Advanced Technology Insights: Gigafactory Ramp-Up

00:00:03: This

00:00:04: is Business Insights, a podcast brought to you by Global Strategy Consultancy Roland Berger.

00:00:13: Welcome to What

00:00:13: Tech Can Do?

00:00:14: The podcast series from Roland Bergers Advanced Technology Center.

00:00:18: In each episode our experts discuss the technological and industrial

00:00:23: shifts

00:00:23: that decisive leaders can't support together on.

00:00:26: this series Is for business leaders in investors who need more than analysis.

00:00:30: they need the operational reality behind the strategy.

00:00:34: In today's episode, we're focusing on Gigafactories where you can expect to learn more about why announcing the start of production is beginning at the hardest phase

00:00:43: not end.

00:00:45: We'll also explore what separates projects that ramp up quickly from ones that spend years catching-up and lastly will highlight decisions made months before SOP which determine whether a giga factory succeeds or fails.

00:00:59: Joining us for this episode are Junhook Choi, Senior Project Manager at Alexec.

00:01:05: A Rollinberger company will also be joined by Idris Olami, Managing Partner At Alexec and Wolfgang Bernhardt, Senior Partner in Advanced Technology Center Co-Head at Rollinburner.

00:01:18: Today we have Wolfgang & Idris And We're talking about battery industrialization Especially focusing on the Gigafactory.

00:01:25: So Wolfgang&Idris When we talk of the gigafactories People always focus on the size of the Gigafactory and equipment, KPEX etc.

00:01:35: But actually you know that building factory is not finished.

00:01:40: they need to run because a lot of Gigafactory announced production but almost eighty ninety percent of their target are missing during start of the production.

00:01:52: And I think this point what we would like to discuss.

00:01:54: What about the challenges and what are the factors?

00:01:58: We need to maybe highlight here.

00:02:00: So before we go in more details, I would like to see from a bigger picture.

00:02:04: so Idris, where do you think... Where are we standing in global perspective on battery industrialization?

00:02:11: Big picture wise Asian players especially Koreans and Chinese.

00:02:15: they're dominating the field.

00:02:18: They have upto fifteen years of industry experience already that can put into game.

00:02:25: They are also having a much deeper supply chain on optimized processes across the entire supply chain from mining until they sell up to their pack, so very vertically integrated.

00:02:35: And this experience usually enables them if they set-up production in Western countries... ...to have less challenges during the ramp-up compared with European and US players.

00:02:46: When we go to Europe and see that picture there We have different game because the baseline is totally different.

00:02:53: Europe is investing a lot in setting up Gigafactories, but at the same time it's not only about building the factory.

00:03:00: But also scaling-up to know how and supply chain into entire ecosystem And doing this simultaneously extremely challenging.

00:03:09: This one of main reasons why we see many different players struggling after SOP reaching let say proper production performance.

00:03:19: Yeah,

00:03:20: so in summary what you're saying is Asian players already learned and they are optimizing now.

00:03:27: on the other hand The European and American players.

00:03:30: They are still learning And also scaling up into parallel right?

00:03:33: Yes

00:03:34: So I think based on our project experiences that there a lot of good teams, also European players.

00:03:42: There are also many Asian employees who is supporting but they're now having some difficulties because of the entire system that's still under development right?

00:03:51: So let's go to Wolfgang and then we'll move on to the factory level.

00:03:56: Wolfgang you already have a very experienced guy here.

00:03:59: so what do think most challenging part about Gigafactory?

00:04:04: compared with other industrial projects?

00:04:06: I think the most important topic is that this combines various industries actually.

00:04:13: It combines chemical experience and manufacturing experiences in a more assembly way, which means you need to look at a lot of things together during the plane and construction phase.

00:04:25: You have to coordinate a huge amount of subcontractors.

00:04:28: You also must look for MEPs and constructions as we've seen before already in the planning stage.

00:04:37: You need to look at processes, you have people how to qualify them and coordinate all that across the value chain also with suppliers from a time perspective or qualification perspective for more milestone perspectives and economic perspectives.

00:04:56: The stakes are high because if you miss the planned points business case is gone.

00:05:01: we've seen quite often companies spend billions of yours because they are late.

00:05:07: I think what you just explained is this during ramp up, it's actually the first trial of the entire system right?

00:05:14: Not just running the production.

00:05:16: so it is accumulated from the construction to the ramp-up and we see not only the production but also see if the whole system works or not.

00:05:27: So Idris then why do you think that ramp ups were difficult here?

00:05:31: What do you usually see in SOP phases?

00:05:35: Usually what we see from our past projects is that when SOPs announced, the factories are still far away from their target performance.

