Frost & Sullivan releases the 'White Paper on the Development of the New Functional Materials Industry in 2025'

Functional materials are a broad category of new materials with special electrical, magnetic, optical, acoustic, thermal, mechanical, chemical, and biological functions. They are important basic materials for high-tech fields such as information technology, biotechnology, and energy technology, as well as for national defense construction. New functional materials are an advanced form of traditional functional materials, developed based on their fundamental principles. They promote the development of the functional materials field into higher dimensions in terms of performance, precision, efficiency, etc. New functional materials refer to those prepared through molecular design, structural regulation, or special processes, possessing special physical/chemical properties (such as high thermal resistance, optical characteristics, electromagnetic properties, etc.) that traditional materials do not have. They are widely used in high-tech fields and can complete mutual functional conversions. They are mainly used to manufacture various functional components and are applied in various high-tech fields.

Source: Frost & Sullivan research

● Policy dividends continue to be released

National strategic orientation and systematic policy support are the core driving forces of the industry. In recent years, 'new quality productivity' and 'dual carbon goals' have become the core of top-level design, promoting new materials to be positioned as a breakthrough point for industrial upgrading. At the central level, policies such as the 'High-quality Development Action Plan for the New Material Industry' set scale-up application targets, accompanied by special funds, tax exemptions, and simplified approval processes to reduce the R&D risks of enterprises; at the local level, through industrial funds in the tens of billions and regional cluster construction, a 'central-local' collaborative policy ecosystem has been formed to accelerate technology from laboratory to industrialization. For fields that have long relied on imports such as high-end carbon fibers, photoresists, and high-purity electronic chemicals, incentive mechanisms have been set up, and intellectual property protection has been strengthened to ensure innovation returns. For example, the localization of semiconductor materials has been incorporated into national security strategy, and policy resources have significantly tilted towards enhancing the autonomy and controllability of the industrial chain, shifting from passive following to the construction of technological sovereignty.

● Technological iteration accelerates domestic substitution

Breakthroughs in basic research and interdisciplinary integration reshape industry competitiveness. The application of artificial intelligence and computational materials science has significantly compressed the R&D cycle. For example, AI simulations replace traditional trial-and-error experiments, doubling the R&D efficiency in cutting-edge fields such as flexible glass and perovskite photovoltaic materials. At the same time, the integration of industry-university-research accelerates technology transfer: universities focus on basic innovations such as nanosynthesis and bio-bionics, while enterprises promote process engineering, such as solid-state electrolytes moving from laboratories to commercial use in new energy vehicles. Domestic substitution has upgraded from 'usable materials' to 'good-quality materials'. In the semiconductor field, third-generation semiconductor materials such as silicon carbide substrates and gallium nitride devices are approaching international standards and gradually replacing imports; in the new energy field, sodium-ion battery materials have broken through resource limitations, vanadium flow batteries have improved energy storage safety, and differentiated competitiveness has been formed. The overcoming of technical barriers not only reduces external dependence but also promotes Chinese enterprises to participate in international standard setting, transforming from technology recipients to rule-setters collaborators.

● Explosive growth in emerging downstream demand

Emerging industries create incremental markets, prompting the upgrade of material performance. The explosive growth of new energy vehicles drives demand for high-performance battery materials such as solid-state electrolytes and silicon-carbon anodes; the AI computing power revolution promotes the iteration of high thermal conductivity interface materials and semiconductor packaging materials; humanoid robots give rise to the application of intelligent materials such as lightweight magnesium alloys and flexible sensors. These demands are characterized by high customization, reliability, and rapid iteration, forcing material companies to dynamically respond to market changes. Consumption upgrading and green transformation expand the scenarios beyond boundaries. Health and environmental protection demands drive the substitution of biobased materials for traditional plastics, with functional consumer goods such as graphene thermal underwear and bionic protein fiber facial masks opening up markets worth hundreds of billions; under the 'dual carbon' goal, green technologies such as photovoltaic silver paste, hydrogen energy storage and transportation materials, and marine anti-corrosion coatings are accelerating implementation, forming a dual-wheel drive of policies and markets.

