Monday, January 26, 2015

51. THE RISE AND FALL OF A123 SYSTEMS                                              

On 24 September 2009, A123 Systems become a public company trading under the ticker symbol of AONE on the NASDAQ. Its shares soared on the first day of trading closing the day at $20.29 per share, making the company valued at nearly $1.2 Billion. It had posted revenues of $36 million during the first six months of 2009, mostly in service revenues. Its marquee investors included names like GE, Qualcomm, and others who, along with the US Department of Energy, had collectively invested over several years in excess of $500 million into the company.

Nearly 3 years later, on 16 October 2012, the company filed for bankruptcy after missing a $2.7 million dollar in interest payment on its outstanding debt. In December of that same year, a bankruptcy judge approved its sale to Wanxiang Group, China's largest auto parts company, for $257 million. Why would a darling company of the CleanTech industry and Wall Street fall so fast and so hard, and what lessons should the industry heed?

Let's start with a quick recap of the company's history. It was formed in 2001 as a spin out from MIT to commercialize a new material system, called nano phosphate, upon which lithium-ion batteries could be built. The background to this new material lied with the safety and reliability issues that plagued the lithium-ion battery industry in the previous decade. The too-frequent fires at battery factories in Asia and product recalls on laptop batteries made the lithium-cobalt-oxide (LCO) material system unsafe at least by reputation, and certainly unsuited for the envisioned electric vehicles of the future.  By 2006, the company had collaboration agreements with the US Advanced Battery Consortium (USABC), an automotive consortium bringing together Detroit's Big Three, along with the US Department of Energy, and was already building battery packs using its proprietary lithium-iron-phoshpate as its primary cathode material. The new batteries were supposedly safer, had very long cycle life (upwards of 2,000 cycles) that was suitable for automotive warranties, and were capable of handling large current spikes -- in battery parlance, it is known as power capabilities. But as time would prove, LFP, as this new nano phosphate material system was known, suffered from lower energy densities compared to the material system it was trying to displace. 

But any shortcoming on energy density was not sufficient to detract the company from focusing on electric vehicles (EV). By 2008, it had signed agreements with TH!NK to supply batteries to this Norwegian electric-vehicle maker. The next year, it had inked deals with Chrysler, Shanghai Automotive Industry Corp., and Fisker. The future was bright and the potential was enormous. It was time for an IPO.

Underlying this exuberant optimism, especially in 2009 when gas prices hit nearly $5 per gallon and electrification of cars was the future, were some weak fundamentals. Yet, they were either unknown or ignored by many...ultimately, these weak fundamentals led to the demise of the company and its sale. Leaving execution out, these weak fundamentals boil down to choice of technology, product and market.

First, there was and still is a mismatch between the technology of choice, LFP, and the requirements of the EV market. Electric vehicles required a long driving range, which in turn dictated a high-energy density battery technology. LFP has a substantially lower energy density that the LCO material system, and it was doubtful that LFP would improve in time to shrink this gap. In other words, LFP was not suitable to build batteries capable of reaching a 200-mile driving range. For comparison purposes, the energy density of the A123 material system was nearly ⅓ that of the batteries used in the Tesla Roadster -- the first model of Tesla Motors. A123, and its list of partner EV manufacturers, were willing to compromise driving range for better reliability and safety. Tesla in contrast, made driving range a key priority for its cars, and elected to improve the safety of the battery through clever engineering designs of its battery pack, i..e, in the mechanical design as well as how the electronic systems safely manage the lithium-ion cells. Nearly a decade later, experience shows that driving range is of paramount importance to drivers of electric cars, and that LCO-based battery packs can be made very safe.

Comparison of select battery properties used in electric vehicles.

