In this round of trade war between China and the United States, all eyes are on the rare earth card, but the other new energy card has been ignored.

Actually, after Trump's sudden declaration of war, China calmly played four cards on October 9th.

rare earth elements, lithium iron phosphate cathode material, graphite, and superhard materials

Among them, the most immediately effective weapon against the United States is undoubtedly the rare earth card. After all, without these industrial vitamins, there is a risk of shock for the massive military industrial system of the US.

However, in terms of long-term impact, lithium iron phosphate may be the protagonist.

After all, the scale of rare earths is only a few hundred million dollars, while the battery market is a hundred billion dollar market, and the driving force and energy storage business behind batteries is a truly trillion-dollar market.

Musk suggested that since the US is short of electricity in terms of AI, it should store the electricity generated at night using batteries. This could directly double the utilization of electricity in the US.

However, in reality, more than 90% of the energy storage batteries conceived by Musk are lithium iron phosphate batteries. On October 9th, China not only restricted the lithium iron phosphate material, but also banned the equipment for producing the

Since June this year, there has been an explosive growth in the import of lithium iron phosphate materials from China to the United States, mainly to South Korean battery factories located in Michigan to Mississippi.

China's Explosive Growth in Lithium Iron Phosphate Materials for Use in the United States

At this point, the West has discovered that humble mixers, grinders, and other such seemingly ordinary equipment, from knives to grinders, have accumulated an unimaginable amount of "know-how" from Chinese manufacturers. If they were to replace their

UBS, a financial institution, once commented to the point that South Korean lithium iron phosphate cathode material manufacturers "lack both commercialization capabilities and clear expansion plans."

The chain reaction is that the energy storage battery supply chain required by the United States 'huge power grid renovation plan will also face huge challenges.

Looking back just five years ago, lithium iron phosphate was still synonymous with low-end, and its shipment share hit rock bottom.

In 2019, the shipment of lithium iron phosphate batteries accounted for only 23% of the total, experiencing a three-year decline with a utilization rate once falling below 30%.

At that time, all major manufacturers were under extreme financial pressure, and the industry generally regarded it as a transitional technology route due to its low energy density, poor winter endurance and so on.

Who would have thought that today, more than 80% of domestic power batteries and over 90% of global energy storage batteries are made of lithium iron phosphate materials, and this market share is still expanding like a snowball.

Hunan Yunao, the industry leader, has revealed that its production capacity utilization rate has reached 117% in the first half of the year, indicating a possible turnaround in the industry's boom cycle.

Actually, 10 days before the Ministry of Commerce issued the ban, Ningde Times officially announced an increase in capital of 2.56 billion yuan for Jiangxi Shenhua. After the transaction is completed, Jiangxi Shenhua will become a wholly-owned subsid

This is the first time that a battery giant has taken direct control of an iron lithium material plant, which is enough to prove the rapid rise of material plants in the new energy supply chain status.

China's lithium iron phosphate has completed an epic transition from over-competition hell to strategic weapon. The technology and business logic behind this are far more profound than we can imagine.

01

Fourth-generation lithium iron revolutionizing high-end and long-lasting batteries

The technical key to the current popularity of lithium iron is the high-pressure solid technology revolution.

In plain terms, it means more positive material can be packed in the same volume to improve battery life.

On June 26th, 2025, Xiaomi released its second model, the Xiaomi YU7. One unnoticed detail is that...

This popular SUV's long-distance version is equipped with a lithium iron phosphate battery, with a driving range of up to 835 kilometers.

This completely breaks people's stereotype of 'standard lithium iron phosphate with long-lasting ternary batteries'.

Once in a while, new car manufacturers often criticize lithium iron batteries. As early as March 29, 2020, Li Xiang publicly expressed his views on this topic.

Using lithium iron phosphate batteries in range-extending or plug-in hybrid vehicles is a disaster.

However, by September 2025, Li Xiang announced the release of the main electric vehicle model i6 equipped with lithium iron phosphate batteries. Li Xiang himself emphasized that the new car has better low-temperature performance and fastest charging

Model Y is also being used.

