[Complete Battery Mastery]⑬ Patent Seal Lifted on LFP, Can Korea Catch Up with China?

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On November 21 (local time), global automaker Stellantis and Chinese battery company CATL signed a memorandum of understanding (MOU) to establish a lithium iron phosphate (LFP) battery factory in Europe. The two companies are considering forming a joint venture with a 50-50 equity ratio. Under this agreement, CATL will strengthen its global presence by supplying LFP batteries to Stellantis, following Tesla, Volkswagen, and Hyundai Motor.

Chinese battery companies, which had previously focused only on the domestic market, are now actively targeting overseas markets, posing a threat to Korean battery companies. According to a report on the non-Chinese global electric vehicle battery market (January to September) released by market research firm SNE Research in early November, LG Energy Solution and CATL recorded an equal market share of 28.1%. LG Energy Solution grew rapidly by 49.2% compared to last year, but CATL showed an even more remarkable growth rate of 104.9%. This is because global automakers have entered price competition for electric vehicles and are increasing the adoption of LFP batteries, which are affordable and safe. The expiration of LFP patents in 2022 also contributed to Chinese companies aggressively targeting overseas markets.

Advantages in Price and Safety... Capacity Limitations

LFP batteries refer to batteries that use lithium iron phosphate (LiFePO4) as the cathode material. The person who first discovered this cathode material was Professor John Goodenough, who jointly won the Nobel Prize in Chemistry in 2019 (passed away in 2022). In 1995, while working at the University of Texas at Austin, USA, Professor Goodenough and his student Dr. Arumugam Manthiram first discovered the LFP cathode material and registered a patent. Professor Goodenough made significant contributions to lithium-ion batteries overall by discovering LFP following lithium cobalt oxide (LCO) cathode materials.

The greatest advantage of LFP cathode material is its 'safety.' When classifying cathode materials by structure, they are broadly divided into layered, spinel, and olivine structures. Lithium cobalt oxide (LCO), nickel cobalt manganese (NCM), and nickel cobalt aluminum (NCA) cathode materials have layered structures; lithium manganese oxide (LMO) has a spinel structure; and LFP cathode material has an olivine structure.

The layered structure involves the repeated insertion and extraction of lithium ions between layers composed of transition metals such as nickel, cobalt, and manganese during charging and discharging. Lithium ions can move easily, but empty spaces are created where lithium ions leave, making the structure unstable. The spinel structure is named after the spinel crystal structure. While the layered structure has two-dimensional pathways, the spinel structure has three-dimensional pathways, allowing lithium ions to be inserted through various routes and providing higher stability.

The olivine structure has a cubic crystal structure similar to olivine. The word olivine originates from the Latin 'oliva,' referring to the olive color of the mineral. The LFP cathode material with an olivine structure has strong bonds between oxygen (O) and phosphorus (P), allowing the structure to maintain stability even if all lithium ions are extracted, resulting in high stability and low risk of ignition. However, LFP cathode material has a lower amount of lithium ions it can store and a lower voltage (3.2V) compared to LCO (3.7V), leading to lower energy density.

The theoretical energy capacity of LFP is about 170 milliampere-hours per gram (mAh/g), which is less than LCO (274 mAh/g) and NCM (275 mAh/g). However, the actual energy capacity of LFP cathode material is about 150 mAh/g, close to the theoretical capacity. This is due to its structural stability. LCO becomes structurally unstable when lithium ions are extracted, so it can only realize about 150 mAh/g in practice. To overcome this, NCM cathode materials with added nickel content were developed.

Another advantage of LFP cathode material is its low cost. NCM cathode materials use expensive cobalt and nickel. Cobalt mining also raises concerns about child labor rights. In contrast, LFP uses abundant iron and phosphate as main raw materials, avoiding such issues. According to an analysis by Samsung Securities, as of the first half of 2023, the price per kilogram of LFP cathode material is about $16, while NCM622 ternary cathode material is in the $40 range, and NCM811 ternary cathode material is in the $60 range. LFP cathode material is about 60% cheaper than NCM622.

Expiring Core LFP Patents

The core patents for LFP are held by, besides Professor Goodenough, Hydro-Qu?bec (a Canadian state-owned hydroelectric company), the University of Montreal, and the French National Centre for Scientific Research (CNRS).

