The Syllabus Of Applied Business Projectabp

1. The concept of secondary
battery

○A battery is the device to
change the chemical energy into the electric energy through the electrochemical
oxidation and the reduction reaction, and it is divided into the chemical
battery such as the first battery, the secondary battery and the fuel battery
and the physical battery such as the solar battery which changes the chemical
battery and the light energy into the electric energy.

○The secondary battery,
differently from the first battery which is disposed after one use, can be used
repeatedly through the discharge which changes the chemical energy into the
electrical energy and the charge which is the opposite process of discharge.

○For the representative
secondary batteries, there are the Ni-Cd battery, the Ni-MH battery and the
LiB/LPB battery. The LiB/LPB battery leads the market due to the low weight per
the same volume, the high energy density and the safety issue, and the hybrid
automobile related battery market is divided from the Ni-MH battery to the
LiB/LPB battery.

II.
The types of the secondary battery

1) Lead-acid battery (Lead
storage battery)

○As the secondary battery
which has been used for the longest time, it has been developed to the present
cheap and reliable battery since Plante had presented in 1860. The lead storage
battery had been widely used for the car in accordance with the prevalence of
car and it also has been used for the small portable devices. But due to its
heavy metal problems of lead, the use is regulated.

2) Ni-Cd Battery

○It is the battery with long
history invented in 1899 which is called as NiCad battery. The large Ni-Cd
battery was developed in Europe during the World WarⅡ and the small enclosed
battery was commercialized in Europe since 1960s. It has been used for the
high-powered industry and military as well as railroad, vehicle and airplane
engine, and due to the development of enclosed type, it is used for the power
of power tools and portable electrical appliances in large.

○
But in terms of the memory phenomenon which is the unique characteristic of
Cadmium metal and the pollutant, along with the invention and development of
high-powered secondary battery like lithium-ion battery, the market of the
Ni-Cd battery is decreased.

3) Ni-MH Battery

○As the secondary battery
commercialized in 1990, it is used for the portable electronics through the
enhancement of energy storage density and the removal of Cadmium which is the
heavy metal. Due to the higher energy density than nickel-cadmium battery, the
excellent cost performance and the use of eco-friendly material, it is used for
the portable devices in large such as cellular phones, laptop computers and
audio devices.

○Since
it has the large capacity per volume, it is also used for the battery of
electric car.

4) Li-ion Battery

○The basic concept of Li-ion
battery was suggested by Armand in 1980. The research on the secondary battery
of high-powered density has been performed actively since the latter half of
1980s, and among them, the secondary battery using the metal lithium on the
negative pole had the high capacity theoretically but it could not be
commercialized due to its instability and unsafety during charge and discharge.
Therefore, the Li-ion battery was invented.

○ The Li-ion battery using
graphite intercalation compound uses the positive and negative pole materials
which can laminate lithium electrochemistrically and the polar aprotic solvent
which transfer lithium-ion. For the lithium-ion battery, since the metal
lithium doesn’t intervene with the charge and discharge response, the problem
caused from the metal lithium dentlight doesn’t occur.

○
The commercialized Li-ion battery uses the positive pole materials of nickel,
cobalt and manganese which are the level of 4V to lithium and the negative pole
materials of carbon which can form the Lithium intercalated carbon and the
level of 0~1V to lithium, so it shows the high battery voltage of which the
average potential difference is 3.6~3.7V.

○The
lithium-ion battery consists of the positive pole, the negative pole, the
separation membrane and the electrolyte. Since the electrolyte uses the
non-water soluble solvent, the electromotive force of the single cell is high
in 3V compared with the 1V of the water-soluble batteries such as led battery,
Ni-Cd battery and Ni-MH battery and the energy density per volume is high.

○The
performance and characteristics of the lithium-ion battery is changed according
to the materials of the positive and negative poles. For the portable
lithium-ion battery, the materials of LiCoO2 system are mainly used. However,
since the positive and negative poles for car needs to compose the large battery,
the commercialization of LiMn2O4 or LiFePO4 is progressed in heat stability,
over-charged durability, resource reserves and material cost.

○For
the lithium-ion battery for portable devices, the cylindrical or rectangular
types using metal container are used in large. For the electrodes, the
concentric circular type is used by overlapping the positive polar, the
separation membrane and the negative polar of winding type or jerry roll. For
each type, the type that the rectangular shape contains the electrodes is in
general.

○For
the lithium-ion battery for car, the shape of portable battery is
commercialized and it demands the large capacity, the low internal resistance
and the high heat radiation. For this purpose, the development of the large
laminated battery is being commercialized.

5) Li-Polymer Battery

○
The Li-Polymer battery has the same composition of the Li-ion battery except
for the electrolyte parts using the polymeric materials instead of the liquid
electrolyte. It doesn’t have the risk of electrolyte leakage which is the
demerit of the Li-ion battery, and the battery can be manufactured in various
shapes like flat-panel or slim type using the plasticity of polymer.

III.
Utilization of Secondary battery

1) Hybrid Electric Vehicle
(HEV)

○The
hybrid electric vehicles are the next generation environmental vehicles which
reduce the harmful gas emissions significantly compared with the existing
general vehicles. That is, due to the internal combustion engine and the
battery engine of electric vehicles, the next generation vehicles reducing the
harmful gas emission significantly compared with the existing general vehicles
can reduce the harmful gas emissions by 90%, improve the air and surroundings
in big cities and also be effective in urban planning and traffic control. So
it is called as the Eco-car.

○
The Prius of Toyota or the Insight of Honda in Japan is the representative car
model and the Prius succeeded in the first mass production in the world at the
end of 2000. With the high fuel efficiency and the combination of merits of
gasoline engine and electric engine, the change of gasoline engine and electric
engine is possible according to the road conditions and surroundings.

