Powering the Future

China's lithium battery industry gets charged to provide power for future generations of technology

Only 10 years ago, the lithium ion battery was limited to the lab experiments of pioneering scientists. Today, the innovative cell is fast becoming the driving force to power the next generation of technology.

After years of toiling, the first home-made commercially viable lithium battery pack was created in 1997 in a research lab of the Tianjin Institute of Power Sources. Breaking through the strong defensive line of its Japanese competitors, the innovative battery marked the country's very first step into the unchartered territory of lithium power.

The technological breakthrough gave many Chinese companies a foot in the lithium-production door. But as the industry maneuvers onto a faster and more productive track, a wide divide is opening from within.

Top players, like Shenzhen-based BYD and BAK Battery Co. Ltd., are underpinning their global foothold on the back of improving safety conditions and battery reliability.

The emerging industry, however, is still in its infancy, standing on wobbly legs. A number of smaller manufacturers, eager to jump on the lithium bonanza, are flooding the market with slipshod, low-capacity batteries for cell phones and MP3 players. The cheap labor and vibrant demands have delivered quick windfalls, but the lack of technological know-how and operational expertise has cast an ominous shadow over their long-term prospect. While fire-related accidents and explosions have been rare, occasional recalls have served as a reminder that the industry still needs time to develop.

"Ever since its start-up, the sector has been feeling the pain of reckless quality control," said Huang Xuejie, a senior researcher with the Chinese Academy of Sciences, in a report. "Now product safety has gained such importance that it may be a deciding factor by which many smaller battery makers would survive or perish."

Richard Liang, Vice President of the Tianjin Lishen Battery Joint Stock Co. Ltd., agreed. "Without proper quality safeguards in place, our promise to be a top brand would look more of a distant hope," he told Beijing Review.

The miracle of Lishen is a vivid microcosm of the country's decade-long trajectory with the rechargeable battery business. Twelve years ago when the state-owned battery maker was founded, it was widely expected to be a market hit. But few expected it to take off so soon--Lishen is currently the world's sixth largest lithium ion battery producer and partner supplier of global electronics giants including Samsung and Motorola.

Effective branding and marketing added luster to the corporate performance, and most importantly the vigorous efforts in safety improvement are paying off, said Liang.

"We did our best to deliver quality assurance throughout all stages of the battery-making process, from product structure design to protective functions," said Liang. "In addition, we scoured the globe for the most advanced materials of electrodes, anodes, separators and electrolytes."

Special casings, for instance, protect the lithium ion inside the batteries in case of high-speed collisions and the lithium ion could also be combined with other substances to reduce the risks, Liang said.

Catching up

From mobile phones and video cameras to laptops and cars, lithium ion batteries are quickly finding their way into households, garages and everyday use. The power source of the future is small enough to fit into the palm of your hand.

Global output of lithium ion batteries has skyrocketed in recent years by more than 20 percent annually and is expected to enjoy its upward momentum for some time.

The high expectations are not unwarranted--lithium, the lightest of all metals, has the greatest electrochemical potential and provides the largest energy density for weight. The self-discharge is minimal, an additional advantage that most other chemistries cannot claim. When disposed, lithium-ion cells cause little harm to the environment, unlike their conventional counterparts.

While the prospects for lithium are high, the batteries are far from perfect. A protection circuit is needed to cover the fragile power source and maintain a safe operation. Overheating or severe damage to the battery can lead to a short circuit, which can cause the unit to burst into flames. The odds of a battery pack combusting are two or three in one million, but when it does happen, the results can be devastating.

Japan staked early claims in the great lithium land grab, leveraging many cutting-edge technologies. The dominance peaked in late 1999 when it accounted for 95 percent of global lithium ion battery output. But as the costs of inflation pinched Japan's industrial profits, two of its Asian neighbors, China and South Korea, started to push their way into the limelight. While South Korea draws strength from a local electronics boom, China has utilized its rich mineral resources--its lithium reserves rank third in the world only after Chile and Argentina. The end result has been a three-way race among the three countries in the hunt for market shares.

But what really set the stage for Chinese battery makers to play catch-up, and what may make their products financially viable, was massive government support, said Yang Yusheng, an academic with the Chinese Academy of Engineering.

No sooner had the lithium ion battery become a component in the talk of a global village than Chinese policymakers set their sights on its infinite potential. In the late 1990s, the former Ministry of Information Industry jump-started a national program to build up the lithium ion industry from scratch, setting its top researchers on a race against the clock.

With millions in government funding, the smaller but more powerful battery swiftly found its market niche. Lithium ion battery makers sprouted up all over the country. The output nationwide added up to more than 1.4 billion packs in 2007, nearly 34 percent of the world's total, according to a report by the Xinhua News Agency.

Going electric

Though engineers have yet to find a compromise between operational safety and energy delivery, the coveted lithium ion batteries will be crucial as the global auto industry goes electric.

Lithium's incorporation into cars would lead to a win-win situation for both the battery and automobile industries. Rising oil prices and growing environmental concerns have placed pressure on the automobile sector for a source of green growth. As automakers shift from gasoline to voltage, they need batteries that not only can quickly and easily be recharged, but are also more able to facilitate long-distance travel and are light and compact enough to fit into cars. This will give lithium providers the perfect opportunity to expand their business.

And in China, the world's fastest-growing auto market, the lithium ion battery has been given the chance to prove its worth. The Chinese Government recently handed out generous policy incentives to get more electric cars on the road in the next few years. "Given the size of the Chinese auto market, the battery business has the potential to take center stage," Liang said to Beijing Review.

In a rush to join the party, automakers are looking to team up with battery giants. The U.S. company Miles Electric Vehicles joined hands with Lishen in July in a joint venture deal to build and sell electric cars in the United States and eventually in China. The new vehicle, called Coda, has hit showrooms and is expected to cruise into the market in the near future.

The alliance is a needed accelerator for both sides. While Lishen handles battery manufacturing, the key part to an electric sedan, Miles provides safety expertise, an area where battery makers lag behind automakers. But as they gear up to drive electric cars off the assembly line, one looming question is whether they can come up with more affordable products, since lithium ion batteries cost around 40 percent more than the nickel-cadmium ones.

Liang told Beijing Review that unit costs will come down once production begins on a large scale. It is still necessary to step up efforts to soothe safety worries and strengthen battery recycling capabilities, he added.