Advantage to Nano One as Dept of Defense Disrupts Chinese US Battery Customer Supply Chain

• Nano One Materials has developed a patented one-pot process for producing lithium iron phosphate (LFP) cathode materials
• This process reduces costs, energy use, and environmental footprint compared to traditional methods
• With 99% of LFP currently produced in China, Nano One's technology provides a critical alternative supply chain
• Recent Chinese export restrictions on LFP processing technology favor Nano One's licensing strategy
• Nano One is supported by the governments of Canada, U.S., B.C. and Quebec, and has key strategic partners

Introduction to Nano One Materials

Nano One Materials is a clean technology company aiming to transform the production of cathode active materials for lithium-ion batteries. Their patented "one-pot" process offers reductions in cost, energy usage, and environmental impact compared to existing production methods. The materials have applications in electric vehicles, energy storage systems, and consumer electronics.

Nano One has proven the scalability of their technology with a pilot demonstration facility in Quebec - the only one of its kind outside Asia. The company has support from the governments of Canada, the U.S., British Columbia, Quebec, along with strategic investments and collaboration with major players Rio Tinto, Sumitomo Metal Mining, and engineering firm Worley.

As Dan Blondal, Founder and CEO of Nano One, explains:

"Our patented one-plot process reduces the costs, carbon intensity, energy intensity, environmental footprint, and reliance on foreign supply chains of concern."

Interview with Founder & CEO, Dan Blondal

China's Export Policy & Its Implications

China currently dominates the LFP battery material market, producing around 99% of global supply. However, in January 2025, the Chinese government proposed export restrictions on LFP processing technology, know-how, and equipment. This policy shift serves as a wake-up call, highlighting the risks of over-reliance on Chinese supply chains. It creates an urgent need for alternative LFP production methods and supply chains outside of China. Nano One's technology and licensing strategy is well-positioned to address this need, as it is decoupled from China's supply chains and provides a cleaner, more cost-effective production solution.

Blondal comments:

"It should be a wake-up call on the risks of relying on cheap Chinese technology because they're pulling back on it. And ultimately, it's not a matter of if, it's a matter of when and how LFP will come to the world."

Navigating a Fluid Landscape

The battery materials market is rapidly evolving, with governments and companies reassessing supply chain risks and seeking secure, domestic production. The U.S. Department of Defense has designated key Chinese companies like CATL as Chinese military companies, restricting business ties. These moves create a complex and adversarial business environment.

However, Nano One sees these developments as favorable, driving increased interest in their technology licensing. With 48 global patents and a waste-free process, Nano One's one-pot method is immune to China's trade and technology controls. This positions the company to enable cathode production that is decoupled from geopolitical risks. Nano One anticipates increased inquiries from companies needing to pivot their China-reliant strategies.

"It's definitely a very fluid landscape. We're seeing tit for tat responses. China does make policy change every January 1st. It happens every year and this one happens to be very specific to LFP. And I think it actually very much works in our favor."

Customer Landscape & Strategic Shifts

Customers and end-users of LFP batteries, like Tesla, will need to rethink supply chains in light of the new restrictions and geopolitical tensions. Reliance on Chinese technology for LFP production now carries significantly more risk.

This is expected to drive battery and cathode producers towards Nano One's technology and licensing packages. The company is already in discussions with potential partners in the Indo-Pacific, Europe, Africa, and North America to deploy their one-pot process. Nano One's pilot facility in Quebec allows them to quickly demonstrate the technology and provide sample materials.

Blondal explains:

"We're certainly on the market right now promoting our technology and our license packages with Worley. So it will bring people into us. What I think it will change is maybe the nature of some of those customers."

Support from the U.S. Department of Defense aligns with the recognized need for secure, domestic supply chains for critical battery materials. The combination of government backing, interest from industrial partners, and Nano One's mature technology puts the company in a strong position to capitalize on the market shifts.