○ In
May, 2009, about 1,250,000 cars were sold and it is so popular that the public
agencies of New York state and New Jersey state purchased the cars as the
official vehicles regarding construction, welfare, environment and transport.

○ As
for the Insight, though it has the gasoline engine, the weight is light by
about 40% compared with the existing vehicles since the body is made of
aluminum and it reduced the air resistance significantly using 1 liter
lean-burn VTEC engine which is the lightest in the world. By the record of
1423.3km running without refueling and the fuel efficiency of 32km per 1 liter,
it gets settled as the environmental sports car of next generation.

○
Also in Korea, Avante LPI of Hyundai Motors and Forte LPI of Kia Motors were
produced in 2009.

2) PHEV

○
The PHEV has the plug differently from HEV. It charges the electricity through
plug and uses the charged electricity during the running. Of course in running,
the car is recharged continuously through the electric motors, and by this
principle, it has the high fuel efficiency and the low pollutants emission
compared with the general internal combustion vehicles or HEV.

○Already
in the advanced countries for automobile technology such as the States or
Japan, they started to pay attention to PHEV instead of HEV. As for the general
structure of PHEV, it consists of the electric motor of internal combustion
engine, the power electronics, the battery pack, the fuel tank and the recharge
plug.

○The
fuel tank is designed as the small capacity compared with the general internal
combustion engine vehicles, and as much as the decreased capacity of fuel tank,
the battery pack replaces the role. So it can be regarded as the trade-off of
battery pack and the fuel tank. The electric motor can perform the both roles
of engine and generator at the same time during running.

3) Electric Vehicle (EV)

○It
is the vehicle which gets the drive energy from the electric energy instead of
the combustion of fossil fuel like the existing vehicles. The electric vehicles
which drive the car by rotating the motor with the electricity charged in the
vehicle were produced before the gasoline cars in 1873. But it had not been
commercialized due to the heavy weight of battery and the long time to be
charged, and as the pollution problem became serious, it has been developed
since 1990s.

○The
first mass-productive electric vehicle is the GM EV1, the high-powered electric
vehicle which is commercially available in California, USA. GM succeeded in the
development of EV which they have developed actively from the beginning of
1990s and started to sell it in the market since 1996. This EV can run up to
208km with the maximum speed of 150km on a single charge.

○Afterwards,
the Ranger of Ford, the RAV4 of Toyota and the EV Plus of Honda were
commercialized in the market. However, the existing EVs lack practicality since
it takes more than 8 hours for charging and the driving distance is short.

○In
recent years, the hybrid cars or the fuel cell cars which charge the
electricity by the auxiliary engine for charging are developed. A lot of
advanced countries promote the force distribution policy as well as the large
investment of government for the early commercialization of EV.

○ In
case of California, USA, it provides the compulsory sale of the Zero Emission
Vehicle since 2003. According to the car sales by company, it makes the
specific sales of the Zero Emission Vehicles such as EV, HEV and Super-ultra
low-emission gasoline car compulsory.

4) Other Uses

IV.
What is the Lithium secondary battery?

○ In
case of the Lithium secondary battery which leads the market of secondary
battery, since it generates the electricity by the movement of the lithium-ion
(discharge) occurred from the electrochemical oxidation and reduction and is
charged through the opposite process, it can be used repeatedly.

○
The Lithium secondary battery is divided into Lithium-ion battery(LIB) and the
Lithium-ion Polymer battery(LPB) depending on the type of electrolyte. While
the electrolyte of Lithium-ion battery is liquid, the electrolyte of the
Lithium-ion Polymer battery is gel or solid polymer type.

○
The Lithium-ion secondary battery is developed first by SONI Energy Tech in
1991 and it is the most eco-friendly next generation secondary battery which
solved the safety problem caused when the lithium metal is adopted in the
negative pole by using carbon negative pole.

○
Since the Lithium-ion secondary battery uses the lithium metal in the
electrode, it is defective in safety so it needs the protection circuit. But
because it has the high energy storage density and it can be made into small or
flat-plate type, it is used for the power of the small portable devices
actively.

○
The Lithium-ion Polymer battery is similar to the Lithium-ion secondary battery
but it replaced the electrolyte of the Lithium-ion secondary battery with the
high polymer in order to enhance the safety. It is safe and can be transformed
into the various shapes. In case of the Lithium Polymer battery, it doesn’t
need to be sealed with aluminum can like the lithium-ion battery and can be
packed with a simple package. The risk of ignition or explosion is decreased
significantly compared with the exiting lithium-ion battery.

○As
well as in the case of the lithium-ion battery, by installing the protection
circuit during the packaging, it blocks off the leading wire in case of
overcurrent, overvoltage and overheating in order to prevent the ignition and
explosion. So the actual ignition or explosion risk is reduced significantly.

○The
lithium-ion battery is rapidly developed in accordance with the weight
lightening and performance improvement of secondary battery which is demanded
along with the development of the portable electronic devices. The lithium-ion
battery is very excellent in capacity and weight compared with the existing
Ni-Cd battery or nickel-MH battery.

– Since the lithium metal
is lighter than other metals, the battery using this metal is also light so
that the energy density based on the same weight is high.

○The
electromotive force of lithium-ion battery is stronger than the existing
secondary battery so that it is superior in weight and easy to be handled. And
the electromotive force of the lithium-ion battery is 3.6V and the cellular
phone can be worked with only one battery. Meanwhile, the electromotive force
of the nickel-based battery is 1.2V so that the connection of three batteries
in series can get the electromotive force of one litium-ion battery.

