A123 Systems Case Study Analysis

A123 Systems

History of Lithium-Ion Batteries

Rechargeable battery evolution accelerated as the world transitioned to instruments enabled by silicon microchip technology from those of bulky electrical components. Mobile devices were designed to be powered by lightweight energy storage systems. The development of batteries for this rapidly evolving market was challenging:

• The nickel cadmium battery had been the only option for modern electronics for many years. It was a great improvement over carbon batteries.

• Later, nickel-hydride batteries became the technology of choice.

• Lithium-ion batteries became available in the 1990s, offering higher energy densities. This technology won out nickel-hydride.

The lithium-ion rechargeable battery offered advantages that were previously unavailable:

• Lithium is the lightest of all metals

• It had the largest electrochemical potential

• It provided the greatest energy content per unit volume

• It had no memory effect

• Its energy leakage rate was less than half that of NiCd and NiMH

• The first of its type was developed by Sony in 1990 with enough cycles to be usable for rechargeable batteries

o Mass production took place in 1991

o Panasonic and Sanyo quickly developed similar batteries that were on the market by 1994

Big advances in a mature industry like batteries were hard to find. Advances in the field focused only on finding slightly better materials or thinning the layers to improve performance.

Pre-A123 Systems: History of Lithium-Ion battery Innovation

Pre-A123 research group

Professor Yet-Ming Chiang directed a mid-sized research group at MIT that focused on design, synthesis and characterization of advanced inorganic materials; particularly toward electromechanically and electrochemically active materials. These materials can be defined as being capable of converting electrical energy into mechanical work, and of converting chemical energy into electrical work.

Chiang’s group began researching better lithium cathode materials in the mid-1990s. By early 2000, the group began wondering if there might be a new way to push the thickness limitations of battery cells. The wondered if battery layers could form themselves based on the Hamaker Constant for Different Materials. Materials in this case are very small particles. The Hamaker Constant is the measure of force between materials.

Hamaker Constant applied to designing an innovative battery system

Chiang describes how this related to the challenge of revolutionizing battery technology:

• “…the Hamaker Constant can have a negative value and cause two materials (particles) to repel each other if immersed in the right medium… we discovered and designed materials systems that organized themselves into an electrolyte separator between the anode and cathode.” (p.453 text, p.5 case study)

Chiang’s basic concept was a key part of a self-organizing colloid concept. His main idea was that he could tailor the forces between materials constituting the battery, deriving a self-assembly process to make a practical battery on a dimensional scale never before possible. The thickness of the separator layer could be as small as a few molecules, with the resulting batteries able to be fabricated in any shape or size. Designing a system of battery materials with a negative Hamaker Constant between anode and cathode was very difficult. Chiang’s team needed to discover a low-index material and a high-index material with key characteristics:

• The right optical characteristics

• Both anode and cathode materials must conduct electrons

• Both must be lithium hosts

Self-Assembling Materials System Development

Chiang’s team mixed methylene iodide, lithium percholate, polystyrene, graphite particles and lithium-iron phosphate particles as a dispersion and poured it into a mold. Copper was chosen as the anode current collector. Aluminum coated with a conducting polymer that has a low index of refraction was used to connect to the cathode particle network. It attracted the lithium-iron phosphate particles.

Creation of A123 as an Early Stage Company/ Financial Info

Ric Fulop was a serial entrepreneur with many key contacts who had been involved in many start-ups. Howard Anderson was the founder of the venture capital firm “Yankee Tek” and a lecturer at MIT Sloan School. He had previously funded two of Fulop’s previous ventures and gave him office space to be an “entrepreneur in residence” while he sought his next venture.

Fulop began investigating innovations in the battery industry and discovered Chiang’s research lab. He was enthused by the self-organizing battery concept and the opportunity for a battery with four times the energy density of the available lithium-ion technology that could be charged one hundred times faster.

Both Chiang and Fulop decided that the new venture would be an early stage company dedicated to further development of the self-assembly battery. They brought on Bart Riley as the R&D leader (he had spent 11 years at Chiang’s company “Superconductor”). A123 negotiated an exclusive license to the key patent filings from Chiang’s lab with MIT’s technology and licensing office. A123 put together the first round of financing of $8.3 M in December 2002 (Northbridge Ventures, Sequoia, Sparta Group, Yankee Tek and MIT’s Venture Fund). Four months later, an additional $4m was raised from Motorola and Qualcomm, both incredible technology companies and users of lithium-ion batteries. Howard Anderson