The innovation of the fourth-generation cathode material company is supporting this technological breakthrough.

Currently, mass-produced lithium iron phosphate materials are divided into first to fourth generation based on their tap density. The early first-generation lithium iron phosphate materials have already exited the mainstream market and are only used

Currently, 70% of energy storage and power batteries on the market are the mainstream second and third generation lithium iron phosphate batteries. They also constitute the impression of lithium iron in people's minds:

The stereotype that it can be used, but not for high-end cars.

The key reversal of the "Zhenxiang" reversal is the fourth-generation high-voltage solid iron-lithium technology.

Its compact density is ≥2.6g/cm³, close to that of ternary batteries, and significant progress has been made in fast charging performance, which enables Ideal to bring the price of pure electric vehicles below 250,000 yuan.

Among them, Jiangxi Shenghua and Hunan Yuneng, which have been acquired by Ningde Times, are at the forefront of the process.

Nine years ago, Jiangxi Shenghua had already placed bets on the technological route of synthesizing lithium iron phosphate from ferrous oxalate. In theory, this route can produce more densely compacted materials and break the curse of lithium iron ph

However, practice is full of challenges. More than 90% of lithium iron phosphate on the market is synthesized from iron phosphate. The production of iron(II) oxalate, which Shenhua bets on, is not only scarce but also has many impurities. In short, i

The precursor of lithium iron phosphate determines more than 80% of the electrochemical properties and is the "gene" of the material. This forced Sublimation to choose to build its own precursor production line, with an initial investment of more tha

The core contradiction of the ferrous oxalate technology route lies in the fact that the advantages are postponed while the disadvantages are highlighted at the beginning.

Its advantages of high compression and fast ion conduction will be fully realized in the fourth generation lithium iron phosphate era. However, challenges such as raw material control and process stability are difficult to address in the early stages

It was not until the demand for ultra-fast charging batteries from companies such as Ningde Times exploded, and Jiangxi Sublimation broke through impurity control and sintering processes through thousand-ton pilot tests that the route transformed fro

This underestimated technical route has cost Jiangxi Shenhua a high investment, and has experienced three consecutive losses in 2018, 2020, and 2023. In 2023, with just a 3% market share, it incurred losses exceeding RMB 1 billion.

However, by the first half of 2025, Jiangxi Shenghua achieved a revenue of 3.958 billion yuan and a turnaround in net profit of 63.78 million yuan, finally starting to climb out of the quagmire of lithium iron price wars.

Currently, high-voltage lithium iron phosphate has become a powerful tool to improve battery fast-charging performance while balancing high energy density. It is becoming the core competition of technological innovation among companies in the industr

In 2024, the fast charging technology of the lithium iron batteries, represented by the CATL's Shenxing battery and the Hive Energy's short-blade battery, will accelerate their installation in vehicles.

In 2025, the industry is known as the year of super charging, and the market demand for super fast charging will rapidly increase.

Of course, represented by Hunan Yunoeng, the industry elder has also successfully stepped into the fourth-generation lithium iron route through process improvements such as secondary sintering, and the high-density material performance represented by

The recent surge in fourth-generation lithium iron phosphate (and half-third generation) batteries has fundamentally changed the automotive market landscape since 2024.

Ideal i6, Lingrun B10, Xiaopeng MONA M03 and other main pure electric models are equipped with all-series lithium iron phosphate batteries, which completely subvert the traditional configuration of low-end lithium iron phosphate and high-end ternary

From the second half of 2025, pure electric vehicle sales will grow rapidly, and the penetration rate of fast charging vehicles has also increased rapidly from 35%-40% at the beginning of the year to 52%-55%.

Behind every popular model, the efforts of the supply chain are indispensable.

02

The war of energy storage of ternary iron lithium

In the field of power batteries, the fourth generation of lithium iron phosphate (LFP) has achieved decisive success in the pure electric vehicle market with its high integration and fast charging capabilities.