○
The Lithium-ion Polymer battery is divided into the lithium-ion rectangular
battery, the lithium-ion cylinder battery and the lithium polymer battery in
large. The lithium-ion rectangular battery and the lithium polymer battery are
mainly adapted for the cellular phone and PDA, and the lithium-ion cylinder
battery are adapted for the electric devices which uses electricity
continuously and demands the high electric power such as the laptop or
camcorder, and recently, it is also used for the hybrid cars mainly using Ni-MH
battery as well as the portable electric devices.

○ However,
in order to use the existing lithium-ion secondary battery which mainly uses
carbon, organic solvent electrolyte and LiCoO2 for the vehicles, there are many
problems of price, life cycle, stability, reliability and sustainability.

V.
The market trends and future prospect of domestic and foreign secondary battery

1. Current status and
future prospect in domestic and foreign markets

○The
world’s secondary battery market formed the 64.5 billion dollars market with
the mobile IT small battery market as the center in 2012, and among them, the
part of the lithium secondary battery formed 24.3%.

○In
2017 when the energy storage system is increased and the electric vehicle
market is activated, it is expected that the secondary battery market will
reach 104.6 billion dollars and the part of the lithium secondary battery will
grow up to 39.5%.

○The lithium secondary
battery market is expected to record the scale of 41.4 billion dollars with the
average annual growth rate of 2.9% from 15.7 billion dollars in 2012 to 2017.

* general mobile phone(3Wh)
à
smart phone(5.3~5.6Wh)

○ The lead storage battery
is expected that it will form more than 45% of the whole market on the basis of
the stable demand(for the engine start of vehicles) until2017.

2. Tesla is planning for
the investment in the giga-factory for secondary battery

○Elon
Musk, the CEO of Tesla, suggested their 2014 sales goal of Tesla EV for 35,000
vehicles which increased by 56% compared with 22,477 vehicles in 2013. And the
productive capacity is planned to be increased from weekly 500 vehicles in the
beginning of 2014 to weekly 1,000 vehicles in the end of 2014. In 2015, Tesla’s
EV will be sold more than 50,000 vehicles at least.

○ However, the supply of the
secondary battery is difficult to meet the demand of Tesla’s EV which is
increasing explosively. Elon Musk announced that they will establish their own
secondary battery giga-factory by investing 2 billion dollars in New Mexico
State, USA. According to the Japanese Nihon Geizai Shimbun, Panasonic will
invest 1 billion dollars which is 50% of the investment. Sooner or later, Elon
Musk will announce his details but the factory seems to produce totally from
cell to pack.

○
The productive capacity of Tesla giga-factory is 30GW and it is the scale which
can annually produce 500,000 vehicles of Gel3(60kWh), the popular sedan. Based
on Tesla S(60kWh), the price of battery will be down from 35,000 dollars to
20,000 dollars significantly. The consumer price of Gel3 in 2017 is 35,000
dollars and it is the considerable price to compete with the existing internal
combustion locomotive.

○
Due to the aggressive price cutting of Tesla in 2017, the existing internal
combustion engine companies face the time to decide whether they should
increase of EV or Plug-in hybrid vehicles or not.

○ In consideration of the
strong regulations of EU and the States on fuel efficiency and emissions, the
existing internal combustion engine companies have no choice but to increase
the production scale of the eco-friendly vehicles. The internal combustion
engine companies which cannot adapt to the new paradigm will be on the
crossroads of life.

▶ Favorable factor to the Korean secondary
battery industry

○By the strategic
cooperation between Tesla and Panasonic, the global car companies are likely to
make the strategic partnership or the investment enlargement with the Korean
secondary battery companies. In particular, Samsung SDI which is the exclusive
supplier of the secondary battery for BMW i3/i8 is the key company for the
strategic partnership with foreign car companies.

○ As Steve Jobs has led the
revolution of mobile phone industry, Elon Musk is leading the revolution of car
and energy industry.

3. Current status and
future prospect of Lithium-ion battery market

(1) Three changes of EV
market

○
The EV market is expected to be changed from 2014. It is because, among the
problems of 1) cost, 2) drive distance and 3) charging which have disrupted the
enlargement of EV market, the problems about cost and drive distance will be
solved from the time. The change factors that we note are as follows:

Change1. Consumer’s
interest increase through new model release and price-cutting

Change2. Government’s
institutional arrangement enhancement through subsidy and environmental
regulations

Change3. Drive distance
improvement through battery performance improvement and PHEV market increase

○ In terms of these changes,
the EV sales is expected to increase by 36.0% annually from 1,620,000 vehicles
in 2012 to 10,250,000 vehicles in 2018. It means that the part of EV from the
whole car market will be increased from 2.0% to 10.7%.

(2) The importance of the
medium and large size battery is increased due to the enlargement of EV and ESS
market.

○
Along with the enlargement of EV market, the focus of lithium-ion battery
market is expected to move from the small battery for IT to the medium and
large battery. The battery capacity for EV is overwhelmingly large compared
with the small battery for IT. For example, the battery capacity of Tesla S
which receives attention recently is 40kWh(basic model) and this is the 5,070
times of Galaxy S3 which is the small battery for IT. It means that the sales
effect of 20,000 vehicles of Tesla and the sales effect of 1 hundred million
devices of Galaxy S3 is the same on the basis of battery capacity.

○ Likewise, the total
battery capacity(44.5GWh) of EV which is expected to be sold in 2018 is the
same capacity of 55.6 hundred million devices of Galaxy S3(6.8 times of the
whole expected shipments of smart phone in 2013). According to the data of the
Ministry of Trade, Industry and Energy, the market scale of the medium and
large battery for EV in 2020 is 264 hundred million dollars and it is 1.9 times
of the small battery market for IT(138 hundred million dollars).

