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Final Nanolab Battery Market Assessment

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Final nanolab battery market assessment

Final nanolab battery market assessment

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    Final Nanolab Battery Market Assessment Final Nanolab Battery Market Assessment Document Transcript

    • -1 Rechargeable Battery Market Assessment Report: An Opportunity for NanoLab, Inc. Robert Shines Marketing Consultant May 17, 2001 Executive Summary 1
    • In order for NanoLab, Inc. to successfully enter and remain in the highly competitive rechargeable battery market industry, it must first consider a series of potential alliances, which will enable the firm to stay ahead of its present and future competitors as well as successfully serve its customers in this rapidly emerging market space. Market Trends and Dynamics Prologue Portable product original equipment manufacturers’ (OEMs) market space can be defined as “global mobile connectivity” for their customers. Consequently, there is global demand for a rechargeable battery that is small, lightweight, ultra-thin and operates longer than standard batteries. It has been said that, “As the world becomes more wired, the demand for liberation from those wires grows, so people can escape with their notebook computers and cell phones.” This need will only intensify as the portable product list evolves from these present-day devices into future personal digital assistants (PDAs), digital phones and cameras, pagers, wireless Internet appliances, electronic books, electronic tablets, Web pads, MP3 players, bar code devices, etc. Therefore, multinational as well as smaller battery manufacturers and their suppliers must help the OEMs sustain this emergent market space. Industry Overview A few short years ago, nickel cadmium (NiCd) and nickel metal hydride (NiMH) were the preferred materials for the rechargeable battery industry, accounting for as much as 55% of sales. 1 In that short time span, however, these compounds have been supplanted by Lithium-ion (Li-ion) as the preferred rechargeable battery material for notebook computers and cell phones. 2 With regard to Lithium-ion, the notebook computer is seen as the primary driver for technological advances, with the cell phone as a close second. This shift is occurring due to several reasons. The first and foremost of these is that as these portable devices become ever smaller, OEMs are demanding that the battery component likewise become smaller and lighter. Battery performance is not to be sacrificed, however. Indeed, performance is expected to increase to keep up with nickel metal hydride cells as well as with the other internal components of the portable device, such as the semiconductor chip. Flexibility is also seen as a factor in driving portable device OEMs toward lithium- based chemistries as opposed to nickel-based batteries. Because of this, the global 2
    • demand for Li-ion batteries is projected to increase around 22% annually through 2004, with a slight leveling off of demand at 15% annually through 2009.3 Projected Worldwide Lithium-ion Battery Sales 14 13.1 11.4 Revenue (US$ Billions) 12 9.9 10 8.6 7.5 8 6.5 6 5.3 4.4 3.6 4 2.9 2.0 2.4 2 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Year Li-ion batteries are still under fire from some OEMs, however. With end users demanding more run time from their notebooks and more “talk time” from their cell phones, the energy-density of the unit battery will become the crucial issue. Li-ion batteries have been shown repeatedly to provide a higher energy-density storage capacity over their nickel-based rivals. On average, battery manufacturers have managed to increase Li-ion battery energy-density 10% to 20% annually.4 However, this increase is negligible compared to the doubling of computing power roughly every 18 months due to Moore’s Law. With regard to computers, if power consumption continues to rise at this rate, there is virtually no major resultant change in run time. Battery life is also degraded as computer processing speeds reach in excess of 1 GHz. At this rate, the chip runs very hot, which requires more power, which in turn takes its toll on the battery. As a temporary measure, many PC manufacturers are trying to place the battery away from heat-generating components. Some concepts proposed include placing the battery on the back of the screen or on the back of the computer itself. Cost is also another point of contention with Li-ion chemistries. Some OEMs are still reluctant to make the switch from NiMH to Li-ion because the price added by lithium is about 20% and they are reluctant to pass on