E-One Moli Energy Corp.
The Long-awaited Lithium Surge
After a decade of struggle, E-One Moli Energy Corp.'s orders from major international firms prove its status as Taiwan Cement Group's future green star.
The Long-awaited Lithium SurgeBy Elaine Huang
From CommonWealth Magazine (vol. 404 )
If the vision had not been true, it would have been a huge gamble. All through the past ups and downs of Taiwan Cement's core business, its company president Leslie Koo remained willing to burn through vast sums of cash for a decade, investing it in E-One Moli Energy Corp. (E-One), a company with an annual operating revenue of merely NT$3.7 billion, just one-twentieth that of Taiwan Cement.
During the course of that decade, as E-One underwent capital reduction three times and burned through about NT$4 billion in investment capital, about the value of its entire capitalization, Koo would often wryly joke with E-One executives: "Maybe we accidentally boarded a pirate ship."
This "pirate ship" has today been transformed into a treasure galleon. Last year, E-One's earnings per share moved into the black for the first time. And as evidenced by Koo's prominent presence at the company's 10th anniversary exhibition in March, serving in the capacity of E-One's chairman, as well as the more than 70-percent share that the Taiwan Cement Group continues to hold in E-One, there can be little doubt that the group views E-One as its future green star.
E-One operates seven production lines at its plants in the Southern Taiwan Science Park, cranking out 42 million lithium ion batteries annually, and is Taiwan's biggest producer of lithium ion battery cores for use in notebook computer batteries. It is also the world's first successful producer of lithium ion batteries for power hand tools. Two years ago, the company began making batteries for Ford Motor Co.
"As a company, E-One has now proven that Taiwan can successfully produce lithium ion batteries for use in electric automobiles," says Thomas Chen, a project manager with the Division of Energy Storage Materials & Technology Research at the Industrial Technology Research Institute's Material and Chemical Research Laboratories.
Happy to Burn Cash for a Decade
Soaring oil prices and the looming specter of global warming have prompted widespread demand for green energy. The current craze for hybrid or electric vehicles has made rechargeable lithium ion batteries the most mature means of green energy storage and power provision currently available – precisely the reason Leslie Koo was only too happy to burn through so much cash during the course of the past decade.
Due to the reduction or even elimination of carbon emissions from such vehicles, the world's automakers are all actively developing gas-electric hybrids and fully electric automobiles. With no auto industry of its own to speak of, Taiwanese businesses are delving into the development of fuel cells, the crucial component in any electric vehicle. Production of lithium ion batteries, with their energy storage capacity, safety and light weight, has become the new battlefield on which Taiwanese business groups are vying for supremacy. In addition to Taiwan Cement, with its stake in E-One, these include Pihsiang Machinery Company, which acquired Pacific Energytech Co., renaming it Pihsiang Energy Technology Co., and Delta Electronics, which acquired Amita Technologies Inc. In fact, E-One's turbulent development path over the past decade precisely mirrors the tortured developmental history of the lithium ion battery industry in Taiwan.
The production of lithium ion batteries inevitably involves electrochemistry, as well as issues with formulation and foreign patents. Moreover, the enormous start-up costs – bringing a production facility on-line runs upwards of NT$1 billion – are hard to recoup. But with the rapid degradation, short lifespan and considerable heft of conventional lead-acid batteries, when the winds of energy conservation began blowing, businesses did not hesitate to gamble on the development of the lighter weight, better storage capacity and faster recharging properties of lithium ion batteries. The batteries produced in Taiwan were formerly used almost exclusively for use in notebook computers and mobile phones, but with various Chinese companies having now entered the competitive fray, including BYD Lithium Battery Co., Ltd. and China BAK Battery Inc., prices have dropped to the point of eliminating profit margins, prompting Taiwanese companies to turn toward production of batteries for use in electric vehicles and power hand tools – higher-end applications with fatter profit margins.
"But sadly, over the past several years Taiwan has seen a wave of lithium ion battery companies that were unable to wait it out until the business heated up and were forced to pull out of the market, some of which were not lacking for big business group support," says Hsu You-rui, an engineer with the Metal Industries Research and Development Centre's Metal Processing R&D Department. He cites as an example the failure of a previous Yuasa-Delta investment venture after just three years owing to hitting a technological impasse.
In addition to the deep pockets of its sugar daddy, E-One was able to hold on largely due to its operational strategy of crossing over from a losing focus on notebook computer batteries to producing those for the power hand tools market and developing those for electric vehicle applications, allowing the company to diversify risk and capitalize on its economies of scale.
Seizing the Edge through Smart Acquisitions
In addition, E-One has relied on the use of deft corporate acquisitions to seize a technological edge over competitors. In 2000, E-One acquired the world's first company to enter the lithium ion battery field – Moli Energy of Canada. In the process, E-One acquired Moli's patents and its existing North American power hand tool and military application markets. It was here that E-One got its hands on formulation technology and systems integration capabilities.
Even more importantly, E-One developed a base of major clients, further cementing its market advantage. E-One president Raymond Lee transformed his company's overly research-intensive corporate culture, focusing instead on end-users, and zeroing in on the benchmark clients in its newly defined base market, by first building cooperative relationships with the top five global consumers.
"If the major companies chose to use our products first, it would be tantamount to setting the industry standard," says Daisy Hung, director of E-One's Marketing and Operations Management Department.
E-One's lithium ion power hand tool batteries have a lifespan of three years, can be used for a full day without recharging and have boosted electrical current values from the conventional 40 amps to 80 amps. Conventional power tools must either be plugged in or use Ni-Cad batteries that last only one year. Consequently, when E-One developed the world's first lithium ion batteries for power hand tools, TTI, North America's biggest maker of power hand tools immediately signed on, thus starting a wave of new entrants into the market, including Sony.
Two years ago, Ford Motor Co. decided to source its lithium ion batteries from E-One, and the company was formally in the business of making batteries for electric vehicle applications, the industry's most technologically demanding sector. The company even received financial support from a Canadian research fund aimed at perfecting batteries for automotive applications. E-One has also been vigorous in its own right in tackling the electric vehicle market, with an R&D budget in this area exceeding three percent of operating revenue. This year, between seven and ten percent of the company's production will be batteries for all-electric vehicle applications.
According to projections from the Japanese think tank IIT, by 2010 the global market for electric vehicles will exceed US$1.5 billion. E-One is planning a major expansion of its South Taiwan Science Park production lines next year, which will increase future production capacity by more than 70 million units, up to 30 percent of which will be batteries for electric vehicle applications. When the gates fully open on the electric vehicle market, E-One will be there, ready and waiting.
Translated from the Chinese by Brian Kennedy
Chinese Version: 燒錢10年，鋰電池進軍國際