○The flow that the focus of
the lithium-ion battery market moves from the small battery for IT to the
medium and large battery will be accelerated along with the growth of ESS
market. The global ESS market will grow annually by 21.7% from 23GWh in 2013 to
90.9GWh in 2020. It is because the demands for ESS will be increased rapidly due
to the demand increase by the energy efficiency improvement and the renewable
energy expanding. And the subsidy policy for ESS which is performed in the
States, Germany and Japan will lead the early market growth.

○
Among ESS, the ESS market using the lithium-ion battery will grow by 46.8%
annually from 1.4GWh in 2013 to 20.6GWh in 2020 and it will record the highest
growth rate. In terms of amount, the demand for the lithium-ion battery of 174
hundred million dollars will be created in 2020.

(3) The Korean companies
will also maintain the market dominance of the medium and large battery

○ In
the global lithium-ion battery market, the Korean companies hold the first
place(36.0%) of global M/S. And considering that the Korean companies obtain
the orders significantly in the sector of EV and ESS, it is expected that the
market dominance of the Korean companies will be maintained also in the age of
medium and large battery.

○Meanwhile, the most
noticeable domestic companies regarding the secondary battery are LG Chemicals
and Leechem.

○ LG
Chemicals held the global second rank in the sector of the small battery in
2013, and also in the sector of the medium and large battery, it shows the most
outstanding capacity among the global lithium-ion battery companies. In
particular, since it creates the stable interest in the sector of
petrochemistry industry and information and electronics industry, the fact that
it can invest in the medium and large battery continuously can be the element
that this company will take the superior position compared with other
competitive companies from a medium and long term perspective.

○Leechem is the first
company which takes M/S 50% in the sector of electrolyte additives which is
essential for the production of lithium-ion battery. This company is noticeable
among the battery material companies because 1) it consists of the various
customers so that it has the low dependence on specific company, and 2) it can
have the high leverage effect when the production of the medium and large
battery is increased by the enlargement of EV sales.

(4) Current status of
lithium-ion battery market

A. The small battery takes
the most part in the lithium-ion battery market.

○The battery can be divided
into the first battery which is disposable and the secondary battery which can
be used semi-permanently by charging electricity supplied from the external
power. The secondary battery can be divided into the lead storage battery and
the lithium-ion battery depending on the materials of the positive and negative
poles.

○The lead storage battery is
mainly used for the vehicles and the industrial standby power, and it takes the
largest scale in the present global battery market.

○The lithium-ion battery is
used for the IT devices including cellular phone and laptop, EV and ESS. The
market scale is smaller than the lead storage battery but the growth will be
accelerated in the future.

○ The scale of the
lithium-ion battery market is estimated as 150 hundred million dollars(based on
2012), and the small battery takes more than 90% of this market with absolute
influence.

○ As
for the shipments of the small battery by application, cellular phone(44%),
laptop(27%) and tablet PC(6%) are the main products for front industry.

(5) The use of polymer
battery is expanding focusing on smart phone and tablet PC

○The lithium-ion battery can
be divided into 1) cylinder type, 2) rectangular type, 3) polymer type
depending on the shape. As for the use of each type, 1) the cylinder type is used
for the laptop as well as electric tools and electric bicycles, and 2) the
rectangular type is used for the mobile devices such as smart phone and digital
camera as well as laptop, and 3) the polymer battery is used for the thin and
light IT devices such as tablet PC and smart phone like Apple’s iPhone.

○The global lithium-ion
battery market is expected to record the annual growth of 8.4% until 2016.

○It is because 1) it is
expected that the sales increase of smart phone and tablet PC which is the
front industry will be continued, and 2) the capacity of the battery installed
at the devices is increasing.

○ In terms of type, it is
expected that the polymer battery will grow by 34.6% annually and overwhelm the
growth rate of the cylinder type(-2.6%) and the rectangular type(-2.4%). It is
because the large scale battery purchasers like Apple prefer the polymer
battery and the growth of tablet PC market which the polymer battery
monopolizes is expected to be continued. The polymer battery recorded the
market share of 24.6% in the global lithium-ion battery market in 2012 but it
is expected to be increased up to 51.4% in 2016.

(6) The Korean companies
take the first place in the global market share and the Chinese companies are
on the trace.

○ In the global lithium-ion
battery market, the power of the three countries of East Asia(Korea, Japan,
China) is absolute. 9 companies from the global Top 10 companies except for
Maxwell of the States belong to the three countries of East Asia.

○The small lithium-ion
battery with large capacity was led by the Japanese companies over 20 years
since the world’s first commercialization of SONI in 1991. But after the mid
2000s, the Korean companies started to surpass the Japanese companies through
1) the independent technology development, 2) the establishment of price
competitiveness in the state of strong yen/weak won, 3) the growth of Samsung
Electronics and LG Electronics which are the main customers. Based on 2012, the
market share of Korea is 36% and it is the global first place, and Samsung SDI
and LG Chemicals take the market share of 22% and 15% individually. (based on
the battery for IT)

○But recently, the Chinese
companies progress rapidly. The market share of the Chinese companies already
took 35% in 2012 and it is similar to the level of Korea. The Chinese companies
started to have the technology competitiveness as well as the price
competitiveness, and in case of the companies like ATL, the technology is
recognized to be adapted to the Apple’s small products.

▶ The stable growth of the secondary battery
for IT is continued.

