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$ENVX Some of the things that Raj and Ajay said directly on the earnings call last Wednesday, with commentary in the parenthesis portion after each statement:
-We shipped early engineering samples to our lead smartphone OEM with the results confirming the critical safety tests are all passing. (Who is the lead smartphone OEM? Samsung?)
-We received the cell dimensions as a continuation of the agreement we made with them. These dimensions are actually of the cell that they expect to be shipping in 2025. (This is the same OEM as above. Is this Samsung?)
-In line with the agreement we announced in June 2024, we also delivered our first battery packs of our first custom cells from Malaysia with packs built in our Korea facility. (This is likely $META)
-In addition, we secured a purchase order from a custom battery from a second marquee smart eyeware customer. (Is this $AAPL? Likely the case it is them or Samsung again)
-Yields are now well beyond the final levels we achieved in Fab1. (Yields were 60% in fab 1, so we are well beyond that is nice to hear.)
-We now have multiple customer audits going on, serving as a strong testament to our manufacturing readiness and our customers' interest in using our products. (Multiple means 3 to 5 customers, all doing this right before they would have a mass purchase order.)
-While we remain focused on smartphones, we're also prioritizing segments where major battery constraints or supply chain requirements are creating a strong competitive advantage for our technology. (HELLO, this is nice to hear and more on this soon in the earnings call)
-Smart eyewear emerged as one of these segments and we're now in the process of developing custom cells for marquee customers in this space. (Marquee companies in smart eyewear include: $META, $AAPL, Google and Samsung)
-Another market that recently emerged as a unique growth opportunity for us is the defense industry, where we recognized a significant portion of our 2024 revenues with conventional graphite battery products. (Hello U.S. and South Korean Governments, let's do a lot of business going forward.)
-Since the US elections last November, we observed an increase in inbound interest from drone manufacturers and defense suppliers seeking battery solutions that comply with allied country supply chain requirements. Earlier this year, we secured a sample purchase order from one of these suppliers for autonomous AI systems. (Anduril, @PalmerLuckey @anduriltech, your tech is going to be even better than it already is with @EnovixBatteries)
-We have officially kicked off the design phase of EX-3M, incorporating feedback from our lead OEMs to ensure alignment with their evolving requirements. (this will blow every battery on the market out of the water)
-Now we are adding capacity to Zone 1 as we see the indications from the market as to how much volume do we need to support. So that's where the capacity lies. And the way we are looking at adding lines is basically long lead time items, such as various different items in the line, which are on the, used as control systems on the manufacturing line. We are ordering and keeping them as inventory at our suppliers. So this makes us, gives us the ability to shrink the timeline as to when we can add second, third, fourth clients. (Is Ajay saying here that each customer will have their own line? If so, there could be 3 to 5 customers auditing and close to securing a line of their own.)
-We talked about two agreements that we have with two customers and they're both progressing. One of them, we actually received the, after passing the milestones and last time I talked about getting a payment for the milestones, we now got a very important miles, next milestone, which is, we got the exact dimensions of the battery that will be in the phone this year. So that is a huge step because now we understand exactly what it is. (Who are these two clients? Tw of the top 8 cell phone OEMs.)
-Just to remind the viewers, what we sampled was a standard battery that we made here of a standard size. But now we got dimensions of the battery and this is north of 7,000 milliamp hours, so sizable battery-And again, this one particular battery that we are making for this customer, it could go into multiple models. Typically, these batteries go into multiple models within the segment of the market. (A one size fits all, and no need to make different batteries for different models. So awesome.)
-And whatever improvements we do, actually the focus from Line 2 to 4 is going to be optimizing the line for also CapEx spend per line as well as the speed. (A lot of learnings and fantastic to hear.)
-That's a more expensive line, but gives us the flexibility because we're not sure exactly where the demand would be when we built that line. As we get more and more visibility into like these kind of custom cells, we can optimize our lines more to that size cells and not have so much flexibility in it, which optimize the cost of the line, which increase the throughput of the line, so which is kind of like a natural evolution of how you do manufacturing as you understand the product demand better. (The universal line already in operation is the most expensive line. The lines going forward will be more affordable because they will be customized for the clients needs.)