that cost to their consumers. The added expense is because Lithium-ion batteries require a safety control circuit to prevent overcharging and over-discharge. Simplifying this control unit is a hurdle Lithium-ion technology must overcome to become more economical. However, the price of lithium batteries is expected to come down due to increased production volumes and economies of scale benefits, which will make them more price-competitive. This must take place if Li-ion is to make its way from higher-end consumer products to lower-end equipment. In short, as user demands for more add-on features such as CD-ROMs and multimedia applications multiply exponentially and as notebooks and cell phones continue to merge and give birth to the next generation of wireless Internet gadgets, these issues are only going to be compounded. In essence, end users are continually demanding more features along with the freedom to use them longer and are not sympathetic to the need to stop and recharge. 3
    • Enter Lithium-polymer Lithium-polymer cells are similar to Lithium-ion batteries, but have the ability to be manufactured as thin as 3-mm. Interwoven with a plastic laminate, it has the ability to be stretched over a wider area. The laminate is actually a gelatinous electrolyte, which allows the battery to be shaped into various forms. This malleability enables the battery to be ideal for fulfilling computer and cell phone OEMs’ specialty application requirements. The gelatinous electrolyte also has a lesser chance of leaking out onto the product components, as could be the case with the liquid electrolyte found in standard Li-ion batteries. Additionally, Li-polymer batteries have a higher energy-density than their Li-ion counterparts. This, consequently, translates into higher battery capacity. Five Key Benefits of Li-polymers * Very low profile * Flexible form factor * Higher energy-density * Better cost (reduced external control circuit) * Safety (less chance for electrolyte leakage) Because of these attributes, Li-polymer batteries are growing predominantly in the cell-phone market, while standard Li-ion batteries are driving the notebook marketplace for the moment. This is primarily due to the size and weight factor of cell phones versus that of notebooks. The size issue will become even more of a factor as cell (and by extension, digital) phones evolve into more PDAs, E-books, Web pads, MP3 players, and the like. As run time for notebooks has given way to talk time for cell phones, we shall soon see “write time” and other “times” become predominant in some of these newer devices as users’ voracious energy appetites explode. 5 Accordingly, the demand for Li-polymers will also soon explode. Several large battery manufacturers, including Toshiba, are betting their futures on this new technology. At this stage, these firms are scrambling to ramp up production in their efforts to be first to market with the product. Smaller battery concerns are likewise scrambling to make alliances with one another to ensure that they too have the resources to enter and stay in this rapidly expanding market space. With this growth, Li-polymer batteries are eventually expected to cut into the market for standard Li-ion cells. It’s anticipated that between the year 2007 and 2008, Li-polymer batteries will experience a growth in annual sales conservatively estimated at 150%.6 This is the primary factor in the decrease of Li-ion’s growth rate from 22% to only 15% during this time period. 4
    • Projected Worldwide Lithium-ion Battery Sales Vs. Worldwide Lithium-polymer Battery Sales 14 13.1 11.4 Revenue (US$ Billions) 12 9.9 10 8.6 7.5 8 6.5 Li-ion 6 Li-polymer 4.0 4 2.5 2 1.0 0 2004 2005 2006 2007 2008 2009 Year As with Li-ion batteries, price continues to be an issue with Li-polymer. OEMs that emphasize a low cost- based marketing strategy are presently not prepared to pay the expected 30% to 50% premium for Li- polymer over Li-ion. This will give the Li-ion market a brief respite. These cost-focused OEMs will opt for the size and weight convenience provided by polymer only up to a certain point. For their higher- volume, low-end products, it is essential that they select the most cost-effective battery. Lithium Battery Cost for Notebook Computer7 Cost to OEM (US$) 80 $60.80 60 $52.43 $41.42 $44.06 Li-polymer $36.53 $31.64 $35.69 40 $26.75 $27.32 $21.86 Li-ion 20 0 2000 2001 2002 2003 2004 Year These OEMs are willing to incorporate a premium battery for their top-tier products, however. In addition, OEMs such as Nokia, which emphasize product differentiation, are more than willing to integrate Li- polymer batteries into their devices. This enables their product to offer unique solutions and performance enhancements over their competitors’ low-end products. In any event, the price differentiation is largely expected to disappear by 2004, further contributing to the market share erosion of traditional Li-ion cells. Several performance issues involving Li-polymer remain, particularly with regard to its production process. These include reliability, cycle life, temperature and handling. It’s been found that many Li-polymer batteries degrade by about 50% in capacity and availability within 200 cycles. Moreover, some consider the battery’s extremely small size to be impractical to the end user, who must constantly insert it in and remove 5