○Meanwhile, the sales of
Galaxy S4 released in April 2013 didn’t meet the expectation and the worries
about the smart phone growth was presented. However, replacing the middle
priced smart phone under 300 dollars with the existing feature phone, the sales
of smart phone in the second quarter of 2013 was 2.3 hundred million phones and
it passed the sales of feature phone of 2.1 hundred million phones. In 2012,
the sales of smart phone recorded 4.7 hundred million phones increased by 57.9%
compared with the previous year. The demands for smart phone in 2013 is
expected to be 1 billion phones increased by 44.1% compared with the previous
year, and the demands for the smart phone in 2014 is expected to be 1.3 billion
phones increased by 30% compared with the previous year.

○ Due to the increase of the
middle priced smart phone and the price competition, the growth of the cellular
phone market is expected to be delayed. Samsung and LG Electronics which established
the vertical system of smart phone components, Apple which has the competitive
advantage of smart phone software and other Chinese smart phone companies
including Lenovo working in China which is the biggest smart phone market in
the world are expected to lead the global smart phone market.

○As
the global consumers’ use of multi-media such as app/game/movie increases, the
data sales of mobile communication companies is increasing rapidly.

○Since the existing 3G
networks cannot cover the rapidly increasing data use, the global mobile
communication companies are expanding the investment in 4G LTE networks.

○
Now 175 mobile communication companies of 70 countries present LTE network
service, and 424 mobile communication companies of 124 countries will invest in
LTE networks in the future. The China Mobile which is the biggest mobile
communication company started to commercialize the LTE network service at the
end of October 2013 and the demands for the 4G LTE smart phone is expected to
increase explosively in the future. And the tablet PC replaces the laptop
quickly.

○The
price of the secondary battery for LTE smart phone is expensive more than 5
times of the feature phone 1 dollar and the price of the secondary battery for
tablet PC is 20 dollars which is expensive more than 10% of the secondary
battery for laptop (based on the end of 2013). The rapid development of LTE
smart phone and tablet PC is positive for the secondary battery market for IT.

○The
market scale of the secondary battery for IT is expected to be 12.5 billion
dollars increased by 8.7% compared with the previous year and it is also
expected to record the stable growth with the early 10% in the future. Samsung
SDI and LG Chemicals hold the captive customers of Samsung Electronics and LG
Electronics, so they are raising the market share of the secondary battery for
IT even in the low-yen state. The market share of Samsung SDI and LG Chemicals
in the first quarter of 2013 is 28.2% and 17.5% individually and they beat
Panasonic of Japan of 16.1%. In case of Panasonic, since the secondary battery
of cylinder type for laptop occupies a high proportion and the polymer
secondary battery for tablet PC occupies a low proportion, it has the structure
which cannot overtake Samsung SDI and LG Chemicals even in the future.

5) Vision and policies

Vision>
maintaining the world’s first place in the sector of the secondary battery for
IT convergence devices

Goals> – expanding the world’s market share: the 1^st
place of 43%(2012)

àthe
1^st place of 45%(2018)

– export increase of lithium secondary battery: 4.6 billion
dollars(2012)

à
15.8 billion dollars (2018)

– employment increase as a key industry: 15,000 persons(2013)

à
30,000 persons (2018)

– technological level(gap) for the advanced countries:
58.2%(-2.8 years)(2013)

à
80.0%(-1.1years)(2018)

Prospective
technology/product/service> ensuring the market
competitiveness through the technology development of the key materials for the
medium and large secondary battery

Investment
proportion> 20% 70% 10%

VI.
2^nd lithium-ion LG Chemicals
strength analysis in the market

1) About Company

○It
is one of the affiliates of LG Group. Manufacturing the petrochemical basic
materials such as high density polyethylene, PVC and acrylic, it cultivates the
information and electronics materials business dealing with secondary battery
and polarizing plate as the future development industry.

○ It is divided into the
petrochemistry business producing ABS, PC and synthetic rubber and the
information and electronics business producing and selling the display
materials such as polarizing plate, 3D retarder, sensitive materials and
circuit materials and the lithium-ion battery used for cellular phone, laptop
and EV.

○ In
May 2011, it constructed the medium and large battery factory for EV in Ochang,
Chungbuk. It supplies the products to main car companies such as GM, Renault,
Hyundai/Kia Motors, Ford and Volvo, and it is constructing the factory in the
States.

○Regarding the glass
business for LCD, it secured the source technology of glass substrate from
Schott of Germany and established the mass-production system. It developed the
film type 3D retarder which is the key material of FPR type 3D TV and started
to commercialize.

○As
for the sales proportion, the petrochemistry business is 75.75%, the
information and electronics materials business is 13.29% and the battery
business is 10.96%.

2) Current state of Company

○The battery sector is the
business to produce and sell the small lithium-ion battery used for the mobile
devices such as cellular phone and laptop and the lithium-ion battery for
vehicles used for EV.

○The small battery of the
battery business is growing with the demands of mobile electric devices, and
also the battery for vehicles has the high potential power due to the demand
increase of hybrid and EV.

○The small battery has the
close relationship with IT industry including laptop and cellular phone, and
this company maintains the structure to make the stable growth and profits
through the continuous extension and the market share for the strategic customers.
And also for the battery for vehicles, the growth is expected due to the
gradual demand increase of EV according to the environmental regulations of
each country which become strong.

○ This company’s battery
business increased the market share through the marketing activity for the
global TOP customers as well as the continuous extension and grew constantly
through the various production innovative activities such as raw materials
internalization and stability enhancement.

○
And the EV battery business which is the future development business secured
the main car companies such as GM, Renault, Hyundai/Kia Motors, Ford and Volvo
as the main customers, and based on the outstanding technology and
practicability compared with other competitive companies, it starts the
business in earnest.

○
This company extends the large-scaled polymer battery continuously according to
the high capacity mobile device demand growth such as smart phone and tablet
PC, and also for the battery for vehicles, it strengthens the competitiveness
as a global leading company by completing the test of stability, durability and
technology and extending the commercialized productivity.