Professor Goodenough first discovered the safe and non-toxic LFP material, but it had poor ionic conductivity. Later, French battery scientist Michel Armand proposed collaboration with Professor Goodenough. Armand, along with scientists from Hydro-Qu?bec and the University of Montreal, discovered that carbon coating LFP improves conductivity and registered follow-up patents. This research was supported by CNRS, which also holds patent rights. The core LFP cathode patents consist mainly of three parts: LFP cathode material composition, LFP carbon coating, and LFP carbon coating process.

In 2003, Hydro-Qu?bec and the University of Montreal first licensed LFP for commercial use to Phostech. Later, German chemical company Sud-Chemie acquired Phostech, transferring the patent rights to Sud-Chemie. In 2011, Sud-Chemie formed a consortium (LiPO4+C) with Hydro-Qu?bec, the University of Montreal, and CNRS to sell LFP patent rights. The following year, in 2012, British battery company Johnson Matthey acquired Sud-Chemie's LFP patent rights.

Professor Goodenough and the LFP consortium made significant efforts to protect their patents. They won $30 million in damages through patent litigation against Japan's NTT. Taiwanese battery company Aleese pays 10% of LFP sales as patent fees. China also applied for patents in 2003 and was granted them in September 2008.

However, China, positioning new energy vehicles (electric vehicles) as a future growth engine, invalidated these patents. In 2010, the China Battery Industry Association filed a lawsuit to invalidate LFP patents with the National Patent Reexamination Board, which ruled the patents invalid one year later.

Following this ruling, Chinese companies such as BYD and CATL were able to freely manufacture LFP batteries and supply them to domestic electric vehicles. Chinese LFP batteries are competitively priced due to inexpensive raw materials and no patent fees. Of course, the invalidation by the Chinese patent office applied only within China, limiting overseas market expansion.

However, in recent years, as LFP patent validity periods have expired, the situation is changing. The patent on raw material composition held by Professor Goodenough expired in 2017. The core patent on carbon coating technology expired in 2022. This removes the biggest barrier for Chinese LFP battery companies entering overseas markets. Earlier, Dynanonics, the top Chinese cathode material company, announced in November 2019 that it had acquired LFP usage rights from a consortium including Johnson Matthey.

The LFP carbon coating process patent is expected to expire in 2024 but can be circumvented by various methods. Chinese companies are believed to hold various patents developed over more than a decade of LFP battery development.

Meanwhile, in 2001, Professor Yet-Ming Chiang, a Taiwanese-born professor at MIT, along with Ric Fulop and Bart Riley, founded A123 Systems in the U.S. and began developing LFP batteries.

In 2002, Yet-Ming Chiang published a technology in Nature that improved the conductivity of LFP cathode materials differently from patents held by Hydro-Qu?bec and others. This involved doping LFP cathode materials or injecting metal compounds containing niobium. A123 called this Nanophosphate. This patent was later recognized as new technology after winning a patent lawsuit against Hydro-Qu?bec.

Yet Ming Chiang, Professor at MIT School of Engineering

A123 achieved early success by signing a contract to supply batteries for Black & Decker power tools. It soon began developing batteries for electric vehicles, signing a supply contract with Chrysler and receiving a $249 million subsidy from the Obama administration. In September 2009, it was listed on NASDAQ, successfully raising $390 million. However, after Chrysler canceled its electric vehicle launch plans and faced a massive recall, A123 filed for bankruptcy. A123 was acquired by Chinese auto parts company Wanxiang Group in January 2013.

At the time, there was controversy over advanced U.S. technology transferring to China, but the U.S. Committee on Foreign Investment in the United States (CFIUS) ultimately approved it. For about 10 years afterward, no significant battery companies emerged in the U.S. Professor Yet-Ming Chiang also founded a new battery company called 24M Technologies in 2010.

LFP Overcoming Limitations

Once dismissed as 'cheap Chinese batteries,' LFP batteries began to gain attention after the 2020 Battery Day mentioned the possibility of LFP adoption. Tesla first equipped the Model 3 with LFP batteries and gradually expanded the models using them. The LFP share was only 6% at launch in 2020 but rose to 37% of total sales by 2022.