    • it from the device. A special stiffening material has been proposed which will be added to the battery. This, however, reduces the flexibility and lightness of the cell and increases its size. Clearly, much work needs to be done to make it more reliable and cost effective for large volume cell phone OEMs to incorporate in their production processes. Competitive Landscape “Know your enemy. Know yourself. And your victory is never in danger.” -Sun Tzu, The Art of War Strategic Overview The multinational battery industry is a spectrum ranging from truly global players on end, to smaller manufacturers in the middle, to those who are only trying to license their proprietary technologies to these first two groups at the extreme end. The following section attempts to briefly summarize the recent activities of the most active of these participants. As these dynamics are analyzed, it is hoped that several possible strategies for NanoLab’s successful entrance into this marketplace are realized. The following table briefly gives an overview of the market participants to be profiled. Firm Location Employees Primary Business Activities ELECTROFUEL Mississauga, 120 currently, Li-polymer Ontario 350 expected battery R&D and by year’s end commercializatio n LITHIUM TECHNOLOGY Plymouth 17 currently, 47 R&D and CORP. Meeting, after merger commercializatio PA., with Pacific n of Li-polymer Auckland, Lithium Ltd. technology, New heavily involved Zealand in licensing VALENCE TECHNOLOGY Henderson, 400 Licensee of 6
    • INC. NV. with PliON manufacturi technology, ng facilities licensor and in Mallusk, manufacturer of Northern hybrid Ireland technology 7
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    • TOSHIBA (TEAC) Irvine, CA. 8,000 Engineering, manufacturing, marketing of semiconductors, storage media, and electronic components ULTRALIFE Headquarter 300+ Development, s and manufacturing primary and marketing of manufacturi both primary and ng facility in secondary Newark, lithium-based NY.; cells additional production and R&D Center in Abingdon, England; polymer cell manufacturi ng facility in Hsinchu Science Park, Taiwan ELECTRIC FUEL Headquarter 164 Manufacturer s in New and marketer of York, NY.; proprietary Lab in ZincAir battery Auburn, AL.; additional offices in London and Israel POLYFUEL Production 1,400 Commercializati facility in employed by on of fuel cell Palo Alto, parent SRI technology CA. International, developed at SRI exact number dedicated to Polyfuel spin- off unknown FULLERENE Headquarter Approximately Leveraging U.S.- INTERNATIONAL s in New 26,000 based fullerene 9
    • CORPORATION York, NY.; production additional technology offices and towards volume production production facilities in throughout Asia Tucson, AZ. and Osaka, Japan A Quick Note on Fuel Cells Fuel cells are a relatively new energy source, which have the potential to revolutionize the rechargeable battery industry. Basically, the technology uses hydrogen and oxygen to create environmentally-safe electric power. The cells have been shown to provide anywhere from 5 to 10 times the energy density of lithium-based batteries. As a potential competing technology to traditional batteries in the near future, several of the profiled firms’ activities in this area have also been illustrated. 10
    • S p e c if i c E n e r g y C o m p a ri s o n W it h B a tt e ri e s 11