3) Market trends and future
prospect

(1) Medium and large
battery

A. EV

○From
the second half of 2009 to the first half of 2011, the stock price of LG
Chemicals rose by 305%. It was not only because of the improvement of the
petrochemical business which is the main business of this company but also
because of the growth of EV battery. Among the global 6 largest makers of
vehicles, it made the EV battery supply contract with all companies(GM,
Renault, Hyundai/Kia Motors, Ford and Volvo) except for Toyota and VW. In a
short time, it became the global first company for EV battery.

○However,
the EV era didn’t open easily. In case of Volt which GM prepared ambitiously
overcoming the failure of EV1(the world’s first mass-produced EV released in
1996), it didn’t reach the sales goal(50,000 vehicles in the Sates) by a
lot(23,000 vehicles in 2012). According to this, the sales of the medium and
large battery of LG Chemicals didn’t reach the actual guidance.

○For
the original goals, the sales of the medium and large battery on 2012 should
have exceeded 800 billion won but the actual sales narrowly exceeded 400
billion won. Overlapping the questions of investors about the growth of the
medium and large battery and the decline of petrochemistry business, the stock
price went downhill.

○At
the beginning of 2013, everything was changed. Due to the combination of
factors such as Tesla’s success and each country’s fuel efficiency regulations,
the complete vehicle companies make an effort to prepare the eco-friendly
line-up including EV and hybrid car. Meanwhile, by the bankruptcy of the medium
and large battery companies including A123, the choice of vehicle companies was
decreased. It made the favorable environment for LG Chemicals which is the
verified global first company.

○ LG
Chemicals are discussing about the battery supply for next generation EV with
the existing customers like GM. And it also has the possibility to make a
contract with new companies such as VW, Honda and Tesla. From 2016 when the
present supplying EV model will be released, the sales of the medium and large
battery of LG Chemicals is expected to exceed the existing guidance(more than 2
trillion won in 2016).

B. ESS

○
Also in ESS as well as the EV lithium battery, LG Chemicals is making a good
result. Since 2010, it made the battery supply contract with about 10 companies
and the range of supply is wide. It supplied the home ESS of KWh level and also
advanced to the electrical grid connection market of MWh level. Due to this
result, LG Chemicals was selected as the global leading company in ESS battery
as well as EV battery(US Navigant Research in May 2013).

○ The
ESS battery sales of LG Chemicals in 2013 are expected to be 66.1 billion won
(company’s guidance 80 billion won). It is just 2.6% of the whole battery
business sales. But the sales is expected to be 137.9 billion won(company’s
guidance 150 billion won) in 2014 and 633 billion won in 2017 with a rapid
increase. Thus, it is expected to take 12.5% of the whole battery sales in
2017.

C. Medium and large
battery’s performance prospective(comprehensive)

○ In
2012, in the sector of the medium and large battery, LG Chemicals recorded the
sales of 437.1 billion won and the operating loss of 65.5 billion won(company’s
estimate). It is unlikely to make the good performance in 2013~14 in a short
time by EV and ESS. In case of EV, the time that the present supplying model is
to be released is after the second half of 2015 and the ESS market is still
immature. The deficit is inevitable until 2014, but in 2015, the sales will
exceed 1.2 trillion won and the operating profit will record 43.7 billion won
to succeed in turnaround.

(2) Small battery

A. Cylinder type battery

○As
the sales of smart phone and tablet PC increase, the sales of traditional
laptop is decreasing. It means the decrease of cylinder battery. Due to the
demand decrease, the utilization rate of LG Chemicals’ cylinder battery remains
at 70%. Though it has the new demands for electric bicycle or electric tools,
the performance is delayed.

○And
there is an opinion that Tesla can destroy the balance of supply and demand for
the cylinder battery. In Tesla’s EV, the small cylinder battery supplied by
Panasonic is installed. 6,200 cells per vehicle are needed in average. When the
sales number of Tesla’s EV is assumed as 42,000 vehicles in 2014(due to the
release of Model X, the SUV EV, 100% increase compared with 2013), the number
of needed cylinder battery reaches 2.6 hundred million cells.

○It
reaches 15% of the world’s cylinder battery demand and 53% of LG Chemical
production capacity. Irrespective of whether LG Chemicals will make the battery
supply contract with Tesla or not, the market trend of cylinder battery is
likely to be improved.

B. Small battery’s performance
prospective

○Since
2011, the profitability of the small battery sector of LG Chemicals has been
deteriorated rapidly. It couldn’t cope with the utilization rate decline of
rectangular battery by the structural depression of cylinder battery
demand(laptop demand decrease) and the smart phone sales decline of main
customers(Nokia etc.). The business profit rate of the small battery sector for
the first quarter of 2013 is estimated around 1%.

○
However, according to the external conditions improvement and the productivity
extension, the turnaround of the small battery sector is expected. First,
polymer batter is expected to lead the improvement due to the supply extension
to APPLE and the installation of additional facilities. At the end of 2012, the
polymer productive capacity was 17,000,000cells/month, but at the end of 2013,
it reached 28,000,000 cells.

○The
utilization rate of cylinder and rectangular battery is expected to be
improved. In case of cylinder battery, the sales for the new devices including
electric tools increase and the Tesla Effect can be expected. In case of
rectangular battery, the smart phone sales of LG Electronics are significantly
increasing.

○
Therefore, the sales of small battery in the second half of 2013 is expected to
1,094,300,000,000 won which is the increase of 17% compare with the first half
and the business profit rate is expected to 6.2% which is improved by 3%. In
case of 2014, the scale of business profit is 165,200,000,000 won and it is
expected to increase by 70% compared with the previous year.