Global automakers such as Ford, Mercedes-Benz, Volkswagen, and Hyundai have launched or plan to launch electric vehicles with LFP batteries. According to market research firm Adamas Intelligence, LFP battery market share surged from 17% in January 2021 to 26% in January 2022 and 31% in September 2022.

This figure is expected to increase further this year. SNE Research estimates that out of 645,000 tons of cathode material loaded from January to June 2023, LFP accounts for 288,000 tons, or 44.6%.

Several factors are analyzed to contribute to the rise of LFP batteries.

First, the electric vehicle market is shifting from early adopters to mass adoption, expanding the market for affordable vehicles. This creates incentives for manufacturers to release cheaper cars, leading to demand for LFP batteries. The growing need for safety in electric vehicle purchases as the market matures is also a factor in expanding the LFP market.

Coinciding with the expiration of LFP patents, barriers for Chinese battery companies entering overseas markets have disappeared. Not only CATL but also BYD, which mainly supplied batteries for its own electric vehicles, has been actively targeting overseas markets since 2023. According to SNE Research, BYD's share of non-Chinese electric vehicle battery usage from January to September 2023 was 1.8%, a 539% increase from 0.4% the previous year.

The technical limitation of low energy density in LFP is also being overcome. CATL uses Cell to Pack technology. Electric vehicle batteries are made in the order of Cell → Module → Pack, but CATL eliminated the intermediate module stage. This allows more battery cells to be packed per unit area, improving energy density.

Chinese companies are developing LMFP (nickel manganese iron phosphate) batteries by adding manganese (Mn) to LFP. This raises the voltage from the existing 3.2V to 4.1V, increasing overall energy density. CATL's M3P battery, which applies LMFP cathode material, has an energy density of 240 Wh/kg, about 20% higher than the conventional LFP battery (210 Wh/kg). LMFP batteries also improve low and high-temperature performance. LFP batteries have poor low-temperature performance, especially vulnerable in winter.

In August, CATL introduced a new 'Shenxing' battery capable of driving 400 km with a 10-minute charge. This battery mixes LMFP and NCM in the cathode and uses specially coated graphite in the anode to improve energy density and charging speed.

Korea's Late Pursuit

Initially, Korean companies predicted that LFP batteries would only be used in some low-cost electric vehicles and that ternary batteries would dominate the market. They believed that improving the energy density of LFP batteries would be difficult, limiting market expansion.

However, feeling threatened by the expansion of the LFP battery market, domestic companies are entering the LFP battery market one after another. They cannot ignore the LFP market while competing in volume with Chinese companies globally. Korea's top three battery companies?LG Energy Solution, Samsung SDI, and SK On?have already officially entered the LFP battery market. They plan to first launch LFP batteries for energy storage systems (ESS) and later for electric vehicles. LG Energy Solution and Samsung SDI aim for mass production by 2026, while SK On targets commercialization by 2028.

The reason domestic battery companies cannot immediately launch LFP batteries is that it takes a long time to build production lines and establish supply chains for materials such as cathode, anode, separators, and electrolytes. For example, EcoPro BM, a leading domestic cathode material company, plans to build a 3,000-ton scale LFP pilot line only in 2024.

China has established an LFP battery production system from mineral mining to cell manufacturing over the past decade. It is not easy for domestic companies to catch up in a short time. Moreover, Chinese battery companies have secured price competitiveness by vertically integrating key raw materials such as lithium carbonate and iron phosphate precursors for LFP.

The Korea Institute for International Economic Policy pointed out in its April report titled 'Analysis and Implications of China's LFP Battery Supply Chain' that "Building an LFP supply chain for our companies requires additional raw material procurement such as lithium carbonate and iron phosphate precursors, different from the existing ternary battery supply chain, and requires large-volume orders to lower unit costs and LFP battery production capacity to absorb them."

Ultimately, domestic companies have no choice but to compete with ternary batteries. Samsung Securities suggested in its September report 'LFP Siege Second Battle' that "It will not be easy for Korea to secure price competitiveness in the electric vehicle battery market with LFP in a short time," and recommended "expanding product portfolios with manganese-based products (cobalt-free NMx, manganese-rich LLO, etc.) or responding to market demand project-wise in the ESS market while building an ecosystem and enhancing product competitiveness."

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