The third generation of lithium iron phosphate has established the absolute advantage of iron lithium in the energy storage field.

During the early development of energy storage batteries, the market dominance was held by Korean companies, with their core product being ternary lithium batteries - for example, the early Megapack energy storage equipment used ternary cells from Pa

However, the poor thermal stability and short cycle life of ternary batteries have become a weakness in energy storage systems.

Countless cases have proven this problem.

Moss Landing energy storage station in California, USA (one of the world's largest lithium battery energy storage projects) initially used LG Chem's NCM622 ternary cells. Four fires occurred consecutively during the four years from 2019 to 2023.

Moss landing energy storage fire

For energy storage batteries to achieve a lifespan of 15 years while maintaining two charges and two discharges per day to realize economic arbitrage, it means that the cell's cycle life needs to reach more than 8,000 times, while the cycle life of e

The industry needs a technological breakthrough, and the opportunity comes from Nanshan, Shenzhen.

In the laboratory, Kong Lingyong, at the age of only 28, discovered a new synthetic method to prepare nanoscale lithium iron phosphate, which prompted him to name his company 'Defang Nano'.

No one expected that this company, founded with just 500,000 yuan in 2007, would rise to become the second largest positive electrode material company in the world relying on this technology.

The method is the liquid phase synthesis of lithium iron phosphate, which is a change in the process route of positive electrode material.

Prior to this, all positive electrode materials were prepared using a mature grinding process, and what was important was to optimize within the framework of the solid-phase method.

The liquid phase rule of Defang Nano completely overthrows this model.

The precursor materials are directly mixed in liquid form in a reactor, and then sintered to achieve atomic-level element mixing and nano-scale particle preparation in liquid preparation.

It sounds beautiful, but the process is full of challenges. People who are familiar with chemical engineering understand that once the process reaction enters the liquid state, the reaction process becomes a blind box in most cases.

The transition from laboratory to pilot line, and from pilot line to production line, will be extremely challenging for each step of process amplification. Careless mistakes can lead to material scrap or even production line accidents, which requires

A Defeng Nano investor mentioned that Kong Lingyong once lived in the factory for a long time, taking the liquid phase method from a technical concept to mass production scale step by step.

Finally, lithium iron phosphate materials prepared by the liquid phase method have achieved breakthroughs in cycle life, becoming a supplier for Tesla, while DY3 and DY5, two products from Defang Nano, have also become a generation of popular long-cy

The beauty of manufacturing in China lies in the fact that although Delichasi passed the liquid-phase method amplification, other technological routes are also advancing simultaneously.nn

Hunan Yunao and Hubei Wanrun, leading enterprises, have delivered the third-generation long-cycle materials with fine particles and uniform materials through the improvement of solid-phase process by grinding the material particles to extremely fine

By now, China's lithium iron phosphate energy storage products have formed a dual advantage of "low cost + long lifespan", ultimately achieving a global market monopoly, and produced the legendary 314Ah battery cell, a blockbuster in the energy stora

Data from 2025 shows that the average cost of 314Ah lithium iron phosphate energy storage cells in China is only 0.28 yuan/Wh, which is 49% lower than the cost of Korean ternary energy storage cells (0.55 yuan/Wh).

Since its mass production at the end of 2022, the 314Ah battery cell has quickly captured 60% of the global energy storage battery market share, becoming one of the most popular standardized batteries in history.

The former leading battery companies in Japan and South Korea have begun to fall behind in growth due to their complete collapse in the field of energy storage batteries.

Since then, the energy storage supply chain as a core equipment of the next-generation power system has been increasingly localized in China irreversibly.

When the United States tried to support Korean manufacturers like LG at the Mississippi River to break away from China's supply chain, it was discovered that these subsidized factories were sending large orders of materials to mainland China.

Perhaps this is how it feels like to have someone hold your neck.