(3) LG Chemicals’ strong
points analysis

○Another
strong point of LG Chemicals is to have the package technology. When the
battery provides the power for the running of EV, it needs the technically
controlling system called BMS(Battery Management System). And the technology to
assemble the capacity and shapes including battery and BMS is called package.
Thus, the EV battery is installed in the shape of battery pack.

○ As
the EV technology improves and the use of battery/battery pack increases, the companies
holding package technology is increasing. It is divided into two cases. One is
that the complete car companies hold the technology and the other is that the
battery companies hold the technology. When the complete car companies hold the
technology, they just receive the battery from the battery companies and
assemble the shape directly after purchasing the parts like BMS. On the
contrary, when the battery companies hold the technology, they complete the
package as the customers want and provide it to the complete companies.

○ At
this point, it is difficult to decide which one is better. The market is also
divided into complete car companies and battery companies, and some companies
hold just the BMS/packaging technology. However, it is likely to be formed
focusing on one group as the EV market grows and the battery companies are
likely to control the market including packaging.

○
The reasons are, 1) It is difficult for the complete car companies to progress
directly because it is the components technology, 2) since the number of the
global complete car companies is significantly larger than the number of the
main battery companies, the battery companies which can produce large amount
are advantageous in terms of cost and technical skills compared with the
complete car companies which should depend on the small production.

○ LG
Chemicals hold all the technologies including BMS and packaging as well as
battery. In case of BMS, it is not exclusive but it receives the stable supply
from LG InnoTek which is the affiliate of LG Group. Especially, LG Group newly
organized the vehicle business team in LG Electronics, and it shows the strong
will to cultivate the components and materials for EV as the next generation
growth power in the group. Since LG Chemicals stands at the center, its
packaging technology will grow as the global leading company.

VII.
Suggestion for current and future 2^nd
lithium ion battery market

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1. The concept of Lithium
secondary battery and its possibility of future development

1. The concept of secondary
battery

○ A battery is the device to change the chemical energy
into the electric energy through the electrochemical oxidation and the
reduction reaction, and it is divided into the chemical battery such as the
first battery, the secondary battery and the fuel battery and the physical
battery such as the solar battery which changes the chemical battery and the
light energy into the electric energy.

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○ The secondary battery, differently from the first
battery which is disposed after one use, can be used repeatedly through the
discharge which changes the chemical energy into the electrical energy and the
charge which is the opposite process of discharge.

○ For the representative secondary batteries, there are
the Ni-Cd battery, the Ni-MH battery and the LiB/LPB battery. The LiB/LPB
battery leads the market due to the low weight per the same volume, the high
energy density and the safety issue, and the hybrid automobile related battery
market is divided from the Ni-MH battery to the LiB/LPB battery.

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2. The types of the secondary
battery

1) Lead-acid battery (Lead
storage battery)

○ As the secondary battery which has been used for the
longest time, it has been developed to the present cheap and reliable battery
since Plante had presented in 1860. The lead storage battery had been widely
used for the car in accordance with the prevalence of car and it also has been
used for the small portable devices. But due to its heavy metal problems of
lead, the use is regulated.

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2) Ni-Cd Battery

○ It is the battery with long history invented in 1899
which is called as NiCad battery. The large Ni-Cd battery was developed in
Europe during the World WarⅡ and the small enclosed battery was commercialized in
Europe since 1960s. It has been used for the high-powered industry and military
as well as railroad, vehicle and airplane engine, and due to the development of
enclosed type, it is used for the power of power tools and portable electrical
appliances in large.

○ But in terms of the memory phenomenon which is the
unique characteristic of Cadmium metal and the pollutant, along with the
invention and development of high-powered secondary battery like lithium-ion
battery, the market of the Ni-Cd battery is decreased.

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3) Ni-MH Battery

○ As the secondary battery commercialized in 1990, it is
used for the portable electronics through the enhancement of energy storage
density and the removal of Cadmium which is the heavy metal. Due to the higher
energy density than nickel-cadmium battery, the excellent cost performance and
the use of eco-friendly material, it is used for the portable devices in large
such as cellular phones, laptop computers and audio devices.

○ Since it has the large capacity per volume, it is also
used for the battery of electric car.

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4) Li-ion Battery

○ The basic concept of Li-ion battery was suggested by
Armand in 1980. The research on the secondary battery of high-powered density
has been performed actively since the latter half of 1980s, and among them, the
secondary battery using the metal lithium on the negative pole had the high
capacity theoretically but it could not be commercialized due to its
instability and unsafety during charge and discharge. Therefore, the Li-ion
battery was invented.

○ The Li-ion battery using graphite intercalation compound
uses the positive and negative pole materials which can laminate lithium
electrochemistrically and the polar aprotic solvent which transfer lithium-ion.
For the lithium-ion battery, since the metal lithium doesn’t intervene with the
charge and discharge response, the problem caused from the metal lithium
dentlight doesn’t occur.

○ The commercialized Li-ion battery uses the positive pole
materials of nickel, cobalt and manganese which are the level of 4V to lithium
and the negative pole materials of carbon which can form the Lithium
intercalated carbon and the level of 0~1V to lithium, so it shows the high
battery voltage of which the average potential difference is 3.6~3.7V.

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○ The lithium-ion battery consists of the positive pole,
the negative pole, the separation membrane and the electrolyte. Since the
electrolyte uses the non-water soluble solvent, the electromotive force of the
single cell is high in 3V compared with the 1V of the water-soluble batteries
such as led battery, Ni-Cd battery and Ni-MH battery and the energy density per
volume is high.