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    • ELECTROFUEL Technology Electrofuel, of Ontario, has as its technology core its lithium-ion SuperPolymer brand battery. According to the firm’s VP-Marketing, the battery has a higher energy density than normal polymer cells. This is due to the SuperPolymer’s extreme flatness, which also allows for a much greater degree of flexibility. Under this brand, the firm currently has two offerings. It’s PowerPad 160 model is geared towards notebook computer users, whereas the EF2100 is targeted towards mobile phone consumers. The PowerPad 160, weighing in at 2.5 lbs, delivers 900 milliamperes (mAh) of power for up to 16 hours of run time. It currently offers 160 Wh. However the company forecasts a higher energy density, of 600 Wh/liter and 225 Wh/kg later this year. This battery also consists of control electronics, which provide information to the user on remaining battery power and improve battery efficiency. The EF2100is designed for use in Nokia's 5000 and 6000 series of mobile phones. It delivers more than 2100 mAh of power, provides 18 to 21 hours of talk time, and is the thickness of the Nokia ultra slim design. It also offers an energy density of 210 watt hours. Markets Besides the notebook computer and cell phone markets, Electrofuel is targeting its SuperPolymer brand towards the defense and portable medical devices fields. In the longer term, the company expects the batteries will also be suitable for electric bicycles, load leveling for electric utilities, and alternative energy businesses such as solar and wind-energy storage. All of these fields have potential use for a super-light, super-flexible battery such as the SuperPolymer. Strategy Electrofuel’s Powerpad 160 battery was initially on back order within a few months of its introduction. Only recently, as of December 2000, was it able to achieve commercial production of this item. The company had similar problems with the EF2100, which only achieved volume production at the beginning of April this year. Hence, the primary concern for Electrofuel is getting product to market quickly. The firm’s VP-Marketing has conceded that, although Electrofuel’s technology has the potential to revolutionize the battery industry, the ability to deliver volume production is critical. While it apparently has reached an agreement with Nokia to distribute its EF2100 product globally, Electrofuel is currently talking to other OEMs about joint- 15
    • venture opportunities so that it has established distribution channels for its future lines. LITHIUM TECHNOLOGY CORP. Technology Lithium Technology Corporation (LTC) produces Li-ion polymer batteries, which are based on unique fiber-web substrates. This proprietary "web handling" technology uses high-performance fibers in composite battery structures and continuous-flow fiber-web coating and handling methods for low-cost manufacturing. The characteristics of the composite formula include improved conductivity, stability, resistance to shorting, and reliability. The lightweight fiber web construction also improves energy density. Perhaps most importantly, the company claims this method results in lower costs and higher yields in its production process. Markets Lithium Technology’s original target had been the portable-product OEMs, in particular notebook producers. Lately, through a series of mergers and acquisitions, it has been looking to obtain a foothold in the emerging market for hybrid electric vehicles (HEVs) in the U.S. and Asia as well. Strategy In October, Lithium Technology started negotiations to merge with Pacific Lithium Ltd. (PLL), an advanced materials supplier to the battery market based in Auckland, New Zealand. The newly formed company, Ilion Technology Corporation, is slated to offer Lithium Technology several benefits. The company is planning to combine Pacific’s experience with Lithium materials technology and Lithium Tech’s knowledge of battery manufacturing processes to carve out marketshare based on volume production. With a steady supply of Lithium battery materials secured, LTC can focus on designing Li- polymer batteries for the HEV market. Pacific Lithium believes its manganese cathode materials are indispensable to hybrid electric vehicles due to their layered structure and temperature stability. Lithium Technology’s CEO has also publicly stated his desire to pursue the HEV market due to higher margins as compared to the cell phone industry. Through Pacific Lithium’s recent agreement with Energy Ventures Incorporated (EVI) to manufacture and sell EVI’s Lithium-ion battery cathode material technology under license, Lithium Technology has gained access to previously proprietary expertise. Perhaps more important, the company also profits as EVI is looking to focus on developing its unique Direct Methanol Fuel Cell (DMFC) technology. All parties involved, Lithium Technology, Pacific Lithium, and Energy Ventures agree that this particularly emerging technology has potential applications for HEV as well as portable devices and may soon supplant Li- polymer in terms of energy efficiency and price. VALENCE TECHNOLOGY INC. Technology Valence's own internal Li-polymer technology is based on research with primarily two substances, manganese oxide and phosphate. According to recent press releases, the company states that structuring its polymer technology around manganese oxide is safer than existing lithium-cobalt systems. It also is more environmentally friendly compared to equivalent methods. The material allows the firm to receive a 30% cost savings as compared to cobalt-based polymer technology as well. Its work with phosphate is expected to further lower its polymer technology costs. Markets Valence is currently targeting its proprietary technological process towards the higher-end GPS and digital 16