03

The Paradox of a Great Victory Turned into a Rout

Chinese material enterprises have helped China's new energy sector win three consecutive battles in energy storage, power, and electric vehicles, but the rapid internal competition within the supply chain has been a consistent challenge like a shadow

In 2020, CATL and BYD launched CTP technology and blade batteries, two key lithium iron phosphate technologies, which greatly improved the energy density of lithium iron phosphate. Together with the introduction of the second-generation iron lithium

Especially the first generation of BYD's blade battery has completely surpassed the ternary batteries of the same level in the needle puncturing test, which fully demonstrates the characteristic of 'lithium iron being safer'.

A new round of lithium iron material expansion is about to start.

In the first half of 2022, the national planned production capacity soared from 3 million tons in the previous year to 9 million tons. If implemented, it will be enough to supply 4,000 GWh of batteries, which is more than four times the battery produ

Expansion of lithium iron production capacity

The production capacity of lithium iron phosphate was only 1.5 million tons by the end of 2022.

At that time, there were three schools of lithium-iron manufacturers.

Pure lithium iron phosphate enterprises (such as Hunan Yuna, Defang Nano), ternary material crossover manufacturers (such as Huayou Cobalt, Greenmet), and pure crossover manufacturers (Longma Baiwei, Zhonghe Titanium White, etc.).

Because lithium iron phosphate's precursor, iron phosphate, is a byproduct of titanium dioxide, titanium dioxide companies are particularly aggressive in crossing over. China National Titanium Dioxide announced a production capacity of 50 million ton

The production capacity announced by these two cross-border companies is almost equivalent to the sum of the entire industry in the previous year, which gives people a deep impression that anyone can do it well.

I have also visited various lithium iron production lines in China in 2022, and my deepest impression was of the western regions like Sichuan, Yunnan, Hubei, and areas along the river.

Relying on their unique advantages in cheap energy, these places are setting off a boom in the construction of iron-lithium production capacity, and vigorous construction and production scenes can be seen everywhere.

The head of a certain lithium iron factory in Sichuan described the scene as follows:

"There are convoys of heavy trucks winding along winding roads or riverside roads everywhere to transport materials; reaction kettles and grinders that have not yet been spliced are piled up at the entrance of the factory; even some workshops have no

At that time, almost everyone in the industry was immersed in the optimistic expectations for the future. Investors, recruitment officials, and project parties would repeatedly calculate based on a simple cost sheet:

According to the market condition at that time, if the profit of each ton of lithium iron material can be stabilized at RMB 5000 to 10000, a production line with an annual output of 10000 tons can recover its initial investment in about two years.

The most famous wealth legend is Tongtong Gaoke.

This company was only established in 2016. Under the leadership of He Zhonglin, who was once a senior manager at Pailong Technology, Rongtong High-Tech completed its D-round financing worth over 5 billion yuan in 2022, with an estimated value of bill

This kind of growth story is a fast run even in the Silicon Valley.

Beneath the feast, risks are continually accumulating.

Firstly, at the point of time in 2022, the real major downstream buyers of lithium iron phosphate are almost only two companies, Ningde Times and BYD. The third player in the industry, Guoxuan High-Tech, chooses to produce and sell on its own.n

Therefore, almost all positive electrode material plants have a customer structure dominated by two major companies, with very weak bargaining power.

Secondly, due to the lack of bargaining power in both upstream and downstream markets, many cathode material manufacturers have found another "path to prosperity" compared to earning meager processing fees.

Over-purchase lithium carbonate to enjoy the benefits brought by inventory appreciation. After all, the processing cost of several thousand tons is too insignificant compared to the inventory appreciation of hundreds of thousands or even millions.

Who would have expected that just one year later, in 2023, the industry situation would take a turn for the worse.

First, the price of lithium carbonate collapsed from a high level in a steep decline, with a drop that far exceeded market expectations;

In the following two years, the intensive release of lithium iron production that has been launched in advance has instantly reversed the market supply and demand, and the pressure of overcapacity has quickly spread to all sectors of the industry cha

The processing fee, once regarded as a profit key, has also plummeted in a straight line from 5000 yuan per ton to below the cost line. Those production lines that were still working overtime in 2022 to catch up with production are now turning into n

In 2022, the lithium iron phosphate industry had a profit of 9 billion. However, in 2023, the whole industry suffered significant losses, with each company setting a record of loss.