● Industrial upgrading drives material innovation

Industrial chain collaborative innovation has become the key to breakthroughs. Leading downstream enterprises output technical standards to upstream material suppliers through joint research and development agreements. For example, battery manufacturers require enhanced fast charging performance for negative electrode coating materials, prompting companies to develop asphalt-based modification technology; panel manufacturers need ultra-thin optical films, forcing breakthroughs in nanoscale coating processes. This 'demand-driven research' model shortens the innovation feedback loop and promotes optimization across the entire chain of materials, equipment, and applications. At the same time, global competition drives performance leaps. International blockades (such as high-end carbon fiber bans) instead stimulate independent innovation, with domestic companies reducing costs through process innovations, such as significantly lowering the production cost of aerogels, which has spread from aerospace materials to new energy vehicle battery thermal insulation sheets. Industrial upgrading gives rise to the 'materials + services' model, where companies transform from single suppliers to solution providers, enhancing their value chain position.

Lithium batteries are a new type of battery that can be charged and discharged multiple times, and reused. They use lithium-ion intercalation compounds as the positive and negative electrode materials. Common lithium-ion batteries use lithium-containing metal oxides and carbon materials as the positive and negative electrode materials, respectively. They are characterized by high energy density, long cycle life, low self-discharge, no memory effect, and environmental friendliness. They are widely used in consumer electronics, new energy vehicles, and energy storage fields. The core components include positive electrode materials, negative electrode materials, electrolyte, separator, and other auxiliary materials.

● Power battery

Refers to rechargeable electric energy storage systems used in electric vehicles, construction machinery, and other transportation vehicles, providing driving energy. The core function is to achieve efficient conversion of chemical energy into electrical energy through electrochemical reactions, meeting performance requirements such as high energy density, long cycle life, safety, and reliability. Classified by positive electrode material, power batteries mainly include ternary batteries and lithium iron phosphate (LFP) batteries. Thanks to advancements in battery technology, cost-effectiveness improvements, and favorable incentive policies, the new energy vehicle industry in China has developed steadily. The shipment volume of electric vehicle batteries in China increased from 86.1 GWh in 2020 to 682.1 GWh in 2024, with a compound annual growth rate of 67.8%. It is expected to further increase to 2,394.2 GWh in 2029, with a compound annual growth rate of 28.5%.

● Energy storage battery

An electrochemical energy storage device is capable of converting electrical energy into chemical energy (or physical energy, kinetic energy), storing it, and then releasing the stored energy back into electrical energy when needed. Electrochemical energy storage typically includes lithium-ion batteries, sodium-sulfur batteries, flow batteries, and lead-acid batteries. Among them, lithium-ion batteries currently dominate due to their cost-effectiveness and excellent physical properties. Electrochemical energy storage systems can be divided into centralized and distributed systems based on application scenarios. Driven by factors such as policy support, technological progress, and growing downstream market demand, China's energy storage battery market experienced rapid growth from 2020 to 2024. The shipment volume of energy storage batteries in China increased from 6.9 GWh in 2020 to 131.2 GWh in 2024, with an annual compound growth rate of 109.1%.

●Consumable batteries and others

It refers to devices that provide power for consumer electronics, portable devices, power tools, drones, robots, etc. Consumer and other batteries are the power source for all electric equipment, directly affecting product performance, including stability, safety, service life, and temperature adaptability. Consumer batteries and others can be divided into primary lithium batteries, small lithium-ion batteries, and cylindrical batteries. Consumer batteries and others are widely used in multiple terminal fields, including smart meters, medical devices, electronic vaporizers, mobile phones and computers, low-altitude economy, robots, etc.

