Aleees’s 10th anniversary - Looking forward to another amazing journey

Aleees, the prime leader of LFP industry, has just celebrated its 10thanniversary and is now preparing for the next decade.  With the support of the Guian New District Area and FDG Group in China, the new joint venture plant in Guizhou would start volume production and contribute revenue in the fourth quarter of this year. It will become the world's largest manufacturer of lithium battery materials in 2020. Aleees plans for IPO raise in China within five years to seize opportunity for EV business. Aleees is stepping up efforts to boost output from Guizhou via its latest multi year investment plan and to strengthen its global market position.

Aleees invested a joint venture plant in Guizhou in September last year, and the ground-breaking construction were conducted in October. The business structure was finalized to an authorized manufacturing method. In addition to continue production of lithium iron, Aleees also announced that Guizhou Aleees would break into the field of ternary cathode materials in China. New plant is scheduled to reach annual output of 15,000 tons six months later and will be doubled to 30,000 tons in 2019. It is also expected to be the first international company with a complete production line for both lithium iron and ternary cathode materials.  There seemed to be a major turning this time and it will become the largest cathode material factory throne in China.

Aleees chairman Edward Chang pointed out that the Guizhou plant has started construction in the fourth quarter last year and officially explored a new business opportunity for ternary materials and lithium-iron battery manufacturing process. With the support of Guian New District, Aleees expects that the new plant to achieve an annual production capacity of 100,000 tons by 2023. And after five years, the revenue will reach RMB 15 billion. (approximately NT$69 billion).

Chairman Edward Chang says that China, a market demand with 30 million of new vehicle, is considering to outlaw the production and sale of petrol and diesel cars from 2040 in a major boost to the production of electric batteries. These measures will promote profound changes and give momentum to Guizhou Aleees development.

Expected turning loss into profit

He emphasized that it is the first attempt in the LFP industry to follow the professional manufacturing business model of TSMC and Foxconn. He wishes to solve the problems that the industry has had in the past - high costs, unstable quality, few choices, and non-customizable services.

Aleees was founded in November, 2007, and officially manufactured cathode materials of LFP batteries in 2008. Management moved to take it public with an initial public offering (IPO) in 2013. And eight years after Aleees was found, the sales figure broke the company’s monthly revenue record in 2015.

Aleees is poised to continue to grow revenue and profits and become an internationally leading LFP manufacturerby benefiting from mainland energy policies to drive overall industry demand as global lithium battery manufacturing plants and product sales regions are mainly concentrated in Asia. Rebates in China will keep the LFP market heated up, stimulating the development of battery industry. However, the company hasn’t been dragged out of the red yet because the business of electric bus is holding the company back. Nevertheless, FDG Group, which is invested by Hong Kong’s richest man Li Ka Shing, has announced joint development partnership with Aleees. The turning point has arrived and Aleees is expected to make its first annual profit this year.

Edward also mentions the most important highlight this time is that Aleees has first stepped into another ternary cathode materials and batteries industry products which have stronger demand. The planned capacity for ternary cathode materials NCM is 9,000 tons and is forecast to double in 2019.

Edward also indicates that NCM and NCA ternary materials products would assist their customers to dominate global mini EV markets and therefore it could further accelerate the business growth. This action brings Aleees into another brand-new operational stage, which changes their business model to technological service as its source of income.

According to his analysis, ternary cathode battery materials had a market demand of nearly 80,000 tons last year. This year, due to the success of mini-sized vehicles business, demand could be double. And by 2020 it can reach a demand of nearly 240,000 tons. As for demand on lithium-iron batteries, the market demand was estimated around 40,000 tons last year. Lithium-iron batteries will grow at a steady rate of 25% annually, and that is expected to reach a market demand of about 85,000 tons by 2020.

Edward then states that the characteristics of ternary battery material NCM are high energy density, high safety margin, lower cost, and small in size. It has emerged in the field of automobiles, and has the opportunity to generate explosive demand in small vehicles industry in the future.

Recently, artificial intelligence (AI) topic is hot. Edward said Aleees and ITRI would establish a R&D cooperation for advanced battery material and carry out a nearly three-year program in development for AI implementation. This is the first time that AI has been introduced into practical in Taiwan and it is a great significance for Taiwan to promote the development of AI in the future.

He pointed out that the price of raw materials in the world has recently increased rapidly. Taking the important metals in ternary materials as an example, purity is very important for the quality of batteries. However due to the global rising of price of raw materials, the price rose by 25% last year. Apart from the purity of nickel is controllable, it can also reduce the waste of resources during the experiment after the implementation of AI.

Edward actively led the company to move forward. The Guizhou new plant, which would begin volume manufacturing this year, is a milestone for Aleees going forward. The following are the highlights of the interview:

Q: What is the significance of Aleees first move to establish a joint venture in Guizhou?

A: When Aleees was groundbreaking last year, we have signed a strategic procurement agreement with Lishen battery companies in mainland China. Aleees will expand cooperation with Lishen and the services include lithium-iron and ternary materials special cooperation, cost transparency, quality control, research and development, and international patent protection.

The layout of Guizhou plant is based on the advantages of a quality database that has accumulated a decade of mass production at Taiwan plant, and the introduction of automated intelligent equipment to achieve the highest stability in the battery plant. This business model allows customers to understand our manufacturing structure.This business model not only allows customers to understand the costs, but also establishes mutual trust between each other and achieves profit sharing among us. This business model can achieve customized specifications by choosing the specified materials. It is a win-win model that can share profits between our clients and their customers.

