[Complete Battery Mastery](19) Can the 'Safety Keeper' Separator Survive in the All-Solid-State Era?

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Along with electrolytes, separators are considered beneficiaries of the U.S. Inflation Reduction Act (IRA). Both items are classified as 'battery components' under the IRA. To qualify for electric vehicle subsidies, the proportion of battery components produced or assembled in North America must exceed 60% as of 2024. This ratio will increase to 100% by 2029. Additionally, if separators from Chinese companies designated as Foreign Entities of Concern (FEOC) are used, subsidies will be unavailable starting in 2024. (See Complete Battery Mastery Episode 18)

Until now, Chinese-made separators accounted for 70% of the global electric vehicle battery separator market. The three major domestic battery companies also used many Chinese-made separators. However, the situation is expected to change going forward. With restrictions on the use of Chinese separators, domestic products are likely to replace them. Korean separator companies are also considering direct production in the U.S.

The upcoming all-solid-state batteries pose a threat to separators. Since all-solid-state batteries replace liquid electrolytes with solid electrolytes, separators are not needed. However, even if all-solid-state batteries become commercialized, their high cost means they will likely be applied mainly to high-end electric vehicles. Most electric vehicles will still be equipped with conventional lithium-ion batteries. This means separators will not disappear.

Almost Touching... The Technology of Separators

A separator is a core material responsible for battery safety, positioned between the cathode and anode. It prevents direct contact between the cathode and anode, which could cause short circuits and fires.

Separators have microscopic pores smaller than 1 micrometer (μm, one-millionth of a meter) that are invisible to the naked eye. Lithium ions move through these pores. While more pores are better, too many reduce physical strength. Separators used in electric vehicle batteries maintain about 40% porosity. The pore sizes must be uniform, not irregular, to ensure proper battery performance.

When the internal battery temperature rises above a certain level (100?140 degrees Celsius), these pores close (shut down), blocking lithium-ion movement. This helps prevent battery overcharging and thermal runaway. However, separators must not melt too easily, as that could trigger thermal runaway.

For separators to function properly, they must be electrically insulating materials. Thinner separators improve battery energy density by allowing more active cathode material. Currently, separators used in lithium-ion batteries are less than 20 μm thick.

Polymer materials are used for separators, mainly polyethylene (PE) and polypropylene (PP).

Separators are divided into dry and wet types based on manufacturing processes. Dry separators are made by mechanically stretching the film base in one direction (uniaxial stretching) to create pores. This process is simple but results in uneven pore sizes.

To make wet separators, PE and PP are mixed with paraffin oil (wax) under high temperature and pressure, then extruded into sheets. The sheets are stretched in two directions (biaxial stretching) and slowly cooled, causing phase separation. When exposed to volatile solvents, the oil is removed, leaving pores.

Wet separators have a complex and costly manufacturing process but can produce thinner and more uniform pores. Dry separators are more environmentally friendly due to the absence of solvent processes and have superior mechanical stability.

In the past, separators used only film materials, but recently ceramic coatings have been applied to enhance performance. Since the base film materials are similar, the coating material largely determines the product quality and price of separators.

28 Trillion Won Market by 2030... Led by Chinese Companies

With the expansion of electric vehicles, the lithium-ion battery separator market is also expected to grow. The cost proportion of separators in battery cells is about 15%. It is estimated that 11 to 13 million square meters of separators are needed per gigawatt-hour (GWh) of battery capacity. Based on this, Kyobo Securities estimated that separator usage in 2023 will reach 8.33 billion square meters, a 37.4% increase from the previous year.

Market research firm SNE Research projected that the global separator market size will grow from $7.5 billion (about 9.85 trillion won) in 2022 to $21.9 billion (about 28.78 trillion won) by 2030. (March 2023)

Japanese companies once dominated the separator market. However, with the rapid expansion of the Chinese electric vehicle market in recent years, Chinese companies have significantly increased production. Achieving economies of scale, Chinese companies expanded their market share by competing on price. According to SNE Research, China accounted for about 68% of global production in 2022, followed by South Korea at 16% and Japan at 13%.

Representative Chinese separator companies include Shanghai Energy New Materials (SEMCORP), Shenzhen Senior, and Sinoma.

SEMCORP was established in April 2010 in Shanghai with capital of 390 million yuan. After Changxin New Materials acquired SEMCORP in 2017, aggressive investments expanded its scale. As of 2022, SEMCORP accounted for 24.4% of global separator production, ranking first worldwide. It supplies separators to China's CATL and South Korea's LG Energy Solution.

Japanese companies include Asahi Kasei and Toray. Asahi Kasei began producing separators for secondary batteries in the 1990s. Since April 2009, Asahi Kasei E-Materials division has operated the separator business. In 2015, Asahi Kasei expanded its business by acquiring Polypore International Inc. (PPO), the parent company of U.S. separator company Celgard, for $3.2 billion. Asahi Kasei also operates a separator factory in Pyeongtaek, South Korea.

Domestic companies include SK Innovation's SKIET and WCP. Recently, LG Chem re-entered the separator business in 2021 and is expanding operations.