00:05:43: Because as you said then real challenges start to ramp up and the main reason for this is that in a battery manufacturing process there's more than fifty sub-processes with more than one hundred fifty critical production parameters and they are running at a very high speed to ensure the economies of scale.

00:06:03: When we take, for example, the electrode production in the coating it runs usually at eighty-to one hundred meters per minute And only small deviations In the coating thickness can lead to a production issue or have an impact on product behavior.

00:06:18: Or if you take the stacking One sheet is stacked within zero point two seconds and only small misalignments, they also have huge impact on the product quality.

00:06:29: And you have hundreds of these issues!

00:06:31: During the RAM app it's not just one issue to solve but hundreds of issues that come at the same time.

00:06:37: So its extremely complex.

00:06:39: to solve it You need a team with the right expertise.

00:06:43: This makes it extremely challenging especially for new players joining this industry To reach the target SOP as well as the target performance.

00:06:53: And what we see is that the phase starting from the SOP to target performance, it's very capital intensive.

00:07:01: Because usually you produce a lot of scrap rate and also all these business cases in other manufacturers.

00:07:08: they are not ready... ...and don't have the capital to follow up this critical ramp-up challenges?

00:07:14: I think also what i see for my project experience even after the SOPs the operators, as you also visit the line a lot.

00:07:23: They are changing the parameter constantly.

00:07:25: so I think that the line is running but they're not stabilized or yet fully industrialized.

00:07:32: So there's still continuing adjusting parameters right?

00:07:36: This is main challenge on what we see and it was just mentioned The one problem which can be seen with issues.

00:07:43: It isn't only issue from certain process.

00:07:48: it is just accumulated from the electro process, cell assembly process information process and we see from outcome that there's an issue.

00:07:57: So you have to tackle in various aspects simultaneously to clear these issues right?

00:08:02: I think this a very difficult point.

00:08:05: also when talk about electrode or cell assembly You know main challenges are clean and dry room Most critical items, I mean clean and dry room.

00:08:16: Actually here you are hitting a one very important aspect.

00:08:19: what is also during the design of factories rather underestimated The battery especially the cell components.

00:08:26: they are very sensitive to moisture in particles.

00:08:29: so if You don't have a proper design for a clean-and-dry room During the ramp up will experience A lot of quality issues.

00:08:37: yeah.

00:08:38: So setting a proper baseline Here and investing Also certain amount Of money is really important to let's say avoid many, many issues during the ramp up.

00:08:50: Yeah actually here this infrastructure problem what usually Asian players also have during their new construction or European players.

00:09:00: I think these are very important because this infrastructure issue it's directly influencing in-the end of product quality right?

00:09:07: Yes and cost!

00:09:09: Because its a fine balance as you mentioned to design the clean and try room a little bit bigger in order to be able solve problems later on.

00:09:20: So having more people in the clean tri-room than originally anticipated at full speed, but at the same time do not overdesign it yeah?

00:09:28: Yeah!

00:09:28: And have something like a fifteen meter high track line... Yeah!

00:09:32: ...the Tri Room that you never need and that significantly impact your costs later on.

00:09:37: yes so its that balance from failed or maybe not so good projects, I think to find it.

00:09:46: And that's what you do

00:09:48: right?

00:09:48: Yes definitely one example we see also across different Giga factories is the clean and dry room for example designed by twenty people but during a ramp up there are over sixty people.

00:10:00: this spikes in humidity.

00:10:02: everyone asks why they have so many electrodes.

00:10:04: quality issues and this is actually set in during the concept phase.

00:10:07: Yes,

00:10:08: This is exactly also what Wolfgang said.

00:10:09: During the construction phase everything should be considered in parallel or simultaneously otherwise this will cause in doing the ramp up after SOP a lot of problems.

00:10:18: Let's talk about the Quality Problems again.

00:10:21: so quality issues are very important in battery industry.

00:10:27: So do you have any experiences in qualities on Wolfgang also?

00:10:31: Do you have an experience quality that are hugely impacting the product and customers or project launches.

00:10:39: Yes,

00:10:40: usually across the entire battery manufacturing process.

00:10:44: You try to install a quality gates to identify the quality issues where they occur.

00:10:50: In most cases it's extremely challenging because as I said small misalignments of small deviations cannot be detected at this right sub-process.

00:10:58: And that's why there is also an end of line test, where you will make a OCV test first OCV second OCV Where you can detect let say quality issues before sending the cells to your client.

00:11:08: and because you have here a script rate but it definitely better than sending them to their clients There are some latent issue what we see only in the field.

00:11:18: This has a drastically impact Let's say a major challenge for many manufacturers.

00:11:24: I think this quality is actually influencing on the production and also delivery, And in the end of relationship with OEMs right?

00:11:31: Because they need to get these products To build their cars and produce their own product.

00:11:38: But once the qualities are not met then it cannot be produced right?