When the plant was built in the early stages of Guizhou, it would allow the production line layout to be completed and constructed in accordance with the needs of the first-tier customers. The purpose is to establish the trustworthiness of the stable quality in a transparent cost structure.

“One production line for unqiue customer”. For Aleees, this typical business model is very important and meaningful. At present, it has already attracted large-scale battery factories such as Tianjin Lishen, ATL (New Energy Technology), and CNAC Lithium Battery.

Aleees has nearly 200 global patents, which 98 are self-owned. This benefits sales in china in addition to achieve cost reduction. At the same time, sales to overseas can also achieve the protection of patents.

Q: What is the profit forecast for the new plant in Guizhou?

A: Guizhou Aleees holds approximately 9% of the new plant shares. FDG Group accounts for 51%, and Guian New District Government accounts for 40%. It is estimated that the first stage production capacity will be 15,000 tons, among which 9,000 tons will be made of ternary battery materials and 6,000 tons will be lithium iron phosphate materials in response to the needs of small and medium car models. And  profit margin is estimated 9% for Aleees in the future.

It is expected that the Guizhou joint venture will be profitable in 2019. According to the regulations, company could apply for IPO raise if they delivered profits in at-least 3 conservative years. Since the District Government is still nurturing the companies in Guian New District, the joint venture plant is expected to be the first listed company in the District.

As the demand is very strong going forward, both lithium iron and ternary industries require first-tier manufacturers like Aleees to accelerate their market dominance in the mainland. In china, the demand for lithium iron is approximately 10,000 tons per year. The production capacity in Aleees Taiwan plant is only 2,500 tons per year. Considering the continuing downturn relations between mainland and Taiwan, Aleees eventually gave up building a plant in Taiwan and decided to fully expand lithium-iron production capacity in Guizhou to meet demand of electric buses and energy storage.

Q: Is Guizhou Province also undergoing transformation?

A: The impression given by Guizhou is "the poorest province in China". However, the Chinese government has invested heavily in establishing the Guian New District. It became the eighth national new district in the mainland, and successfully introduced Foxconn, Apple, and Qualcomm. Under the premise that eco-system would be protected, Guian New District has developed heavily in big-data related industries and electric vehicle industries.

Gui'an New District introduced Aleees last year and it is another Taiwanese company that has been introduced right after Foxconn. At present, Foxconn has already hired 20,000 employees in the Guian New District. The Guian New District is now full of high-tech industries and Big data companies such as Huawei, Tencent and Alibaba.

Q: What is the future development of electric car in China?

A: China's electric vehicles are expected to reach a scale of 2 million by 2020, which will maintain 40% annual growth production in the next few years. In addition, the mainland will implement a ban on gasoline and diesel sales in 2040. At the same time, ChangAn Automobile in the Mainland has already announced that it will stop selling fuel vehicles in 2025. Aleees now forecasts that they will become the world’s largest cathode material plant by 2020. It is precisely prepared for the ban of gasoline and diesel in 2040 as they are ready for the world’s largest electric vehicle market.

Edward leads with passion and inspires employees

Edward was only about 30 years old when he founded the company and he became a very young chairman in those listed companies in Taiwan. Before Aleees is founded, he has been a Chinese teacher, a public school teacher, and a congress assistant. But these inspirational life experience are the bits and pieces that make him cherish and work harder to actively seek for new opportunities for the company.

Edward, who started from scratch and recalled for these years, said, “Everyday I woke up I have to think about how to earn money and pay for my colleagues.” Aleees has always been the largest manufacturer of lithium iron materials since it was founded. Edward said, "I always think that Today is hard, tomorrow will be worse, but the day after tomorrow will be sunshine. However, 99% of people would give up tomorrow and never see the sunshine. I have to find a way to survive and see it."

Edward recalled that the idea of ​​entrepreneurship was popped up in 2008 when he was talking with two good friends. Although they still had to work at the time, they used our house as collateral to borrow money to set up the company. At the beginning, the capital amount was only 5 million NTD but they were lucky to meet a venture capital. However, it was a difficult time at the beginning for the first plant in Guishan, Taoyuan to manufacture. The production problems were struggled with mass-market manufacturing even fifty engineers were hired and production line was invested. Therefore at the time, we were brutally given no pullback.

Edward also saidthat although he was a public school Chinese teacher, he had failed chemistry class when he was in middle school. By recalling that Aleees was facing production period in the early stage, Edward always moves himself to the place where the biggest problem is. He believes one should always lead from the front line. He even went to Guanghua Mall to buy some middle school chemistry textbooks to study. He started from the first page of the textbook and studied about the reaction temperature in the ferric phosphate. Then he also tested in the production line for six months. By conducting R&D for three shifts a day and continuing to make progress within 24 hours, they finally made the first product.

Aleees employees praised their CEO Edward’s hardworking. One of the employees revealed that those are Edward’s sincerity, enthusiasm and hardworking strengthen the bond in the team. In the future, Edward said, “The Guizhou Aleees strategy will undergo some major changes to focus on dedicated customer specialization, patent protection, and to prioritize the need of top customers.”