    • phone markets. In addition, it’s eyeing possibilities in the military and aerospace fields, to include satellite applications. Strategy Valence’s strategy is simple: world domination through licensing. The company plans to buy all the rights to lithium-polymer technology that now are held by Telcordia Technologies Inc., formerly known as Bellcore. By all accounts, Telcordia’s patented lithium-ion technology, known as PLiON, is recognized as the leading-edge technology in the field of polymer-based batteries. It then plans to combine this newly acquired technology with its own manganese- and phosphate-based designs and license this hybrid know- how internationally. As analysts have likened this process to the Qualcomm licensing model with its proprietary CDMA technology, Valence’s leadership has justified the strategy by stating, “The market is growing at such a dynamic rate that there is no way one supplier can fulfill all the demand." By proliferating its technology through licensing agreements, the firm hopes to continually be alert to new market opportunities through its worldwide licensees, particularly in the niche market areas. By making any potential competitors their customers, the firm is projected to significantly expand its licensing and royalty revenue base. To put more teeth into the strategy, Valence intends to restructure itself into a holding company containing three business units. The first unit will develop licensing and consulting relationships for the PLiON battery design, factory set-up and material fabrication processes. The second will handle the sale of materials and components required for battery cell construction and assembly. The third will focus on strategic market development, including the sale of niche Li-ion batteries. TOSHIBA AMERICA ELECTRONIC COMPONENTS, INC. Technology Toshiba America Electronic Components Inc. (TEAC) has developed its own proprietary li-polymer cell known as the Advanced Lithium Battery, or ALB. Key attributes of the ALB when compared to other li- polymer batteries include a higher drain rate, better temperature ranges, higher discharge capabilities, and a reduction in swelling. The swelling factor is significant in that it lessens the chance of the cell rupturing. These cumulative traits combine to give the battery a theoretically higher energy density (capacity) as well. Toshiba scientists also assert that ALBs and traditional li-polymer batteries are direct replacements for each other because the technologies offer the same form factor and charge regime Markets Toshiba is currently ramping up ALB volume and steering it towards the next generation of handheld portable devices such as higher-end cell and digital phones. Personal Digital Assistants (PDAs), scanner- type devices and E-books and Web pads will also be given top priority. Of course, since Toshiba is not only a supplier of batteries, but also an OEM of notebooks such as the Satellite, Satellite Pro and Tecra series, it’s looking to incorporate its ALB technology into these products as well. Strategy Toshiba is currently setting its sights on only next-generation technology. Research into emerging li- polymer technologies such as ALB is seen as driving the firm’s future in battery development. It’s also an offshoot of its corporate-wide marketing strategy, which emphasizes product differentiation and premium items over low-cost leadership. This was the impetus behind the firm’s decision last month to transfer one of its conventional Li-ion and NiMH plants to competitor Sanyo. It realizes that while it may lose short- term market share in these older technologies, it will gain in the long-term with its ALB foothold. Toshiba 17
