Episode 017: Opening Our Own Lab

In January 2023, our company will start the battery evaluation and inspection business at the Fulogic I.C.E. Lab. I.C.E. stands for Inspection, Cycle (charging and discharging), and Evaluation of the batteries.

Why is our company, a trading firm, now entering the evaluation business? In this episode, I would like to explain the reasoning behind this decision.

As you may know, the demand for lithium-ion batteries is surging worldwide. The biggest driver of this demand is electric vehicles (EVs).  In 2020, the total global shipment value of lithium-ion batteries was 5.9 trillion yen, of which 54% was for EVs. In 2021, the market grew to 8.4 trillion yen, with 58% going to EVs. The industry's growth rate was an explosive 142% in just one year, and the proportion occupied by EVs are increasing.

So, how many lithium-ion batteries does an EV use? To put it simply, an EV uses 5,000 to 10,000 times the amount of battery capacity as a smartphone. From a battery manufacturer's perspective, producing batteries for 100 to 200 EVs is equivalent to manufacturing batteries for one million smartphones. Given the growth potential of both markets, it is only natural that manufacturers would focus on EVs. After all, laws are being enacted worldwide to ban the sale of gasoline-powered vehicles by 2030 or 2035, ushering in an era of 150 million EVs.

Meanwhile, small lithium-ion batteries, which have been in use for about 30 years in PCs, smartphones, and power tools, have seen their prices significantly reduced. As a result, profitability has declined, and this sector may no longer be a priority for major battery manufacturers. In fact, companies like Sony and Hitachi have divested from the small lithium-ion battery business, and Korean manufacturers are also rapidly shifting their main focus to EVs.

However, there are still many needs to supply small-scale demand, such as 300 batteries per month or 1,000 per year. A business with small production volumes does not mean the same as a business with low social importance.

A Past Experience

About ten years ago, I was working on a project with a medical device manufacturer to develop a battery pack for an oxygen mask disconnection alarm used in Intensive Care Units (ICUs).

When a patient is transported to the ICU on a stretcher (i.e., without being connected to a power source) and an oxygen mask is placed on them, there is a risk that the mask may come off if the patient moves their head. If the nurse fails to notice this, the patient’s life could be in danger. In situations where many patients arrive simultaneously due to disasters or accidents, this risk increases. This product was designed to sound an alarm when the mask became loose, alerting the nurses. It was a product of great social importance.

However, the domestic cell manufacturer we negotiated at that time was reluctant to supply cells for this product. To put it briefly, their reasoning was:
"We cannot take on a 5-billion-yen liability risk for a product that will only generate 1 million yen in monthly sales."

In the end, we could not persuade the cell manufacturers to change their stance, and the project was temporarily halted.

When I visited the medical device company to relay this decision of cell manufacturer, one of their executives turned to me and said:

“I understand the cell manufacturers’ decision from a business perspective. However, our company must discuss the issue of human lives. I don’t want this to sound like a threat, but please consider this: if the family member of someone at that cell manufacturer were brought to the ICU during a disaster, and they had to rely on the conventional type of oxygen mask overnight, how concerned would they feel? We will not place any further burden on you, Mr. Tanaka, but if you ever have the opportunity, please share this message with the cell manufacturers. Instead of just thinking about why something cannot be done, I wish they had considered how it could be done.”

Later, I heard that the medical device company ultimately commercialized the product using batteries from a foreign manufacturer that took the stance:
"As long as it is used within the specifications, we do not care how it is used. If an accident occurs, it is the responsibility of the device manufacturer."

However, since this manufacturer did not provide as much data as domestic manufacturers, the medical device company had to conduct additional tests at an external evaluation agency—tests that normally should not have been necessary for them. This cost extra time and money.

When I heard this story later through a third party, I felt an overwhelming sense of powerlessness. Battery data is left entirely to the manufacturer, and evaluation is left entirely to the customer. Is this really the right way?

Why We Opened Our Own Lab

Our company has no capital ties with any manufacturer, so we pride ourselves on being able to introduce batteries solely based on compatibility with our customers’ products—without being influenced by the manufacturer’s business interests or inventory situation.

However, whether a battery truly performs as expected is something that we have always had to leave to the customer to verify. But not all customers have the ability to conduct battery evaluations on their own. As a result, they often have no choice but to trust the data provided by the battery manufacturer.

Until now, we were able to obtain reliable data from domestic manufacturers. But as they shift their resources to EV batteries, it is becoming increasingly difficult to source cells for small-lot, multi-product businesses like ours. Naturally, this means we will have to introduce cells from lesser-known overseas manufacturers more often.

When that time comes, what will we say if a customer asks, "Is this data really trustworthy?"
Right now, we have no way to answer that question.

That is why we wanted to have our own evaluation facilities. We are not saying that manufacturer-provided data is unreliable. However, such data is usually collected under ideal conditions for the battery.

What happens when a battery is used at its upper or lower temperature limits?
What happens when it is charged and discharged at the maximum rated current?
How does it behave under conditions close to actual usage?

We were fortunate to receive government subsidies for COVID-19 recovery, which helped us take this step. Now, we can provide testing services for many companies that lack their own evaluation capabilities.

We may be giving ourselves too much credit, but we believe we are becoming a valuable resource for small-scale battery users who are struggling with the rapid changes in the battery industry.

Let me say this one more time:
A business with small production volumes does not mean the same as a business with low social importance.

Whenever I start to forget that, I remind myself of the disappointed expression on the face of that medical device executive.

(End)

This essay was released to Fulogic mail-magazine readers on November 22th 2022 so contents do not reflect today’s slow EV market. We thought this is still meaningful to those who are interested in battery evaluation.

This essay was originally written in Japanese and was translated to English by ChatGPT. A few corrections are made by the original author.