Lithium battery electrolyte is a key component of lithium-ion batteries. Its main function is as a medium for ion transport, allowing lithium ions to migrate between the positive and negative electrodes, thereby enabling the charging and discharging process of the battery. It usually consists of three parts: lithium salts, organic solvents, and additives. Key parameters such as the ionic conductivity, thermal stability, chemical stability, and electrochemical window of the electrolyte can significantly affect the energy density, power density, cycle life, and safety of the battery.

From 2020 to 2024, the shipment volume of lithium battery electrolytes in China increased from about 176,000 tons to about 1.327 million tons, with a compound annual growth rate of 65.7%. Driven by further development in downstream industries, the shipment volume of lithium battery electrolytes in China is expected to reach about 4.244 million tons by 2029, with a compound annual growth rate of 26.2% starting from 2024. Solvents account for the highest proportion in lithium battery electrolytes, about 80%, followed by lithium salts, accounting for about 10%-15%, and additives have the lowest proportion, about 5%.

Source: Frost & Sullivan research

●Enhanced permeability of new lithium salts represented by LiFSI

New lithium salts represented by LiFSI have demonstrated significant advantages in terms of conductivity, thermal stability, chemical stability, and battery performance, making them more in line with the future development direction of high-energy density, high-power density, and high-safety lithium batteries. Electrolytes with LiFSI as the electrolyte maintain good compatibility with cathode and anode materials, which can significantly improve the high and low temperature performance of lithium-ion batteries. LiFSI shows strong competitiveness among new lithium salts due to its excellent ionic conductivity, thermal stability, and electrochemical stability. It is expected to become one of the mainstream alternatives to LiPF₆ in the future, with a high degree of development certainty. The preparation process of LiFSI has become relatively mature, and cost and price are key factors for further large-scale substitution. In recent years, the penetration rate and mass proportion in electrolyte formulations have increased significantly, with some showing a trend of replacing LiPF₆ as the main salt.

● Industrial chain integration and increasing concentration

With the continuous expansion of production capacity in China's lithium-ion battery electrolyte industry, leading enterprises are accelerating the release of high-quality production capacity, and the overall competitive landscape of the industry is tending towards concentration. Small and medium-sized enterprises with lagging technology and lacking economies of scale are significantly squeezed in terms of profit margins. To reduce the cost pressure brought about by price fluctuations in core raw materials such as upstream lithium salts, organic solvents, and additives, some enterprises are accelerating the extension of their industrial chain upstream. By deploying raw material production links, they aim to increase the self-sufficiency rate of raw materials and achieve dual guarantees of cost control and supply chain security. Enterprises with comprehensive advantages such as product quality assurance, strong R&D capabilities, large production capacity scale, and a complete raw material supply system are gradually receiving bulk procurement orders from downstream leading battery manufacturers and achieving strategic binding through deep cooperation, thereby enhancing industrial synergy capabilities. The comprehensive capabilities of electrolyte enterprises in cost management, capacity intensification, technological innovation, and other dimensions will become the key to determining their market position. The industry concentration is expected to continue to rise, and the competitive advantages of leading enterprises will further expand.

● Upgrade of environmental protection and safety performance

Environmental protection requirements are becoming increasingly stringent, posing higher challenges to the electrolyte industry. The production process of electrolytes involves multiple chemical reactions and separation purification steps, which may generate certain waste and pollution. In the future, the electrolyte industry will pay more attention to environmentally friendly production, promote clean production processes, reduce waste emissions, lower energy consumption and resource consumption. Electrolyte recycling technology will also be further researched and applied to achieve resource recycling. For the residual electrolytes in waste batteries, some leading enterprises and universities have carried out process research such as extraction recovery and regeneration purification, initially achieving efficient recovery of lithium hexafluorophosphate, solvents and additives. By constructing an electrolyte closed-loop reuse system, not only can resource waste be reduced, but it also helps to mitigate the impact of raw material price fluctuations on the profitability of downstream enterprises. The tightening of environmental protection regulations has prompted enterprises to increase R&D investment, calling for technical breakthroughs under the themes of "cost" and "environmental protection".