00:11:41: Wolfgang do you have some experiences or qualities about your project?

00:11:46: Yeah, I think that's an important topic.

00:11:48: And also again here it is finding the right balance between the risk that a cell manufacturer can take and being too risk avoidant putting to many cells actually in the scrap bin.

00:12:03: We have seen this as because of problems they were reluctant to send out cells.

00:12:08: They had huge scrap rates even after one-and-a-half years of project start with more than fifty percent.

00:12:16: Maybe real scrap was only twenty or thirty, but they already had.

00:12:20: their customers have lost the confidence.

00:12:24: So that's why it is so important to apply the right concept from beginning.

00:12:29: and you always talk about technical cleanliness.

00:12:31: I think those kind of things really make sure quality in factory produced not controlled at end.

00:12:41: Yes exactly.

00:12:42: And as Idris, you just mentioned about the capital investment right?

00:12:45: Yes.

00:12:45: This construction ramp up.

00:12:47: a lot of capital investments are required for building up the Gigafactory and if they lose or scrap all this kind of product then there losing also time at cost.

00:13:00: in end trust from OEM.

00:13:02: So I think this is also very important.

00:13:04: And you are also mentioning about like, thirty-fifty people from the supplier during the technical clean or the clean and dry room setup... ...and also doing the construction phase right?

00:13:14: What are the roles of the suppliers actually do in the ramp up?

00:13:18: The supplier role is extremely crucial if we talk about early phase.

00:13:23: What is also underestimated, it's the strong supplier integration into the construction phase.

00:13:29: Usually during a construction you have general contractor but more than fifty different subcontractors who are covering different disciplines and here very strong supplier integrations.

00:13:40: on-site presence as absolutely success factor going to ramp up what is important for example equipment manufacturers or suppliers on-site until you reach the target performance.

00:13:54: It's not only, let say enough to keep them until they're SAT at this site acceptance test or during the commissioning and cold and hot commissioning but until you reached Target OE.

00:14:06: This is also underestimated.

00:14:07: And from an early phase design of contracts in a manner they have to stay on site, right?

00:14:12: So and then obviously after the ramp up you also start to see a critical items in regarding the sub-components.

00:14:19: The supplier for different components like aluminum foils, copper foil, cassette materials and so on.

00:14:24: And here is strong supply integration To assure proper quality and quantity is essential.

00:14:30: It's like any simultaneous engineering project.

00:14:32: Right Exactly Yes!

00:14:34: Also one thing very important factor from my experience.

00:14:37: It's actually, of course the first is involvement or engagement with a supplier.

00:14:42: But on another part it not only the number of suppliers and people are there right?

00:14:46: Its about how experienced they are because I've seen also lots new guys who're supporting Because after SOP or SAT They think like oh contract has already ended So their just sending some new guy for experience as training center

00:15:02: The C team?

00:15:03: Yes exactly.

00:15:04: And then it happens a lot of issues there and they cannot, let's say handle these issues.

00:15:10: So this is like hugely escalated again.

00:15:12: another quality problem occur right?

00:15:15: I think we talk about a lot points in each single aspect but those are all originated or generated from the earlier phase for construction.

00:15:27: what your opinion on how to prevent from the construction phase?

00:15:31: Yeah The foundations for success or failure are already laid in planning and construction.

00:15:39: And a proper setup of the organization, that is on one hand clearly defined but also takes into account needs to adapt during different phases is crucial.

00:15:52: A very clear project management office supported by the right type experts Already from start with people from Asia, that have done it and not just learned in university.

00:16:08: Exactly!

00:16:08: I think it's a really crucial point.

00:16:10: what Wolfgang hits here to establish form the beginning on a project organization which addresses complexity right?

00:16:17: And including all different players into their team that you do it as one team.

00:16:23: It's an investment, but very fruitful at the end during a ramp up.

00:16:27: Definitely not reduce your risk to zero!

00:16:30: You will always have ramp-up issues even with heritage players.

00:16:33: if they localize somewhere else They also have ramp problems But really big issue can be avoided when investing more time in planning.

00:16:43: Exactly

00:16:44: The technical aspect quality aspects are typical what people consider right?

00:16:49: But this governance or the project management aspect, This is what usually let's say underestimated in the rampa phase and construction phase.

00:16:59: And it becomes even more crucial because of cultural differences?

00:17:02: We all know you have to integrate people from China or Korea.

00:17:08: They need work with Germans or French people.

00:17:12: Everybody has a different culture.

00:17:14: they need to adapt, trust each other.

00:17:16: that takes time.

00:17:18: And they need to learn how to work together in an environment.

00:17:21: that is not what was used before.

00:17:25: It's just their colleagues who speak German or French, They talk in English and have to be aware of miscommunication etc.