-We have capacity now in our Korean factory to support some of these for now. And we have space available nearby and we can expand that and build more capacity. I mean, the good news is that, as these things start getting qualified, we get visibility into what this demand could be like in next year because it takes a year or so to get these things really qualified into production. And as we start getting into quals in these opportunities, we will and we can expand in our facility there. It's a very nice site, it's in Nonsan, and we have opportunity to grow there. So we are excited by that. (Raj alluded that expansion in Korea is coming.)
-I mean, we have some, we are able to now get the materials from these EV makers and we have them in our Malaysia factory because as you remember, we shut the factory down here. Originally, we were thinking of doing some of that work here, but we moved it all to Malaysia and Ajay was able to create some space there because these are different materials. They were to be handled a little differently. So we have an area there where we are doing the EV work. And we're now able to dice that material and we are working on making those into cells to prove out the advantage of our architecture even in the EV space. So stay tuned for that. I think this year, we should have some updates on that. (Updates on EV likely means licensing is going to be coming this year. They have their own dedicated space and showing how they can differentiate with $ENVX architecture. Who are the EV clients? $TSLA? Porsche? VW? Toyota?)
-You see in our investor letter, we are able to not only make this cell, but we are able to package it with the battery management and so on into a pack in our Korea facility and we were able to deliver that to the customer. So it's a tremendous progress from the time we got the purchase order to actually get some early samples out from our new factory. So and the results look really good. And like I said, we're going to continue to make that. And I'm kind of bullish on this market as a market that has a lot of potential in the out years, particularly because of the user interface problem has been really solved well with GenAI. You can speak to these devices. (Raj is bullish and so is $META when they are receiving this. This makes sense why $META said this will be the year for them in this space.)
-That's the reason we are seeing tremendous interest on our technology in this space. It will take some time to get to multiple tens of millions, but it's a good place to start. (Multiple tens of millions of batteries being shipped in the AR space is just major, since that could easily be a half a billion in revenue alone, and that is not even smarthpones or EVs.)
-So there are some longer lead time items, which we have told working with our suppliers, we have started stockpiling them at their place on their dime. But they're taking a risk on us, which is really good way of handling of how quickly you can set up this Line number 2 and then Line number 3. And so we are trying to always look for ways of shrinking that timeline. The first one took whatever time it took. The second one will be significantly lesser. And our ability to quickly ramp that into the production is also going to improve over time. (Gonna be a lot quicker to get future lines up, and they have the materials at the ready when the purchase orders come in.)
-Like, for example, in 2024, we talk to them about what's the kind of phone model that would launch in late 2025 and we get requirements in terms of cycle life, energy density, in terms of size, in terms of fast charge capability and so on. At the same time, they give us these requirements. They're also working on what process they should pick, how much memory should it have, what display they're using, what camera they should use, and we give them a certain standard size cell, the cell that we've made internally. They test them and then they extrapolate from that what that performance will look like and what performance they need when they fix all the other components in the phone, right? And then they give us the exact dimensions of the cell, which is what we just got now. And then we make that cell and we give it to them and then they test it along with all the other components which are now frozen. And if everything passes and everything looks good, then they give us a purchase order to make multiple volume production of that cell. Now that one particular cell could now go into multiple models in '25 and in '26 too. So it's not like it's only stops at '25. Because like I mentioned, there could be different phone models that can be launched in different parts of the world. And that could continue through '26, for example. And then when they start thinking about what's going to launch in '26, if there are some changes to that cell, they'll give us those and we start working on them. So this is going to be a continuum, if you will. It's not like we make this cell, it goes '25 done, we make another cell, it goes '26 done. It doesn't work like that. It's usually a continuum, there'll be some overlap between the phone launches based on the regions they're launching, based on the volume they're launching. That's typically how this works. (There is so much good stuff here, I don't know where to begin other than they know they will be in phone models beginning this year and going forward. That is a lot of fun to see and will be a lot of fun for investors.)
A lot of good out of this call. Cannot wait to see continued execution. @jmalchow @DrTJRodgers @AlderLaneEggs @RocketPenguin75 @eenLien @mcinnes_danny @spenbaker @MichelNantel @Foldnow1984
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