The intensification of entanglement is also reflected in the industrial chain game of "downstream harvesting and material factory dilemma".

The head battery plant passes the price pressure entirely to the upstream material plants through the cooperation mode of material cost + fixed processing fee.

For instance, at the peak of the industry's boom in 2021, Wanrun Technology had a gross profit margin of 31.12% for its lithium iron phosphate products. However, this has been declining for three consecutive years, falling to 0.08% in 2024.

Some leading companies in the industry had a product gross profit margin exceeding 30% in 2021, but it had dropped to less than 8% by 2024.

Processing materials has become a situation where the second generation does it at a loss, the third generation works for free, and only the fourth generation can recover the investment.

Under intense pressure, major manufacturers have to make an official announcement about their fifth-generation lithium iron phosphate via PPT to attract the attention of customers and investors.

The material factory has lost the pricing power and degraded into a role of subcontractor, with its profit margins severely squeezed. The lithium-iron industry is also facing the 'ultimate paradox'.

Positive-grade materials account for more than 50% of the cost of batteries, yet the market value of leading battery manufacturer Ningde Times New Energy Technology Co., Ltd. is already close to RMB2 trillion, with daily profits exceeding RMB200 mill

The top four companies in terms of lithium iron phosphate are Yunao, Defang, Wanrun and Shenhua, with a total value less than one hundred billion yuan, which is only about 5% of the market value of Ningde itself.

However, the head is not the worst situation. According to the data in 2024, the CR5 (top five concentration ratio) of the lithium iron phosphate industry reached 75%. Leading companies such as Hunan Yuno and Defang Nanma have taken away 90% of the i

This dilemma of leading technology but lagging profits has become an important challenge for the development of China's iron lithium industry.

During a financial report meeting, an investor asked Hunan Yuno Energy, the leading company with excellent earnings in lithium iron phosphate industry, about how to improve the company's extremely low ROE. The secretary to the board smiled bitterly a

Looking at the industry, we have done our best to achieve this.

Conclusion

An indisputable fact is that without the support of China's materials supply chain, there would be no star companies like Ningde Times or BYD. And it would be impossible for the new energy vehicle industry to achieve a penetration rate of over 50% in

China has taken more than 95% of the global production capacity and core technology of lithium iron phosphate materials. This gives China the confidence to use this material card to counter the United States. When Korean and Japanese manufacturers tr

This is a strategic victory at the national level, a dual monopoly in technology and production capacity.

However, on this strategic track with a trillion-dollar scale, Chinese material enterprises are still struggling with industry-wide losses, with a gross profit margin of less than 10% and the leading enterprises' ROE barely breaking even, which is qu

The technological walls have been built, yet the business moat has not been fulfilled. In one sentence:

It used to be done with ease and plenty of time to spare, but now it's a rush with barely any time to roll over and crawl on by.

The industry still seems to be in the vicious cycle of being criticized for it is high-tech when not done in China, but becomes excess production capacity when China does it.

The road is still ongoing, and the ultimate challenge for Chinese material enterprises is to

How to transform technological victories into long-term, stable, and reasonable business returns is not only a test of corporate innovation ability, but also a test of the healthy development of the entire industrial chain and the reasonable profit d

To break this paradox, a fundamental upgrade in industry cognition is necessary.

Battery materials are not traditional bulk chemicals with big opening and big output, but rather a sophisticated engineering that requires high precision and quality stability. This understanding will encourage the entire industry chain to move away

Fortunately, whether it is through innovative techniques such as the liquid phase method, ferrous oxalate method, secondary sintering method, or the premium prices of the fourth and even fifth generation of lithium iron, and now as lithium iron begin

Only in this way, can the end destination of Chinese battery material enterprises be BASF, Dow and 3M, instead of excessive production capacity.

This article comes from "New Energy Industrialists" on the Weixin Official Accounts