Global micro-battery market for true wireless hearables will grow 90% year-on-year.
Coin cell batteries will grow to account for 57% of the market in 2020.
Seoul, Hong Kong, New Delhi, Beijing, London, Buenos Aires, San Diego
January 22nd, 2020
Varta, a German battery manufacturer, has seen significant volatility in its share price over the last year. But according to the findings of Counterpoint Research’s recent report – “Global Micro-Battery Market for Hearables (TWS) 2019-2020”, the concern over Varta is likely misplaced and overlooks the recent surge in the true wireless hearables market, which is growing much faster than previously expected. Counterpoint expects that Varta’s sales volume will grow 57% year-on-year in 2020. The research also highlights that concerns over Varta’s temporary supply shortages will be solved and are not fundamental issues relating to Varta’s product or price competitiveness. Varta is also alleging that some Chinese companies are infringing its patents and it is initiating legal proceedings against those companies.
The size of the global market for true wireless hearables is estimated to have reached 120 million units in 2019, according to Counterpoint Research’s Hearables Market Forecast. It grew faster than expected in early 2019, ultimately more than doubling the 46 million units achieved in 2018. Accordingly, the related upstream supply chain has benefited from the boom, with micro-batteries being a key component.
Counterpoint Research forecasts that the micro-battery market will grow 90% in 2020. As the canal-type premium hearables such as AirPods Pro and Galaxy Buds are becoming ever more popular they will also influence the share among the different micro-battery types. Coin cell batteries will jump from around a quarter to well over half the micro-battery market, with Varta maintaining its leading position. Samsung SDI and LG Chem will also benefit from this rapid growth.
Cylindrical micro-batteries, that made-up 48% of the micro-battery market, will decline to represent less than a fifth of the much larger overall micro-battery market in 2020. LG Chem will likely remain the leading player of this battery type.
Pouch (polymer) micro-batteries, for low-end hearables, which are largely driven by small Chinese players, will continue to account for around a quarter of micro-battery sales.
Exhibit 1: Hearables – Micro-Battery* Market Share and Leading Players by Battery Type
* Note: Micro-batteries for earbuds only (excluding batteries for charging cases)
Liz Lee, Senior Analyst at Counterpoint Research, said, “As demand for coin cell batteries exceeds the current supply, more battery companies will commercialize coin cell batteries and expand their capacity. However, as with all rechargeable lithium-ion batteries, there is a safety risk. Leading hearable manufacturers will be aware of the potential brand-damage arising from product failures and will select battery suppliers based on factors including quality. Thus, only a few companies with long-term track records of safety and reliability, are expected to benefit.”
For EVs, the most crucial component is the battery. No wonder then that competition is getting fiercer among global automobile OEMs and battery manufacturers to get a hegemony over the EV battery market. However, this competition is also yielding technological breakthroughs.
In the automotive paradigm, lithium-ion battery technology stands at the center of innovation. There has been a significant amount of progress in the improvement of lithium-ion battery technology. Here, we provide a brief overview of some of these developments and what the future holds.
NCM 811 just around the corner
Battery cell manufacturers are spending heavily on R&D for improving the energy density of lithium-ion batteries. Although the speed of improvements has been slow, gradually, lithium-ion batteries have helped increase the driving range of EVs by utilizing high-energy source materials and improving the per-unit cell size. There have been considerable efforts to boost the nickel portion of total cathode materials. Most of the top battery players have announced their plans for commercialization/mass production of NCM811 by 2019-2020. NCM811, which contains 80% nickel, 10% cobalt and 10% manganese, has a much longer lifespan and allows EVs to go further on a single charge. In April, CATL mentioned it had begun mass production of the NCM811. Recently AESC, acquired by Envision Group from Nissan, also announced its plan to produce NCM811, which promises more than 300Wh/Kg and 600-650Wh/L in 2020.
Solid-state batteries coming next
Battery companies have been introducing a roadmap for solid-state battery technology as the next-generation technology and exhibited various innovative products as well. In theory, solid-state batteries have a lower risk of electrolyte being exposed or exploding due to physical shock. This is because solid-state batteries adopt a solid electrolyte made of polymer or ceramic materials instead of the liquid electrolyte used in current lithium-ion batteries. Thanks to their high performance at elevated temperatures and high capacity, solid electrolytes are a technology that could further boost energy density. Interestingly, automobile OEMs seem to be taking a more proactive approach towards the R&D of the solid-state batteries. So far, Toyota ranks first in the number of patent applications for solid-state batteries. Last year, Volkswagen announced it would invest US$100 million in solid-state battery maker QuantumScape to mass produce the product by 2025.
Exhibit 1: Battery energy density & EV range on the rise
Falling battery prices
The falling prices of battery cells and packs are also fueling the penetration of EVs. EV battery cell and pack prices were estimated to be US$140-US$150 per kWh and US$170-US$180 per kWh respectively, at the end of 2018. Thanks to economies of scale that battery cell makers will experience with energy density improvements, the price per kWh will keep falling further. By 2025, we predict EV battery cell and pack prices would fall below US$80 per kWh and US$100 per kWh respectively. This implies the cost will decline around 10% per annum. Consequently, the battery pack, which currently accounts for 30-40% of EV manufacturing costs, will make EVs cheaper than equivalent internal combustion engine (ICE) vehicles after 2025. With more countries moving to phase out ICE vehicles and more automobile OEMs rolling out EV fleets, the price drops should trigger explosive growth in EV demand. Ultimately, this will form a virtuous cycle.
Leading battery manufacturers including CATL, Panasonic, LG Chem, Samsung SDI, and SK Innovation are fighting to win orders from global automobile OEMs. In doing so, they are also providing an excellent stimulus to each other. We do not see it as meaningful for battery vendors to line up order backlogs as long-term orders are generally flexible in terms of sales volume and price and depend on the market situation. Instead, it is essential to get a picture of ramp-up plans for the entire industry in order to track supply and demand movements going forward. Capacity expansions have accelerated sharply since the EV portion of global vehicle sales volume began to look significant. The cumulative capacity reached 129GWh at the end of 2018. We expect the cumulative battery production capacity for EVs to increase to nearly 800GWh by 2025, led mainly by the expansion of the top players.
No significant changes in the competitive landscape before 2025
Unlike other technology products, batteries are customized components. EV batteries, especially, need to be precisely optimized for each EV right from the product development stage to get optimum power and safety management. As the EV battery business requires a long history of competitiveness in such product development along with mass production experience, the industry has a high entry barrier. That is why we expect existing top players will continue to lead the market, and there will be no significant change in the competitive landscape for a while.
But, what about automobile OEMs who are willing to take battery cell technology and production into their own hands? At the initial stage, we believe that they will have to depend on long-term battery supply deals from multiple battery vendors. The long-term contracts will help to clear supply bottlenecks at a time of soaring demand and hold out the promise of cheaper batteries over time. Automakers will also have flexibility in supply for potential emergency scenarios and encourage competition among vendors to get better prices. In the meantime, they will attempt to internalize EV battery manufacturing based on the know-how and R&D accumulated through acquisitions or benchmarking a battery vendor in an exclusive partnership. When the time comes for the market focus to shift from the current lithium-ion batteries to solid-state batteries after 2025, the industry could look very different.
Exhibit 2: Global EV battery suppliers and auto OEMs
You can click here to download the full report on “How Competition is Driving Innovation in the EV Battery Market” from our Research portal.
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