    • also realizes that these newer chemistries will be more profitable for the firm over the long haul. Loyal Toshiba customers’ willingness to pay more for higher-end products and services is not the only factor in the profitability analysis. The company foresees accelerating price erosion in these older technologies in the near future and wants to divest itself from them incrementally. ULTRALIFE Technology Ultralife is a specialty battery manufacturer that produces both primary and secondary cells. Its major product is the lithium “Pouch” cell that consists of lithium anode and manganese dioxide cathode electrodes. These are folded in a flat configuration and sealed in thin, lightweight laminated aluminum foil pouches. This lithium manganese-dioxide chemistry results in a power source with nearly twice the energy of cylindrical-cell lithium sulphur-dioxide batteries, which are currently in widespread use by the U.S. Army and NATO countries. The lithium manganese-dioxide configuration is also used in the firm’s commercial batteries. Markets Ultralife’s primary focus tends to revolve around military and industrial markets for its products. In terms of consumer markets, however, it appears that the firm is reaching beyond the portable device market to grab a slice of the medical applications market. It is also much more focused on a global marketing strategy, having recently opened a new li-polymer production facility in Taiwan to serve the Asian marketplace. It’s also formed, with other Asian players, a joint-venture firm called Ultralife Taiwan Inc. The venture will also produce li-polymer batteries, thereby expanding the firm’s Asian market territory. Strategy Ultralife recently entered into two agreements with the U.S. Army, which will enhance its marketing position. As part of the U.S. Army’s Communications-Electronics Command (CECOM) and Land Warrior programs, the firm is under contract to complete the development and engineering of its “Pouch” batteries. The U.S. Army desires the firm to have the production process streamlined as soon as possible so that it may fulfill its mission requirements more efficiently. The military foresees the portable cell as enhancing its mobility and logistical requirements and also sees the manganese-based chemistry as not only safer, but also more environmentally sound than older sulphur-based chemistries. Through these contracts, Ultralife not only solidifies its reputation as a supplier of quality cells to the military, but also enhances its global marketing strategy as U.S. allies in NATO and Asia customarily find themselves buying similar equipment to the American military to maintain ease of interoperability and systems integration in joint exercises. ELECTRIC FUEL Technology Electric Fuel is a U.S. firm with its roots in the Israeli military-industrial complex. Its contender in the battery marketplace is the ZincAir, first produced in 1998. ZincAir batteries are related to alkaline battery 18
    • technology that uses the controlled oxidation of zinc to produce electrical energy. The difference is that instead of storing oxygen inside the battery in manganese dioxide, ZincAir batteries draw their oxygen from the atmosphere. As a result, the battery’s casing has miniature air holes to allow the oxygen influx. Electric Fuel says the ZincAir offers from three to five times the capacity of most rechargeable batteries, including Li-ion and Li-polymer. Markets Due to the firm’s origins, Electric Fuel is targeting its product initially toward specialty applications in the military-industrial sphere. It is not known if they have plans to enter the portable device marketplace. Strategy Electric Fuel’s strategy seems to be two-pronged. Initially, its focus was on signing as many distribution partners for its ZincAir as humanly possible. These included partners in the U.S., including CompUSA and InTouch USA, Canada, Mexico, the U.K. and Asia. However, it soon found itself ill equipped to deal with the high demand from its expanding distribution network. To compensate for this, the firm switched from manual to automated production last June at its Israeli production facility. The exchange allowed the company to expand from its initial 30,000 units per month capacity to 500,000 per month by December 2000. It’s anticipated that this facility will allow the company to produce sufficient volume production for the foreseeable future. POLYFUEL Technology Polyfuel is a spin-off from Stanford Research Institute (SRI), based in Palo Alto, CA. The firm aims to commercialize the research performed at SRI in the field of fuel cell development. It already has developed a membrane for use in a direct methanol fuel cell (DMFC). These cells are similar to proton exchange membranes (PEMs) currently being designed for the automotive market, but obtain hydrogen directly from methanol. Since the cells consume methanol rather than hydrogen gas, they can be refueled quickly and inexpensively, making them more suitable for the portable devices market. Polyfuel is looking to supply products by the end of 2001, which will supply five times as much continuous power as today’s Li-ion and Li-polymer batteries. Markets Polyfuel is looking at the entire portable device field, but for right now has cell phones and PDAs as its top priorities. The company has stated that once it becomes larger, it may also look at methanol fuel cell applications for the automotive as well as household markets, scheduled to emerge around 2005 and 2010, respectively. Strategy 19