SKIET was established in April 2019 as a spin-off from SK Innovation's separator division. SK Innovation entered this field in 2004 (then SK Energy) by successfully developing lithium-ion separators. SKIET held a 6.6% global market share by production volume in 2022 and is the largest domestic separator company.

WCP, the second-largest domestic separator company, was founded in October 2016 in Cheongju, Chungbuk. Its parent company is W-SCOPE, established in Japan in 2005 by CEO Won-geun Choi, a former Samsung Electronics employee. W-SCOPE is listed on the Tokyo Stock Exchange. W-SCOPE Korea produces small separators for IT applications, while WCP produces separators for electric vehicles.

Will Korean Companies Benefit from IRA?... Considering North American Expansion

Since separators are closely related to battery safety, the verification process is stringent, and entry barriers are high. For electric vehicle applications, changing separator suppliers requires about four years of approval from automakers. Therefore, battery cell companies select major separator suppliers to ensure stable supply.

Currently, Samsung SDI reportedly sources more than half of its separators from WCP. SK On mainly obtains separators from SKIET. LG Energy Solution's suppliers are diversified among China's SEMCORP, Shenzhen Senior, and Japan's Asahi Kasei and Toray.

However, this structure is expected to change. The starting point is the U.S. IRA. Under the IRA, separators are classified as 'battery components.' According to IRA regulations, as of 2024, at least 60% of battery components must be manufactured or assembled in North America to qualify for government electric vehicle subsidies. This ratio increases to 70% in 2026 and rises by 10% annually thereafter. By 2029, 100% of components must be manufactured or assembled in North America.

In December 2023, the U.S. government designated China, Russia, North Korea, and Iran as foreign entities of concern. Companies located in or owned, controlled, or directed by these countries are designated as Foreign Entities of Concern (FEOC). This effectively includes almost all Chinese companies. From 2024, battery components supplied by FEOC will disqualify electric vehicles from subsidies.

Accordingly, companies supplying batteries for U.S. electric vehicles are more likely to use separators manufactured by Korean or Japanese companies instead of Chinese ones. In fact, with the FEOC regulation applied, the number of electric vehicle models eligible for subsidies sharply decreased from January 2024. The same regulation will apply to critical minerals starting in 2025.

Separator manufacturers building factories in North America may also receive Advanced Manufacturing Production Credits (AMPC). The U.S. Treasury Department's IRA guidelines announced in December 2023 included separators and electrolytes in the list of products eligible for AMPC. Previously, only battery cells and modules qualified for tax credits of $35 and $10 per kilowatt-hour (kWh), respectively.

In the future U.S. battery separator market, fierce competition is expected between Korean and Japanese companies to replace China. Domestic separator companies are likely to accelerate their entry into the North American market. SKIET has produced separators in Jeungpyeong and Cheongju in Korea, Changzhou in China, and Silesia in Poland. The battery industry expects SKIET to announce a new North American separator factory in early 2024.

Separator produced by SK IE Technology

WCP produces separators in Chungju, Korea. The company plans to invest 700 million euros to build a separator factory with an annual capacity of 1.2 billion square meters in Hungary, where Samsung SDI has a battery production base. WCP is also considering North American expansion.

The battery industry is paying attention to LG Chem's moves after re-entering the separator business after six years. Since October 2021, LG Chem has been building a joint venture with Japan's Toray in Hungary. LG Chem plans to secure an annual production capacity of 800 million square meters by 2028. LG Chem sold its separator business to Toray in 2015. LG Chem is also considering building a separator factory in North America.

The Fate of Separators in the All-Solid-State Era

Although the separator market is expected to grow with the expansion of the electric vehicle battery market, there is one major challenge: the commercialization of all-solid-state batteries, known as the 'dream battery.' All-solid-state batteries replace liquid electrolytes with solid electrolytes to reduce fire risks and do not use separators. As all-solid-state battery use expands, the role of separators will inevitably shrink.

Many experts predict that even if all-solid-state batteries become commercialized, their high cost will limit them to the premium market segment. Due to technological development challenges and price competitiveness, the market is unlikely to grow rapidly.

The global average price of liquid electrolytes used in lithium-ion batteries was about $9 per kilogram in 2023. The main raw material for sulfide-based solid electrolytes, lithium sulfide (LiS2), costs between $1,500 and $2,000 per kilogram. Even with mass production, it will take considerable time for prices to fall to the level of existing lithium-ion batteries.

SNE Research expects the market share of all-solid-state batteries to remain around 4% by 2030. This means the position of separators will not be significantly shaken even after the commercialization of all-solid-state batteries.

References

Maeil Business Newspaper, "LG Chem Reenters Secondary Battery Separator Market," 2021.10.27
SNE Research, LIB 4 Major Materials SCM Analysis and Market Outlook (~’30) Report, 2023.3.2
SNE Research, Separator Planning Column ③ The Future of Separators, 2023.7.10
Korea International Trade Association, Impact of U.S. IRA Implementation Guidelines on Korea's Battery Supply Chain, 2023.9.6
Kyobo Securities, Promising Potential of Separators, 2024.1.2