The lithium-ion battery (LIB) is a key element of EV propulsion. LIBs consist of three primary functional materials: the anode, cathode, and electrolyte. Another key component is the separator, which typically keeps the positive and negative electrodes apart and acts as a safety function. The constitution of conventional lithium-ion cell materials is as follows:

• Anode: Made from carbon
• Cathode: A metal oxide
• Electrolyte: A lithium salt in an organic solvent
• Separator: Made from polyolefin

Since chemical resources are used, LIB materials have mainly been developed by the global chemical players.

Pricing, along with the reliability of the source of the material, is a key aspect to consider within the LIB materials and EV markets. The price level of an LIB is largely dependent on materials cost. In terms of unit cost, each material accounts for the following percentage of the battery cost:

• Anode: 5% to 15%
• Cathode: 5% to 11%
• Electrolyte: 10% to 14%
• Separator: 40% to 60%

Perhaps it’s not surprising, then, that in December and January, I noticed industry buzz throughout the Japanese media regarding an expansion of the production capacity for new materials manufacture. I also heard the call for new joint venture rollouts made by Japanese suppliers in these fields. In fact, the spotlight on key materials surfaced last year, mostly driven by the debut of EV models by Japanese auto OEMs.

Consider the following examples:

• Marubeni and Honjo Chemical: Joint venture for the production of electrolytes
• Mitsui Mining & Smelting: Expanded production capacity of manganese cathode materials for LIBs
• UBE Industries and Hitachi Maxwell: Joint venture for separators
• NEC Energy Devices: Decided to enhance its electrodes production capacity from current 2 million kWh battery to over 10 million kWh by 2012

Japan is home to competitive players involved in all of the key components of materials supply for LIBs. Indeed, the global LIB market share has been dominated by Japanese players such as Stella Chemifa (electrolytes), Asahi Kasei (separators), Tanaka Chemical (cathodes), and Hitachi Chemical (anodes). These Japanese players hold an almost 80% market share of the worldwide LIB market.

Recently, other Asian market players have been attracting remarkable attention due to their LIBs for electric vehicles. LG Chem, Samsung’s SB Limotive, and Chinese dark horse BYD have successfully penetrated the field. They are threatening incumbent LIB manufacturers such as GS Yuasa, Sanyo, and Toshiba.

However, although Korean and Chinese vendors are strengthening their battery business by focusing on the integration of commercial lithium-ion EV batteries, neither country has competitive market suppliers. They have relied on Japanese suppliers for these key materials in order to integrate LIBs into their end products.

Korean market players have admitted to these limitations and have begun to remedy the issue. In July 2010, the Korean government and leading companies, including Samsung SDI and LG Chem, launched a national support program. Through this program, Korean market players will promote renewable batteries and energy storage systems (ESS) business as Korea’s next growth engine. In particular, the program will focus on developing competitive materials suppliers for LIBs adopted in EVs. Korean players have begun to acknowledge that it will be impossible to progress in the market unless they secure reliable and competitive production lines for materials.

While China is truly one of the leading production regions for LIBs with its global market share of 65% in low voltage lithium-ion batteries, its high voltage market share is negligible. Furthermore, a technological gap still exists between China and the developed countries. Existing LIB vendors in China are focusing on providing batteries for cell phones, notebooks, and electric bicycles. The number of vendors varies, and these vendors are not competitive in terms of the maturity of the technology for LIB used for EVs. Moreover, the battery vendors lack relationships with automakers and alliances. Most importantly, there are no competitive Chinese players for the production of LIB materials.< /p>

As such, Japan currently dominates the global LIB materials business and market share. I believe that Japan’s competitiveness in the LIB market (and the EV market) is closely related to the market dominance of Japanese materials suppliers. Close collaboration and favorable provision relationships between materials suppliers and LIB manufacturers, as well as end purchasers, are serving to strengthen Japan’s leading role in the global LIB materials business.