    • In addition to its technological edge, Polyfuel stands to benefit from its relationship with an, as of yet, undisclosed chemical producer which will manufacture its cell membranes. This relationship is significant in that the chemistry industry, for the most part, has displayed a lack of interest in manufacturing membranes for the portable devices market. It seems that the industry is more concerned with possible fuel cell applications for the automotive and household markets for the near future. Polyfuel plans to use this advantage to beat larger firms, such as Motorola and Samsung, to market. Motorola, in particular, is looking at portable fuel cells based on liquid methanol technology, which it says will outperform Li-ion and Li-polymer batteries by a factor of 10 to 1. The technology is expected to be commercially available in the next couple of years. However, since it has faced the lack of interest from chemical producers with regard to the necessary membrane material, it has been forced to turn to Los Alamos National Laboratory (LANL) to develop its membranes. Since LANL’s core competence may lie more in design and not necessarily volume production, Motorola says it is unlikely to introduce fuel cell battery substitutes until at least 2003. Polyfuel, conversely, is set to begin volume production at a million fuel cells per month beginning the end of 2001. FULLERENE INTERNATIONAL CORPORATION Technology Fullerene International Corporation (FIC) is a joint venture formed to commercialize fullerene materials. The FIC partners are Mitsubishi Corporation (MC), Materials and Electrochemical Research Corporation (MER), and Research Corporation Technologies (RCT). MER, the partner who originally started the fullerene production, claims fullerenes can store five times as much hydrogen as the metal hydrides used in nickel-metal hydride batteries. Compared to lithium-based batteries, fullerenes are said to provide higher performance and to be lighter, safer, and better for the environment. Markets The partners foresee many different applications for fullerene-based materials such as field election displays (FEDs), fuel cells, superconductors, capacitors, and electric vehicles. However, they are targeting the rechargeable battery market as its first commercial endeavor. Strategy FIC plans to use Mitsubishi’s extensive experience with marketing and business development contacts to form alliances with several Japanese firms to explore commercial applications for fullerenes. The venture is a new path for partner Mitsubishi, which has realized that leveraging advanced, emerging technologies into new ventures keeps the firm abreast of the latest technological developments in the long term. One of the initial successful contacts has been with the Honjo Chemical Corporation, a specialty chemical company in Osaka. The partners have found the fullerene commercial potential limited by the ability to produce in volume, thereby yielding a lower cost. The problem was attacked by initially opening a production facility in Arizona, based on MER's process technologies. To increase production capacity further and to provide a logistical support base to its potential customers in Japan and throughout Asia, FIC has helped Honjo build a reactor and separation system at its facility in Osaka. The plant came online and started producing material in December 2000. 20
    • To summarize: Firm Technology Markets Strategy ELECTROFUEL Lithium-ion Portable JVs with SuperPolym devices, OEMs er defense, medical LITHIUM TECHNOLOGY Fiber-web HEVs, portable Lithium CORP. substrates devices stockpile, cathode material licensee, fuel cell partner VALENCE TECHNOLOGY INC. Manganese GPS/digital Licensee oxide and phones, military/ of PliON phosphates aerospace technology , licensor of hybrid technology 21
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    • TOSHIBA (TEAC) Advanced All portable Leverage Lithium devices, ALB Battery including its toward (ALB) based own proprietary future, on brands divest Li-polymer older technologi es ULTRALIFE Pouch cell Military- Global based on industrial sector, markets lithium medical through manganese- applications U.S. Army dioxide contracts ELECTRIC FUEL ZincAir cell Military- Global based on industrial sector distributio alkaline n network, technology automated with oxygen production influx POLYFUEL Direct Portable Exclusive methanol devices, relationshi fuel cell automobiles, p with (DMFC) households membrane producer FULLERENE Fullerenes Batteries, FEDs, Keiretsu INTERNATIONAL fuel cells, contacts, CORPORATION superconductors Asian , HEVs, etc. production base 23