Second, A123 Systems was fundamentally a battery materials company. That's where its innovation lied. As such, it focused primarily on improving the design and manufacturing of its battery materials. Yet, the battery pack in an electric vehicle was a complex integrated system that brought together both the battery and its materials along with a sophisticated battery management system (BMS), i.e., the electronics and software that control the battery's performance and reliability. A123 Systems largely left the design of the BMS to its customers. That meant that the overall battery pack system could not be fully optimized as long as its key ingredient subsystems were designed by different parties. In contrast, Tesla elected to design and build the entire battery pack themselves, using a battery cell design (18650) that had been around for at least a decade. In other words, in the complex balance of battery materials vs. system design, where does a company put its emphasis? History now shows us that the system-emphasis proved to be more optimal. Materials in general take a long time -- upwards of a decade -- and large investment capital to reach commercial maturity. Systems development tend to reach maturity at a faster pace.

Third, or perhaps it should have been first, is cost. The 18650 used in the Tesla models was already being used in millions of laptop computers. It was relatively inexpensive to manufacture. It made sense for, at the time, a nascent electric vehicle company to leverage the scale that the PC industry brought to batteries. In contrast, A123 Systems and all the supporters of LFP had to start from scratch: Build a manufacturing infrastructure, develop an efficient supply chain, establish scalability and ensure reliability. None of these are easy tasks, and they tend to take time and a lot more money. Ultimately, these delays and investments show up as losses in the company's financial statements.

Lastly, it was about the initial choice by A123 and its partner customers of targeting electric vehicles for the mass market, which meant pushing for affordable car pricing thus introducing serious cost pressures on the supply chain. The electric vehicle market is still in its infancy, even after several years of government incentives and increasing regulation. Therefore targeting electric vehicles for the mass market was a tall order, especially when performance and overall cost were not matching those for traditional vehicles with an internal combustion engine. It greatly increased the challenges that the customers of A123 Systems had to overcome. Over the past several years, we saw both TH!NK and Fisker go bankrupt (Fisker was too acquired by Wanxiang).  GM and Ford ultimately chose batteries from LG Chem, a large industrial giant that was willing to underwrite the necessary capital to penetrate Detroit...a luxury that a comparatively small company like A123 could not undertake. Once again, Tesla made a different choice of targeting niche markets, first with an expensive sports car, then going after the high-end luxury market. Both of these choices relaxed the cost constraint and allowed the design and manufacture of an electric vehicle with few if any compromises compared to their combustion-engine counterparts.

© Qnovo, Inc. 2015 / @QNOVOcorp @nadimmaluf #QNOVOCorp

Friday, January 23, 2015


Our Silicon Valley newspaper, the San Jose Mercury News, published this morning an article on the all-known battery blues. We have heard this story before. Your battery runs out before your day is out. The paper quotes Prof. K.M. Abraham, from the Center for Renewable Energy Technology at Northeastern University in Boston, saying that the present battery material system is reaching a dead end and that a new material paradigm is needed. The paper continues to describe how users are now lugging with them battery bricks; this is jargon for these extra heavy battery chargers that you can carry with you in case your phone battery dies in mid-flight. 

But these bricks are incredibly impractical. You pay hundreds of dollars for your thin and slim smartphone, yet you are willing to compromise by carrying these heavy battery bricks. The inexpensive versions from China (retailing somewhere near $20) don't last much. Ones with higher quality can be quite expensive, with some even breaking the $100 mark. This is the definition of a poor compromise. Consumers deserve better!

The battery materials and chemistry are not evolving fast, their energy density is not increasing at a rapid rate, and they are falling short of providing higher capacity batteries. For the time being, smartphones seem to be limited to around 3,000 mAh as a maximum capacity. At this capacity, the energy density is state-of-the-art at more than 600 Wh/l, but the batteries seem to last a full day at this capacity. The iPhone 6 Plus and the Sony Xperia Z3 are examples of devices with approximately 3,000 mAh of capacity, and they are receiving rave reviews.

So what solutions can be acceptable to consumers and involve no compromise? 

First, make 3,000 mAh batteries the standard across smartphones. Yes, that also means using the highest possible energy density, presently around 600 Wh/l. 