○ The performance and characteristics of the lithium-ion
battery is changed according to the materials of the positive and negative
poles. For the portable lithium-ion battery, the materials of LiCoO2 system are
mainly used. However, since the positive and negative poles for car needs to
compose the large battery, the commercialization of LiMn2O4 or LiFePO4 is
progressed in heat stability, over-charged durability, resource reserves and
material cost.

○ For the lithium-ion battery for portable devices, the
cylindrical or rectangular types using metal container are used in large. For the
electrodes, the concentric circular type is used by overlapping the positive
polar, the separation membrane and the negative polar of winding type or jerry
roll. For each type, the type that the rectangular shape contains the electrodes
is in general.

○ For the lithium-ion battery for car, the shape of
portable battery is commercialized and it demands the large capacity, the low
internal resistance and the high heat radiation. For this purpose, the
development of the large laminated battery is being commercialized.

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5) Li-Polymer Battery

○ The Li-Polymer battery has the same composition of the
Li-ion battery except for the electrolyte parts using the polymeric materials
instead of the liquid electrolyte. It doesn’t have the risk of electrolyte
leakage which is the demerit of the Li-ion battery, and the battery can be manufactured
in various shapes like flat-panel or slim type using the plasticity of polymer.

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2. Utilization of Secondary
battery

1) Hybrid Electric Vehicle (HEV)

○ The hybrid electric vehicles are the next generation
environmental vehicles which reduce the harmful gas emissions significantly
compared with the existing general vehicles. That is, due to the internal
combustion engine and the battery engine of electric vehicles, the next
generation vehicles reducing the harmful gas emission significantly compared
with the existing general vehicles can reduce the harmful gas emissions by 90%,
improve the air and surroundings in big cities and also be effective in urban
planning and traffic control. So it is called as the Eco-car.

○ The Prius of Toyota or the Insight of Honda in Japan is
the representative car model and the Prius succeeded in the first mass
production in the world at the end of 2000. With the high fuel efficiency and
the combination of merits of gasoline engine and electric engine, the change of
gasoline engine and electric engine is possible according to the road
conditions and surroundings.

○ In May, 2009, about 1,250,000 cars were sold and it is
so popular that the public agencies of New York state and New Jersey state
purchased the cars as the official vehicles regarding construction, welfare,
environment and transport.

○ As for the Insight, though it has the gasoline engine,
the weight is light by about 40% compared with the existing vehicles since the
body is made of aluminum and it reduced the air resistance significantly using
1 liter lean-burn VTEC engine which is the lightest in the world. By the record
of 1423.3km running without refueling and the fuel efficiency of 32km per 1
liter, it gets settled as the environmental sports car of next generation.

○ Also in Korea, Avante LPI of Hyundai Motors and Forte
LPI of Kia Motors were produced in 2009.

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2) PHEV

○ The PHEV has the plug differently from HEV. It charges
the electricity through plug and uses the charged electricity during the
running. Of course in running, the car is recharged continuously through the
electric motors, and by this principle, it has the high fuel efficiency and the
low pollutants emission compared with the general internal combustion vehicles
or HEV.

○ Already in the advanced countries for automobile
technology such as the States or Japan, they started to pay attention to PHEV
instead of HEV. As for the general structure of PHEV, it consists of the
electric motor of internal combustion engine, the power electronics, the
battery pack, the fuel tank and the recharge plug.

○ The fuel tank is designed as the small capacity compared
with the general internal combustion engine vehicles, and as much as the
decreased capacity of fuel tank, the battery pack replaces the role. So it can
be regarded as the trade-off of battery pack and the fuel tank. The electric
motor can perform the both roles of engine and generator at the same time
during running.

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3) Electric Vehicle (EV)

○ It is the vehicle which gets the drive energy from the
electric energy instead of the combustion of fossil fuel like the existing
vehicles. The electric vehicles which drive the car by rotating the motor with
the electricity charged in the vehicle were produced before the gasoline cars
in 1873. But it had not been commercialized due to the heavy weight of battery
and the long time to be charged, and as the pollution problem became serious,
it has been developed since 1990s.

○ The first mass-productive electric vehicle is the GM EV1,
the high-powered electric vehicle which is commercially available in
California, USA. GM succeeded in the development of EV which they have
developed actively from the beginning of 1990s and started to sell it in the
market since 1996. This EV can run up to 208km with the maximum speed of 150km
on a single charge.

○ Afterwards, the Ranger of Ford, the RAV4 of Toyota and
the EV Plus of Honda were commercialized in the market. However, the existing
EVs lack practicality since it takes more than 8 hours for charging and the
driving distance is short.

○ In recent years, the hybrid cars or the fuel cell cars
which charge the electricity by the auxiliary engine for charging are
developed. A lot of advanced countries promote the force distribution policy as
well as the large investment of government for the early commercialization of
EV.

○In case of
California, USA, it provides the compulsory sale of the Zero Emission Vehicle
since 2003. According to the car sales by company, it makes the specific sales
of the Zero Emission Vehicles such as EV, HEV and Super-ultra low-emission
gasoline car compulsory.

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4) Other Uses

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4. What is the Lithium secondary
battery?

○ In case of the Lithium secondary battery which leads the
market of secondary battery, since it generates the electricity by the movement
of the lithium-ion (discharge) occurred from the electrochemical oxidation and
reduction and is charged through the opposite process, it can be used
repeatedly.

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○The Lithium secondary
battery is divided into Lithium-ion battery(LIB) and the Lithium-ion Polymer
battery(LPB) depending on the type of electrolyte. While the electrolyte of
Lithium-ion battery is liquid, the electrolyte of the Lithium-ion Polymer
battery is gel or solid polymer type.

○ The Lithium-ion secondary battery is developed first by
SONI Energy Tech in 1991 and it is the most eco-friendly next generation secondary