Common additives used in electrolytes mainly include VC (vinyl carbonate), FEC (fluoroethylene carbonate), PS (sulfonates), and DTD (some ether compounds). They play different roles in film formation, oxidation resistance, extended cycle life, and high-temperature performance. VC outperforms other additives in many aspects. Compared to FEC, the SEI film formed by VC is denser, more stable, and has a better effect on suppressing battery polarization; at the same time, VC offers stronger cost-effectiveness in terms of cost and safety, while FEC may lead to a decrease in Coulomb efficiency and affect cycle life. Compared to PS and DTD, VC has a higher industrial maturity and lower unit cost, with better adaptability, especially in conventional graphite anodes and ternary material systems, where it has good process compatibility and fewer adverse side reactions. VC also possesses multiple functions such as film formation and safety protection, making it one of the additives with the best overall performance at present.

Source: Frost & Sullivan research

The shipment volume of electrolyte additives in China achieved a compound annual growth rate (CAGR) of 64.3% from 2020 to 2024, increasing from 16,000 tons in 2020 to 116,000 tons in 2024. In the lithium battery electrolyte additive market in 2024, VC accounted for 37.0%, being the largest single category. The shipment volume of VC was about 43,000 tons in 2024 and is expected to grow to 109,000 tons by 2029. VC maintains a core position in the formulation system, with not only continuous growth in shipment volume but also a long-term share leadership in the industry.

Source: Frost & Sullivan research

Shanghai Lingkai Technology Co., Ltd. (referred to as 'Lingkai Technology') was established in 2011 and is a research and development-oriented high-tech enterprise centered on organic synthesis chemistry and fluid engineering technology. The company focuses on providing small molecule compound research and development, production, and commercialization solutions for the fields of pharmaceuticals, new materials, and new energy. Its business spans three strategic sectors. In the field of new materials, years of technical development and accumulation have enabled the company to provide one-stop solutions from technology research and development, key process optimization, finished product quality control to commercial production in aspects such as photoresist monomers, PI monomers, PSPI monomers, lithium battery materials, and functional monomers. Currently, several new material products of Lingkai Technology have passed sample tests, and some products have entered the stage of large-tonnage supply.

Through continuous and in-depth commercialization efforts, Lingkai Technology's business has covered the five continents of the world and established good cooperative relationships with more than 5,000 pharmaceutical companies and research institutions. Lingkai Technology always focuses on market demand, adheres to the development philosophy of 'science, rigor, innovation, and cooperation', and is committed to becoming an important partner in the fields of pharmaceuticals, new materials, and renewable energy that customers around the world can trust. It continuously contributes to the cause of life health and green energy innovation.

Lingkai Technology provides advanced electrolyte lithium salt solutions such as LiFSI, which are considered potential substitutes for traditional LiPF₆ due to their excellent performance. It also produces a variety of electrolyte additives, deeply involved in the upstream of the semiconductor and display industry chain, including various polyimide monomers and photosensitive polyimide monomers, which are used as basic materials for manufacturing flexible circuits, advanced packaging, and high-performance PI films and slurries. In addition, the synthesis of photoresist resins and photoacid agents directly supports semiconductor fine lithography processes.

Source: Frost & Sullivan research

Lingkai Technology, relying on its independently developed two core technology platforms, has achieved safe and continuous production of high-risk reactions, improving process efficiency and product purity. In the field of new materials, the PI monomer developed by the company has optimized the synthesis path through continuous flow microchannel technology, significantly increasing yield and purity. The photoresist monomer uses continuous crystallization purification technology, with metal impurities controlled at <1ppb, meeting EUV lithography standards and accelerating the domestic substitution of semiconductor materials. The patented tower reactor technology has achieved continuous production of LiFSI, increasing capacity by about 40%, with thermal stability superior to industry standards and suitable for high-voltage batteries. The company's developed 3-fluorocyclobutanesulfoxide additive can extend the cycle life of lithium batteries and meet the needs of solid-state batteries.

Source: Frost & Sullivan research