Second, make fast charging ubiquitous. If consumers can fast charge their mobile devices, then their anxiety about battery life is greatly diminished, if not eliminated. What is fast charging? Fast enough that you can charge your phone in about 30 minutes; if not all the way to 100%, then at least to 80%. This is the level when consumers viscerally feel that they have plenty of charge in their battery. 

Third, give the consumers a great sense of satisfaction that their batteries will have ample longevity and warranty, in other words, give them 800 cycles or more.  Don't cheat them with 500 cycles. These three elements can already be delivered to consumers today -- the technology already exists.

That's the definition of no compromise. As a consumer, let your carrier know. Demand a battery with no compromise. Let your device manufacturer know. Vote with your wallet and rebel against the lousy battery choices that the industry keeps entertaining.

© Qnovo, Inc. 2015 / @QNOVOcorp @nadimmaluf #QNOVOCorp

Tuesday, January 20, 2015


We have seen time and time again: the consumers' #1 priority is the battery. That's right, not 4K video, not 40Mpixel cameras, or a power button to operate with your middle's the battery. So let's see how the leading models of 2014 fared on battery life.

I put side by side the iPhone 6 Plus against the major Android phones, namely the Galaxy S5, Sony Xperia Z3, LG G3, Moto X, HTC M8 and a newcomer, the OnePlus One. Let's plot for each of these smartphones the measured use time, specifically, the numbers of hours each device lasted in web viewing over LTE. This is a fairly good estimate of the battery life. On the horizontal axis, I show the battery capacity in mAh. So what observations can we make?

First and foremost, what is plainly obvious to all mobile device users: The bigger the battery capacity, i.e., the more mAh, the longer your device will last. The Moto X has the smallest capacity, and the Xperia Z3 has the largest capacity. Yes, you guessed it, the Z3 outlasts the Moto X by nearly 5 hours!

Second, we see that there is a kind of linear relationship between capacity and hours. This is math lingo that says that if we increase the battery capacity by a factor of two, then the hours of use will also increase by the same proportion, in this example, also a factor of two. There are some small exceptions but in general, this says that there are no games one can play: it's a one for one relationship between battery capacity and hours.

So given that all of these phones offer nearly the same screen size (5 to 5.5 inches), why is it that these different manufacturers have such disparities in their batteries? Why don't they standardize? After all, they all use the same radio chips and processor chips...why do they tinker so much with the battery with so little to show for?

There are several reasons. One, engineers like to customize if they are allowed to customize. So first thing they do is customize the size of the battery to fit the desired phone look and feel. Second, they need to balance a number of competing specifications. For the battery, these competing specifications include capacity, but also how fast they can charge the battery, and how long the battery will lasts (also known as cycle life).

Unfortunately, for these engineers, it's a game of whack-a-mole. If they increase the capacity, as Sony  did with their Xperia Z3, then they need to drop the charge rate. The Sony Xperia Z3 has one of the slowest charge times in the industry. Motorola engineers went in the opposite direction. They decided to charge faster than their competition, but to do so, they had to drop the capacity to a measly 2300 mAh, making the Moto X the phone with the worst battery life.

© Qnovo, Inc. 2015 / @QNOVOcorp @nadimmaluf #QNOVOCorp

Friday, January 16, 2015

48. THE LITTLE COMPANIES THAT COULD                                            

Imagine a world where your device, whatever it may be, has a source of energy -- may be a battery, may be not -- that lasts, I mean lasts to the point you don't think about the period. It lasts in its operation and lasts in its longevity. If you ever find yourself with a low energy level, and I mean ever, then it's only minutes before your device is recharged. And yes, the energy source is so tiny that you can't even point at it. I know, this is in a distant universe, but why is it so distant? After all, a drop of gasoline has enough energy to power a mobile device for days or weeks, and one can replenish this source of energy in no time. And you don't have to worry about it going bad. So will we ever get there? Yes, with time, patience and lots of effort, in other words, dollars, sweat and time. You have got to believe that StarTrek will happen in this distant future, and we will have dilithium fuel to power everything.

