Prospects of the New Energy Vehicle Energy Storage Consumer Electronics Isolation Membrane Industry

01. Lithium battery separator is a key material for power batteries

The separator is a crucial component in lithium-ion batteries. Lithium ion batteries are representative of modern high-performance batteries, consisting of four main parts: positive electrode material, negative electrode material, separator, and electrolyte. Diaphragm is a thin film with a microporous structure, which is the key inner component with the most technical barriers in the lithium-ion battery industry chain, accounting for about 10% -20% of the cost in power batteries. The separator mainly plays a role in isolating the positive and negative electrodes to prevent short circuits and providing microchannels to support lithium ion migration in lithium batteries, which has a critical impact on battery safety, rate performance, and cycling performance.

Production process of lithium battery separator

There are significant differences in material selection, thickness, and number of micropores among different membrane processes. The manufacturing of diaphragm base film is mainly divided into dry and wet methods based on the mechanism of microporous formation. The dry method can be divided into single pull and double pull methods, while the wet method can be divided into asynchronous and synchronous methods according to whether the stretching orientation is the same. The synchronous method is very uniform and suitable for consumer batteries, while the asynchronous method has a high yield and is suitable for power batteries.

• Dry process membranes are perforated by stretching. The dry process mixes high molecular weight polymers, additives, and other raw materials to produce a uniform melt extrusion. Under tensile stress, a lamellar structure is formed. After heat treatment, a hard and elastic polymer film is obtained, which is then stretched again at a certain temperature to form micropores. After heat setting, a microporous film is produced. The dry single pull process is mainly developed by Celgard in the United States and UBE in Japan, and is very mature. The dry double pull process was developed by the Institute of Chemistry of the Chinese Academy of Sciences and industrialized by Zhongke Technology. In 2001, the Institute of Chemistry transferred the overseas patent of double pull to Celgard, making it the culmination of dry membrane technology. In 2015, it was acquired by Asahi Kasei Corporation of Japan.

Figure: Process flow of dry diaphragm technology

• Wet process membranes are perforated by extracting plasticizers. The wet process adopts the principle of thermally induced phase separation, mixing plasticizers with polyolefin resins. During the cooling process of the molten mixture, solid-liquid phase/liquid-liquid phase separation occurs. The membrane is pressed and heated to a temperature close to the melting point, and then stretched to make the molecular chain orientation consistent. The membrane is kept warm and the plasticizer is extracted from the membrane using volatile solvents (dichloromethane/trichloroethylene) to produce the membrane. Wet process separators are currently the mainstream because they can be made thinner, resulting in higher battery capacity density, and are therefore adopted by large battery manufacturers such as Sanyo, Sony, Panasonic, Wansheng, etc. The representative companies of wet process membranes are mainly Asahi Kasei from Japan, Dongli Donglan from South Korea, SKI from South Korea, and Enjie from Shanghai.

Figure: Wet Diaphragm Process Flow

Lithium battery separator industry chain

Diaphragm is located in the upstream of the lithium battery industry chain and is one of the four core materials of lithium batteries, accounting for about 12% of the cost of battery cells. The three major application areas of downstream new energy vehicles, energy storage, and consumer electronics are jointly driving high demand for lithium batteries.

Image: Lithium battery separator industry chain

02

Analysis of the Competitive Landscape in the Lithium Battery Diaphragm Industry

• On the supply side: The pace of overseas expansion has slowed down, and there is a relative shortage of new production capacity. After the price reshuffle of membranes, the concentration of the global membrane industry has gradually increased, forming a pattern of four major overseas and three major domestic suppliers, and seven major global suppliers. As the birthplace of lithium battery separator materials, Japan and South Korea dominate the global wet separator market with advanced technology and first mover advantages. Representative companies include Asahi Kasei, Toray, SKI, Sumitomo, Ube, and Worscope. Due to overall high production costs and capital expenditures, the production capacity growth rate of most overseas separator companies may not keep up with the industry's growth pace. South Korea's SKI lithium battery separator is mainly used to support its own battery factories or supply to its subsidiary joint venture factories, with limited external sales. Except for SKI, the expansion growth of the four major overseas separator companies in 2021 was only 300-350 million yuan, with a total expansion growth rate of 10% -15%, far lower than the demand growth rate of LG, Samsung, and Panasonic.

Forecast of Foreign New Production Capacity in 2021

• Asahi Kasei of Japan: Expected to add 200 million square meters of production capacity in 2021. In 2020, the company had relatively few expansion projects, with only 90 million square meters of wet process projects put into operation in the first half of the year. By the end of 2020, the company had a production capacity of 1.1 billion square meters and 2 projects under construction. Japan had a wet process project with a production capacity of 300 million square meters, which is expected to be put into operation in the first half of 2021; The United States is a dry process project with a production capacity of 150 million square meters, expected to be put into operation by the end of 2021 or 2022; As a result, the effective new production increase of the company by the end of 2021 compared to the end of 2020 is less than 300 million square meters. Coupled with the impact of capacity ramp up, production line debugging, and yield rate, it is expected that the new production increase in 2021 compared to 2020 will be within 200 million square meters.

• Japan's Toray expects to add 60 million square meters of production capacity in 2021. Japan's Dongli released its mid-2022 development plan in mid-2020, which disclosed for the first time the expansion of diaphragm production capacity. In 2018, Dongli's diaphragm production capacity was 650 million square meters, compared to 850 million square meters in 2019, a year-on-year increase of 30%, with an additional 200 million square meters added, indicating a relatively small increase; The company plans to have a production capacity of 1.02 billion square meters in 2022, an increase of 20% compared to 2019. Over the course of three years, an additional production capacity of 170 million square meters will be added, with an annual increase of 56 million square meters. The increase is relatively small, and the expansion of production is basically stagnant.

• Sumitomo Japan expects to add approximately 50 million square meters of production capacity in 2021. Sumitomo Chemical released its 2021 development plan on November 30, 2020, which includes an increase in diaphragm business capacity from 180 million square meters in 2017 to 400 million square meters in 2021, with an increase of 220 million square meters over four years and an average annual increase of about 50 million square meters.

• Japan's Wscope is expected to add 100 million square meters of production capacity in 2021. According to the FY2020Q3 Earning Results Presentation, by the end of 2019, the company had 13 diaphragm production lines with an estimated production capacity of 500 million square meters; In the second half of 2020, the company plans to build two production lines, which are still under construction and have not yet been put into operation as of October. We expect the company to increase its production capacity by these two lines in 2021 compared to 2020, with an estimated 100 million square meters.