Battery plays a critical role in scaling clean energy. China has been a dominating player, leading both technology and manufacturing. US and Europe, with the massive R&D invested, are gradually catching up with innovative battery technology, such as sodium-iron and silicon anode, and less mature yet promising ones, such as solid-state batteries. A bigger gap between the West and China remains on the manufacturing front. With years of mass-producing batteries, Chinese manufacturers lead the efficiency game with a streamlined production process, lower distribution costs, and skilled workers. While US companies would benefit greatly from cheaper and faster technology scaling by collaborating with Chinese manufacturers, various frictions exist, such as tariffs, critical mineral rule, and domestic content tax credits to reinforce production onshoring. Whether some of these policies make sense is beyond the scope of this discussion. What I want to focus on today are several models developed in the last few years for Western companies to leverage China’s manufacturing strength when bringing their technology to the markets.

Joint Venture Licensing - Northvolt’s Approach

Northvolt, Europe’s leading battery manufacturer, established partnerships with Chinese manufacturers in 2023 for their sodium-ion battery technology. They maintained tight control of core IP through carefully structured agreements. The company reduces production costs by 40% while protecting its proprietary technology.

Contract Manufacturing Plus - QuantumScape’s Strategy

QuantumScape’s strategy with solid-state batteries demonstrates the effectiveness of contract manufacturing plus arrangements. Besides retaining their core solid-state technology, their method begins with non-core component production and expands manufacturing rights based on performance metrics. This gradual approach allows them to verify partner capabilities and establish trust before deeper collaboration.

Protected Technology Transfer - Form Energy’s Iron-Air Battery

Form Energy’s iron-air battery scale-up showcases protected technology transfer in action. In addition to retaining core chemistry intellectual property, the company compartmentalizes the manufacturing process and licenses specific components. Compliance audits, standardized testing protocols, and third-party verification are put in place for quality control. Market access agreements with terms on territorial rights and dispute resolution mechanisms provide further shields in commercialization.

Final Thoughts

It’s tempting to get into an ideological war and make battery technology political. But by doing so, we risk losing the momentum in clean energy deployment. With the intermittent nature of renewable energy, its continued adoption requires the storage solution to follow suit. The duck curve stems from renewable energy penetration and will only get worse as more clean energy comes online. The exploding demand for electricity consumption in the age of AI will lead to further deterioration of grid efficiency at best, hyperscalers abandoning ships and reverting back to gas plants at worst.

There are incentives on both ends to collaborate. Chinese manufacturers want to get out of China’s ‘race-to-the-bottom’ blood war. US companies are seeking cheaper solutions to get through the Valley of Death quickly. Combining the best of the two worlds, everybody wins. Focusing on unit economics as we scale the battery technology, deploy clean energy, and tackle climate change should be anything but controversial.