But who's participating in this effort? Is there hope? This blog sheds some light on the numerous companies, many of which are innovative startups, that are trying to change the world on this front. Two types of energy storage seem to garner interest and development effort: Fuel cells and batteries. I will focus here on batteries, especially lithium-ion batteries that are applicable to mobile devices.  Innovation and development are loosely broken into five categories as shown in the figure below.

Developing new anode materials is one of the prime focus areas for several startup companies. This is aimed at raising the energy density beyond the wall that is now towering over the industry.  Companies such as Amprius, Enevate, SiNANOde are examples of startups focused on silicon-based anodes. Quantumscape, a spinout from Stanford University, is focused on a entirely new structure and material system with high dielectric constants. Envia seeks to develop higher voltage cathodes -- by raising the voltage, one also raises the energy density. Lab demonstrations have been very promising at many laboratories but scaling to real-world production remains a tall task for these companies.

Electrolytes is another fertile area of investigation. Plenty of effort is aimed at replacing the liquid or gel-like electrolyte medium by a solid-state material with conductive properties for the ions. SEEO, Sakti3 and several other companies are working on launching batteries with solid-state electrolyte. It's a promising area but serious limits still remain including scaling to cost-effective volume production.

Improving the design and manufacturing of batteries is also another area of great interest. Enovix is combining newer materials that can be deposited and manufactured using semiconductor-like processes. Imprint Energy seeks to screen print batteries in what should be a cost-effective and repeatable process.We, at Qnovo, are focused on clever control systems and software to open up the operating envelope of batteries.

There are tens of startups working on new battery technologies. Inevitably, I have missed in my brief list several others that are also leaving their mark on this field. Collectively, the contributions of all these companies will ultimately elevate energy storage to an entirely new dimension. It will take time but the goal is achievable.

© Qnovo, Inc. 2015 / @QNOVOcorp @nadimmaluf #QNOVOCorp

Wednesday, January 14, 2015

47. THINNER IS NOT BETTER                                                             

What does the new iPhone 6, Samsung Galaxy A7, Huawei Ascend P6 have in common? First, they are amongst the thinnest mobile smartphones ever made. The iPhone is 6.9 mm. The A7 is a mere 6.3 mm and the P6 comes in at a paper-thin 6.2 mm. Thickness, or lack thereof, does make these devices quite elegant. 

The second thing they share: They have amongst the smallest battery capacities, and consequently struggle in delivering a long battery life. In comparison, the smartphones with the best battery lives, for example, the Sony Xperia Z3, clocks in at 7.3 mm, a whole millimeter thicker than the Samsung device.

Naturally, a thicker phone allows the use of a thicker battery. That extra millimeter may not sound a lot, but it adds an extra 15-20% of capacity to the battery. That translates to about 350 - 500 mAh more in capacity, or 2 to 4 hours of additional use time.

But the impact is more meaningful than that. A thin battery suffers from a dramatic drop in energy density. Let's look at the chart below that shows a survey of several batteries from one of the leading manufacturer. It shows how steeply the energy density drops with every millimeter of thickness that is removed.

Let's take the Sony Xperia Z3 as an example. It is 7.3 mm thick. Its battery is about 4.5 mm thick. Its energy density is nearly 600 Wh/l. Shaving one millimeter from the battery thickness yields a serious loss of energy density, down to about 500 - 525 Wh/l, or about 15%. This is in addition to the volumetric loss of ~20% that I mentioned earlier. In other words, the total loss of capacity is now approaching 35%, or more than 750 mAh, corresponding to several hours of use time that the end consumer no longer gets to have. Put a little differently, the cost of shaving one, just one, millimeter of thickness from your elegant smartphone device is equal to 5 or more hours of lost use time to you. So, next time you go shopping for a smartphone, ask yourself a simple question: Elegance vs. Practicality? If you favor elegance, then go thin, but now you can't complain about your battery.

