with the development of a three-chamber charge/discharge evaluation test system, ESPEC has released a product that is capable of performing efficient evaluations based on desired temperature conditions and load modes.

A satellite map of industries involved in research into innovative in-vehicle batteries is shown in Fig. 9. Powerful development capabilities can be created by pulling together satellite industries that provide efficient basic research, material and components development, battery development, and evaluation and analysis outsourcing functions. This unique cooperative style is unheard of in other countries.



Fig. 9 - Forces driving the development of innovative in-vehicle batteries from research to commercialization

Conclusion Business models in the LIB industry differ significantly between small consumer batteries, in-vehicle

batteries, and fixed batteries, and businesses must have detailed strategies based on an understanding of the differing nature of these various models if they are to increase competitiveness. In particular, competition related to technology development and business models for in-vehicle LIBs is intensifying on a global scale.

Aside from being an issue of worldwide importance, vehicle electrification presents a chance not only for the automotive industry, but also for research organizations and the battery, materials and components, and evaluation test industries. Compared to other types of batteries, the most challenging aspect of product development for in-vehicle batteries is ensuring safety and reliability.

Currently, in light of the fact that there has been increased activity towards providing international standards for safety evaluation tests—a field in which many countries have seized the initiative, the automotive industry is intent on developing technologies to fulfill various test methods while the battery industry is intent on creating strategies and tactics for winning business with the automotive industry.

Bibliography 1. Sato, N., Nikkei Business Online, "Technology Management", serial starting April 19, 2013 2. Sato, N., Yoshino, A. (Editor), "Safety Technologies and Materials for Lithium-ion Batteries", CMC

Publishing, p. 247 (2009)

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ESPEC Technology Report Technology Report · Technology Report Ensuring Safety and Business Models for Lithium Ion Batteries ... Samsung SDI (South Korea) Panasonic (Japan) Toray