Rising from the ashes
Most people would assume this was the end of the story, until another MIT battery startup - SolidEnergy Systems Corp - rose from the ashes of A123. This time, it's taking a different business approach.
SolidEnergy - a Massachusetts-based clean energy and battery materials enterprise that develops next-generation battery materials and concepts - plans to team up with both battery and materials firms on the mainland to first enter the drones market this year. It will make its foray into the smart-phone market next year to produce 30 million battery units by the end of 2016, and eventually take on the electric-vehicle market in 2017.
"The bankruptcy of A123 was a heavy blow to investor confidence in the battery industry, making it hardly possible to raise funds for battery projects for quite a while. However, putting aside these problems, what we cannot ignore is the huge market demand that still exits, and the real potential to disrupt the market with new technology innovation, which is also the reason we started SolidEnergy," says Hu Qichao, founder of SolidEnergy.
Back in 2009, when A123 was still one of the hottest clean-tech companies, Hu, like other young material scientists, entered MIT with an entrepreneurial dream.
The research team Hu joined had been delving into an advanced lithium battery material since the early 1990s. When Hu arrived, the only problem yet to be addressed was that the material used in the battery could only function at high temperatures (above 80 C), which meant it could not be used at room temperature.
Hu and his team spent five years exploring novel electrolyte and anode materials that would both enable the battery to function well at room temperature. Besides, with the new material, the battery energy density reached twice that of traditional lithium-ion batteries - the most commonly used battery in mobile phones, electric mobiles and hybrid cars - allowing the battery to have the capacity of two of the same size.
Rising from the ashes
However, Hu's excitement for his success in the laboratory did not last long. When he started seeking investments to transfer the technology to products, the clean-tech bubble of A123 collapsed. "You won't believe that we won almost every business plan competition across the US, but we could not find one real investment because all investors were afraid of any involvement in the battery industry," Hu said.
Hu then turned back to the defunct A123 - probably the last place he should have gone to at the time. Using an idle equipment and production line, he started to revive battery prototypes again. The informal partnership between Hu's battery startup and A123 became formal in 2013, when A123 emerged out of bankruptcy and turned itself into a technology incubator, A123 Venture Technologies, while SolidEnergy became A123's first strategic partner after reconstruction.
To avoid repeating the mistakes A123 had made, Hu has no intention to build up his own production line. Public information shows that A123 had spent more than $300 million in equipment and other capital expenses between 2009 and 2012. This increased the business risks as profits were squeezed by growing market competition.
Being different from A123, SolidEnergy's business model is to be capital light and focus on technology design and innovation, while cooperating with material and battery producers to leverage existing manufacturing capacity, the mature process and economy of scale.
"For example, we're now partnering with several material and battery companies in Jiangsu province and Shenzhen, as well as consumer electronics companies in California, such as Google's modular phones," Hu says.
Rising from the ashes
The product called "anode-less" battery is a system that incorporates an ultra-thin metal anode and a safe electrolyte that reduces the battery size to half while maintaining the same battery capacity.
According to Hu, "anode-less" battery core materials are compatible with various cathodes, depending on different applications and industries, and can be manufactured using existing Li-ion manufacturing facility without requiring special industry equipment, so that all SolidEnergy needs to do is to sell their anode and electrolyte materials to existing Li-ion battery producers, instead of opening up new plants.
All batteries are composed of three parts - cathode, anode and electrolyte. The past decade has seen fierce competition among battery producers on high energy-density cathode materials, from lithium iron phosphate to lithium cobalt oxide, then to ternary batteries such as lithium nickel manganese cobalt oxide, while the development of anode material has remained slow.
"This is what makes our product revolutionary," Hu said. The first-generation anode was graphite invented in the early 1990s, while the second generation's was silicon-based and invented in the mid-2000s. "Now, we're moving to metal anode for beyond Li-ion batteries".
And, Hu sees a promising market for "anode-less" batteries. "It means your phone will have longer battery life without increasing the size or weight, or your electric cars run twice the distance on a single charge, and this does not even require the battery producers to spend money buying new equipment because the 'anode-less' battery can be assembled to all kinds of cathodes," he said. "The market is huge."
The mainland is already the biggest lithium battery-producing base and the second-biggest lithium battery producer and exporter in the world, commanding a 40-percent share of the global lithium-battery market. According to the latest data from the Ministry of Industry and Information Technology, 5.29 billion lithium batteries were produced on the mainland last year alone.
Zhou Pengfei, manager of SinoHytec - a Beijing-based firm specializing in new energy vehicles - said the "anode-less" battery could be a revolution for lithium batteries if costs and quality are well controlled.
"Most lithium batteries use graphite as an anode ... A new anode product should be revolutionary if it's significantly cheaper, safer and has higher energy density than graphite batteries," Zhou said.