Market Dynamics & Future Outlook

If trade tensions continue to escalate, the cost of importing LFP or LFP batteries from China will likely rise. This creates an arbitrage opportunity for local producers using Nano One's lower-cost process, potentially leading to higher margins in the near-term.

"If the tariff war continues to escalate the cost of, let's say, buying LFP or buying LFP batteries from China and putting them in our devices over here, it's going to get more more expensive. And if we can make materials and batteries here locally without a tariff regime, presumably there's an arbitrage opportunity here where there could be outsized margins as we build up the market."

Longer-term, cathode production is a high-volume, low-margin business. Nano One's process provides an estimated 30% reduction in capital and operating costs, and uses 80% less energy than traditional methods. This cost advantage, combined with avoiding tariffs and geopolitical risks, makes the one-pot process highly competitive.

However, achieving the scale needed for sustainable cost-competitiveness will require significant volumes and investment. Government support and offtake commitments will be key to kickstarting this domestic LFP ecosystem. In the near-term, early-movers may enjoy higher margins, but ultimately high-volume production will be needed to realize the full benefits of Nano One's technology.

Blondal notes:

"Eventually, cathode and high volume production, it's a low margin, high volume game. That's what we have to anticipate. In the beginnings of it, we will see higher margins, but ultimately, we need to get the massive volumes to make this really work and get it really humming."

The company expects the current developments will accelerate decision-making by potential partners. While Nano One's strategy remains consistent, the market shifts increase the appetite and urgency among cathode producers and end-users to adopt their technology. The restrictions also eliminate the option of simply copying China's dirtier, waste-heavy production methods. Investment and commitment to cleaner, localized production is now imperative.

The Investment Thesis for Nano One Materials

• Nano One's patented one-pot process provides a cost-effective, environmentally superior LFP production method
• China's export restrictions on LFP technology create an immediate need for alternative, localized supply chains
• Nano One is ideally positioned to license their process to global partners, with an operational pilot facility
• Government support and industry partnerships validate Nano One's technology and business model
• Near-term, the supply chain shifts may enable higher margins for early-movers in domestic LFP production
• Longer-term, Nano One's process advantages and freedom from geopolitical risks provide sustainable competitiveness

In the words of Founder and CEO Dan Blondal:

"We were already doing everything to decouple from China anyways. But what [China's policy] does do is it changes really the appetite, the impetus and the speed at which our potential customers want to move."

The export restrictions on China's LFP technology have accelerated the global imperative to secure domestic supply chains for this critical battery material. Nano One Materials' patented one-pot process and strategic partnerships position the company to be a key enabler and beneficiary of this shift. As battery and car makers seek to de-risk their supply chains, Nano One provides a compelling solution that is cost-effective, environmentally superior, and geopolitically secure. With proven technology, government support, and a highly relevant value proposition, Nano One Materials presents a timely and attractive opportunity for investors to gain exposure to the rapidly growing LFP battery market.

Macro Thematic Analysis

The global transition towards electric vehicles and renewable energy is driving unprecedented demand for lithium-ion batteries. Simultaneously, the concentration of critical battery materials production in China has emerged as a significant supply chain risk. China's dominance in LFP cathode material production, at 99% of global supply, has left the industry heavily reliant on a single, geopolitically complex source.

China's proposed export controls on LFP technology underscore the strategic importance of this material and the risks of over-dependence on Chinese supply. It is a watershed moment, forcing a global reconfiguration of battery supply chains.

Western governments and industry are now acutely aware of the need to establish secure, domestic production capabilities for LFP and other key battery components. This will require significant investment, policy support, and technological innovation.

Companies that can enable localized, cost-effective, and environmentally sustainable battery material production are set to play a crucial role in this transition. They will help de-risk supply chains, reduce costs, and improve the overall competitiveness and adoption of electric vehicles and energy storage.

The current geopolitical tensions and supply chain disruptions are painful in the short-term, but may ultimately accelerate the development of a more resilient, diversified, and sustainable global battery industry. Investors have an opportunity to participate in and benefit from this transformational shift by identifying the key technologies and companies that will underpin the battery supply chains of the future.