While it’s normal for established technology companies to turn to low-cost Asian manufacturing, lately even very young companies have been heading east.
A prominent example is Boston Power, a startup based in Westborough, Massachusetts, that’s developing longer-lasting, higher-capacity lithium-ion batteries.
The company has won widespread recognition for its technology, and lists HP and Mercedes-Benz among its early customers. But in 2009, it failed to get a $100 million grant it had applied for as part of the U.S. Recovery Act, and in late 2011, the Chinese government stepped in with a package of $125 million in venture capital, low interest loans, and grants.
Now Boston Power is building a factory in China that can make enough batteries for 20,000 electric cars. It’s also building a new R&D and engineering facility there.
Boston Power’s founder, Christina Lampe-Onnerud, says money was only a part of China’s draw. Recently she talked to Technology Review senior editor Kevin Bullis about the other attractions China has to offer, the impact the move could have on U.S. innovation, and what it takes for a newcomer to take on big battery manufacturers.
TR: What makes China attractive to young technology companies?
Lampe-Onnerud: It’s not like China is all good and the U.S. is all bad. It’s not that simple. We love being based in the United States for the innovation culture. Boston is a phenomenal community where there’s a lot of support and infrastructure for innovators and entrepreneurs. What China has given us is scale and recognition, very, very high up in the bureaucracy.
The premier of China invited me to meet with him. In the United States, well, I understand that I cannot speak to President Obama, but could I speak to someone in the administration? It would be good for me to know at least what my country wants to do. I could not get through. We would love to do manufacturing in the U.S., but if China is more eager and more hungry, that’s where we will go.
Although you’re based in the U.S., you’ve long had connections to Asia. What was the attraction in the beginning?
When we set up the company, we went immediately to China to do prototypes. In the U.S., the idea was, you could run pilot trials, but pay $1 million up front. And I’m like, “I’m not going to pay you a million dollars. I don’t even know if it works.”
In China, I was able to make our prototypes in production facilities. I paid for the materials and we were able to do small runs. I was there donating time to the team at the factory, sharing my insights from 15 years in the battery industry, so it was more like a trade. We had working prototypes two months into the journey, and I paid for it out of my Bank of America savings account—$5,000 or $6,000 per run.
How important is the money, especially now?
Money was really not the biggest draw. This was good money for us, because the operating costs of the factory will be very low for a few years, which is fantastic. But maybe more importantly for me and for our investors is that in China, through its long-term policy, the markets are coming. So there is real market draw. The mayor of Beijing has a simple policy. If you want to buy a gasoline-fueled car, you enter into this lottery, and if you win, you can drive that car four days out of seven. If you would like to drive seven days of seven, you have to buy an electric car. That looks like a great opportunity. They are, in this way, creating clean-tech markets.
So I would suggest that the markets are number one, the government’s number two, and the money is number three.
If manufacturing of advanced technology increasingly moves to China, how will this affect the development of new technology in the United States?
If we had gotten the stimulus grant, we would’ve probably had a factory here first. [But] we would still have built one in China, because the market is so large. We are entrepreneurs first. We will go where the market is. I think if we would’ve had the opportunity to do it here, we would have stimulated other innovators. The more touch points you have, the more impact you’ll have.
How important is it for researchers to be close to the manufacturing?
It’s true you have to be in manufacturing. The fact that you can do it with PhDs in a lab is great, but unless you can transfer that fairly effortlessly to production, you run out of cash. You can’t fly in and out of the factory. You have to live at the factory, have to learn to speak factory, you have to see what they need help with, and you have to learn to anticipate some of the issues on the line, because production is so expensive.
Why didn’t you get the $100 million stimulus grant from the Department of Energy?
While I am extremely well-connected in the business world, I am not really well connected in the political world, and I didn’t really know if there was some other agenda than what we could read. We didn’t spend a lot on lobbying. Then, in the end, all the money went to Michigan. Our perception is that it was hard for the people making those choices. It was probably a mistake to try to [decide which companies to fund] in less than four months.
As an entrepreneur I will deal with the reality that I was not invited into the club. I have love from Europe, I have some U.S. customers, and I have enormous attention from China.
How can a company like yours take on established battery manufacturers, especially ones that already have partnerships with major automakers?
We’re going against Goliath: Sony, Sanyo, Panasonic, LG, and Samsung. You are absolutely right that you need very large partners, [but] Boston Power is partnering now with very large Chinese automotive companies.
Panasonic will remain one of the biggest battery companies in the world. No question. They have fantastic R&D facilities. Japan will remain a player; Korea will absolutely remain a player. But China is entering in a big way. And China is doing something that’s so cool. It’s inviting players from all over the world to be in their sandbox. China will be a force. No question.
As a citizen of the earth, if you want to use that term, I’m feeling very, very good, because China really needs this clean technology. They’re hungry for this technology, and they are innovating around it.