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    • STRATEGIC RECOMMENDATION In order to successfully penetrate the world market for rechargeable batteries, NanoLab must fully exploit its core competence of large-scale, customizable carbon nanotube (CNT) production. The firm’s patented chemical vapor deposition (CVD) manufacturing process is also an advantage in that it lends itself more readily to full scale production when compared to the arc vaporization and laser ablation methods. It is recommended that NanoLab collaborate with several research-based institutions that are currently investigating future battery and fuel cell technologies. This academic collaborative research effort will not only satisfy the goal of keeping NanoLab’s research cutting-edge, but will also enable the firm to keep abreast of research activities performed by potential competitors. As this collaboration proceeds, it’s also suggested that NanoLab become an eventual licensee of any technologies emerging from these groups. NORTH CAROLINA CENTER FOR NANOSCALE MATERIALS It’s highly recommended that NanoLab team with Otto Z. Zhou in his efforts to design an iron- polymer nano-composite battery. The battery hypothetically offers twice as much specific energy as today’s competing Li-ion batteries. This technology might suitably complement NanoLab’s technology if a licensing agreement were pursued. NORTHEASTERN UNIVERSITY CATALYTIC AND NANOSTRUCTURED MATERIALS Terry Baker and Nelly Rodriguez have collectively done extensive research in the area of hydrogen storage in graphite nanofibers. Although many in the scientific community have debunked the pair because of unsuccessful attempts at reproducing their results, the potential ramifications of their findings with regard to fuel cell technology is simply to great to ignore. Additionally, the couple may welcome advances by NanoLab to work in partnership simply to substantiate the validity of their earlier work. DEPARTMENT OF MATERIAL SCIENCES AND ENGINEERING, M.I.T. Dr. Ann M. Mayes of M.I.T. has also performed considerable research in her efforts toward the development of new electrode and electrolyte nanostructures for Li-polymer batteries. Her group is expected to have a prototype battery based on this technology very shortly. It’s also known that they’re considering starting a commercialization firm. After cooperation with these groups, NanoLab can then combine these technologies with its own proprietary CVD-based production expertise Valence-style and sublicense the resulting efforts to interested parties. This will also enable NanoLab’s licensees to achieve volume production themselves, which is the key success factor in the battery industry. For example, LANL is a potential licensee as it’s currently under pressure from Motorola to produce membrane materials, which will enable the giant to enter the portable device fuel cell market quickly. Under this scenario, the lab would gain priceless volume production know-how and consequently enable Motorola to remain competitive with smaller, aggressive firms such as Polyfuel. NanoLab’s CVD patent is the key to this strategy because under the patent’s terms, NanoLab has an unrestricted sublicensing clause. This is the foundation to the firm’s global expansion in the battery marketplace. 25
    • References 1” Ion dominates lithium battery market”, Purchasing, February 10, 2000 2“Lithium-polymer market taking shape: The technology is out of the lab and is entering the commercial realm”, Electronic Buyers’ News, December 4, 2000 3”Expect lower prices for lithium batteries”, Electronics Purchasing, February 22, 2001 4“Global rechargeable battery-pack market is expected to grow from about $4.4 billion in 1999 to around $5.8 billion in 2004”, Electronic Buyers News, September 18, 2000 5 See 2 6” Battery makers ramp lithium-polymer units”, Electronic Buyers News, February 1,1999 Note1: Linear regression was used to forecast sales for 2008, thereby yielding the 150% growth figure between 2007 and 2008 Note2: In “Valence Buys Battery-Technology Rights From Telcordia for $50 Million in Stock”, Wall Street Journal, November 09, 2000, Valence predicts the polymer-battery industry will grow from $1 billion/yr to $8 billion/yr by 2005, although it is unclear whether the prediction has the year 2000 as its starting point or the year 2003. 7”Batteries”, Electronic Buyers News, September 18, 2000. Note1: Linear regression was used to forecast costs for years 2001 through 2003 26