00:17:34: Also the colleagues who only speak Korean and Chinese Exactly!

00:17:37: So it's another way around also similar cases.

00:17:40: That's

00:17:40: why actually on-site peace is crucial.

00:17:43: The entire team is on-site also to enable a basis, especially working with Asians.

00:17:50: You can do lots of things with trust but first you have build up the trust right?

00:17:53: Yes I

00:17:54: can confirm!

00:17:57: So now we are only talking about those facts which went wrong.

00:18:02: so let's talk something positive.

00:18:04: What are success factors for project launches?

00:18:09: Definitely there.

00:18:09: many things at sea level can decide correctly from the beginning on.

00:18:13: It's it is first point we addressed already a proper project in the organization.

00:18:19: you need manpower, competence and supply integration from early-on.

00:18:23: A second thing don't try to save cost at wrong spot.

00:18:28: Don´t save costs.

00:18:30: clean or dry rooms.

00:18:32: Design them for a proper process to assure later quality.

00:18:37: And third point my perspective And it's also extremely crucial is a realistic planning.

00:18:46: Because without the realistic planning, you will never achieve your targets.

00:18:50: I see projects where they have planned to ramp up as multiple electrode and cell lines in the factory... ...and simultaneously building other gigafactories.

00:19:00: this would not work.

00:19:02: so having from the beginning on a realistic plan In terms of timeline but also in terms of budget I

00:19:09: can confirm that's the most important topic.

00:19:11: We have seen so many business plans, but they were completely unrealistic and it turned out some of them never happened because companies run out to try money.

00:19:23: So being more realistic not just promising something to whoever is whether its upper management or their supervisor board or external investors are crucial as rest is doomed to fail If you are not doing that.

00:19:37: In the

00:19:38: beginning they always see as an ambitious planning, right?

00:19:41: But in the end it turns into unrealistic planning.

00:19:44: I think this is what we need to keep that in mind Not only for European players but also Asian players who are new at a different location.

00:19:53: This is general factors for everybody.

00:19:55: It's

00:19:56: even more important if i look at Chinese players.

00:20:01: They have two or three requirements in permitting to look at internal, and they deal maybe with one of the agencies.

00:20:10: To solve those permitting issues so that build a factory and ramp it up for about eighteen months?

00:20:16: And then I think you can do the same in Europe because we are fast, we are agile... We're deciding fast which they do but they underestimate roadblocks the administrative and legislative system in Europe or in the US.

00:20:34: The differences in culture, etc.

00:20:36: Yes they will experience some roadblocks what they cannot do by themselves right?

00:20:42: In Europe especially also in America definitely.

00:20:45: so now we are talking about a lot of single detail factors And I would like to ask very important one question Do you think that European batteries players Will have their future In five or ten years.

00:21:00: Most difficult question, yeah?

00:21:02: Yeah I do believe so.

00:21:04: what they need are partnerships.

00:21:06: They all start in various forms of partnerships but if you want to drive a car it's not a good idea To do that without the driving teacher right.

00:21:17: just starting sit-in and think You can go to the highway might end up with some problems.

00:21:25: So really have somebody on on your side that helps you.

00:21:29: That already knows how to do it, except that you need to learn and use that as a player.

00:21:35: if that's being done I think there is the future yes?

00:21:39: It's good point because Koreans in Chinese they have undergone learning curve more than one decade And invested alot of efforts.

00:21:49: lots R&D lot of investments.

00:21:53: time factor is crucial.

00:21:55: If Europe invest the same time, the same effort.

00:22:00: It's definitely possible to succeed in the battery business but there is no shortcut.

00:22:07: I think this very interesting point.

00:22:08: as a Korean who was also living in Europe experiencing all these on battery gigafactories for Asian players and also European players i think next five or ten years will be very interesting too.

00:22:21: see how the battery industry goes Also In Europe And also America Right?

00:22:26: Yes.

00:22:27: I think we need to have the right environment in terms of regulations, We will probably need in Europe concerted action between industry and politicians In order do so And also build up a certain scale because companies that lack scale Will not be competitive.

00:22:46: They simply fail Because they don't have necessary R&D power.

00:22:51: they don't have the necessary budgets to do so and that's probably the most crucial topic here in order to stay competitive, uh...in that global environment.

00:23:00: Yes

00:23:01: I think um..that is very important statement to understand about the battery industrialization especially towards European players And also Asian players who will localize into new location right?

00:23:14: So thank you for having time this podcast!

00:23:19: Thank You!

00:23:23: In the next episode, we'll go deep on another technology reshaping how industries operate.

00:23:28: Subscribe so you don't miss it!

00:23:52: innovation, and business performance around the world.

00:23:56: For more information visit our website at RolandBerger.com.