But why is the effect so dramatic? If you recall from an earlier post, a lithium-ion battery is made of alternating layers of cathode-anodes separated with a "separator" material. The active material, i.e., the stuff that is actually responsible for storing the electrical charge constitutes only a fraction of this layered arrangement. In other words, there is an "overhead" of extra material that needs to be there, but does not really contribute to storing energy. When the battery becomes thin, the contribution of this "overhead" becomes much more prominent, thereby reducing the amount of active material available per unit volume, and hence reducing the energy density. It's pure geometry. 

Of course, one can try to increase the amount of active material in this small volume. For example, one can "compress" more of the graphite material in the anode. But these come at a cost: the charge rate and the cycle life of the battery drop very rapidly. So once again, this goes to illustrate how the battery manufacturers are hitting the wall!

© Qnovo, Inc. 2015 / @QNOVOcorp @nadimmaluf #QNOVOCorp

Friday, January 9, 2015

46. ...AND THE SURVEY SAYS:                                                 

This year's Consumer Electronics Show (CES) in Las Vegas, which is just ending, has given us, consumers, a lot of new gadgets to ponder. We saw a gamut of new toys from larger TVs, 4K video, curved screens and curved smartphones, to wearable devices and IoT -- a new acronym for Internet of Things, or perhaps better said as "connecting all things", but that would be a CAT; we wouldn't like that!

But what do consumers really, really care about? We no longer have Steve Jobs to presciently guide the consumer flock to where they should spend their dollars. So, marketing experts resort to surveys, of all kinds. So what are these surveys telling them.

Fortune and SurveyMonkey released a poll at the 2015 CES show. They asked "what new or improved smartphone feature are you most excited about?". The #1 answer was, yes, you guessed it right, "improved battery life." By a 2:1 margin, it led the next best wanted feature: faster processor. The same survey also showed that nearly ¾ of all respondents were not likely to buy a fitness band or smart watch in 2015. So if surveys are such a guide, why are the consumer electronics manufacturers spending huge development dollars on smart watches and so little on making their batteries perform better? 
A 2014 survey by The Guardian in the UK shows that consumers are asking for better batteries ahead of all other features

The Guardian in the UK published earlier in 2014 another survey asking consumers to rank a number of features in smartphones. It also found that a better battery came in as the #1 desired feature. So I ask again, why aren't the electronics manufacturers seeking the best innovations and technologies to make batteries better? I will offer a few suggestions.

First, the battery problem is not easy to solve. Electronics manufacturers have plenty of smart electronics and software engineers, yet, more often than not, they lack in the critical skill of battery chemistry. It was not until the last decade that engineers and scientists wanted to work on batteries. So, these large consumer electronics manufacturers have to seek solutions elsewhere. They are not finding the answers with the large battery manufacturers in Asia who themselves are struggling with making better batteries. Many electronics manufacturers are not organized nor well suited to efficiently work with innovative startups that have creative solutions for this problem. So they are stuck and keep iterating around silly solutions.

Second, there is a lot of NIH in the industry -- that's an acronym for Not Invented Here. Engineers are an amazing creature. I can say that because I am one of them. On one hand, they have an imaginative mind and are great at what they do, but on the other hand, their ego can stand in their way and that prevents them from seeking solutions that may not have been invented by them. I am, of course, crudely generalizing and there are lots of exceptions. But the degree of NIH is climbing in the industry especially as the mobile industry is rapidly commoditizing placing enormous pricing pressures on the manufacturers.

The net result is that the rate of innovations is beginning to slow down, and the industry is beginning to fall into a vicious circle of introducing silly features that consumers do not care about, and that's precisely what the surveys are saying. Time will be a judge of the new wearable products. But one thing I can tell the manufacturers now: Let us help you fix the battery problem!

© Qnovo, Inc. 2015 / @QNOVOcorp @nadimmaluf #QNOVOCorp