Enovix Corp (ENVX) is innovating in consumer electronics batteries with a 100% silicon anode technology that greatly increases energy density while solving the thermal runway problem that has been a persistent risk with current battery technology used in most IoT, mobile and personal computers.

Lithium-ion battery architecture hasn’t changed much in the last 30 years. The path to successful innovation starts with core technology and cell design. Next, companies must invest in manufacturing process development. After years of development and testing, the final phase is process validation and production. This is where ENVX stands today with its BrakeFlow safety technology and step-change increase in battery capacity. ENVX employs a stacking process (rather than rolling) in its manufacturing that provides a significant competitive advantage and is unique to the company. As such, ENVX is speculative as its revenues are small, and its at-scale manufacturing process remains unknown.

Most lithium-ion batteries use a conventional graphite anode with the theoretical specific capacity of 372 mA-h/g (milliamp hours per gram). A silicon anode significantly increases the ratio of lithium to silicon bonding giving it a theoretical specific capacity of 3579 mA-h/g which is over 9x that of graphite. What makes this massive increase in energy possible is the company’s novel three-dimensional cell architecture. Cathodes, anodes and separators are precisely laser patterned and stacked side-by-side. This allows for more efficient use of the battery’s volume which improves its overall energy density. A conventional lithium-ion battery can’t practically accommodate a 100% active silicon anode because they expand significantly during charging – creating high pressure within the battery. This pressure acts on the large face of the battery and would require a constraining force as large as 1.7 tons to keep the anode from expanding. ENVX’s 3D cell architecture can accommodate a 100% active silicon anode which requires only 210 pounds of force to restrain the anode. The company uses this constraint system to surround the cell and limit the battery from swelling (maximum 2%) and growing in size.

ENVX’s new CEO Raj Talluri (RJ) has a strong background in the semiconductor industry between his former leadership positions at Micron, Qualcomm, and Texas Instruments with experience taking products into high-volume manufacturing. According to a report by JP Morgan, battery manufacturing is more similar to the “back end” of semiconductor manufacturing which is the least expensive part.  The team is still bringing the diligence and understanding of manufacturing tolerances from that industry over to its battery technology, with promising early results. RJ wants to customize the form-factor and performance of the battery to suit each customer’s needs which is now enabled by Enovix’s equipment.

In recent months, ENVX has made a number of announcements, including: 1) design approval for the Gen2 Autoline, 2) Fab-2 location in Malaysia, 3) purchase orders issued for the Agility Line at Fab-1 and Gen2 Autoline at Fab-2, as well as 4) a report that its output from Fab-1 was 12.5k cells in Q12023, ahead of its prior expectations of 9k cells which suggests that manufacturing improvements have been substantial to-date.

In April 2023, ENVX raised $133.9m in net proceeds – or $155.7m if the initial purchasers exercise their option – via a pre-sold 3.00% convertible senior notes deal, due 2028, with an initial conversion price of ~$15.61/ENVX share an and approximate dilution of 7%. More encouraging was ENVX’s Chairman, Mr. T.J. Rogers, participation with the purchase of $10m of the convertible deal. Mr. Rodgers already owns ~21M shares. And the participation of John Doerr, Chairman of Kleiner Perkins, with the purchase $10m of the convert. These two investors have a history in Silicon Valley. Mr Rodgers previously joined the board of Enphase Energy, “as a favor to Kleiner Perkins.”  Their relationship started earlier when Kleiner Perkins invested in Mr. Rodgers when he founded industry titan Cypress Semiconductor.

ENVX plans an additional $70M in non-dilutive financing, through its partner YBS International, to support the development of its next-generation high volume manufacturing facility (Fab-2) in Penang, Malaysia. According to a report by Canaccord Genuity (April 18, 2023), the ~$70M raise, in conjunction with the funds raised via the convertible notes deal, will likely be sufficient for the company to build 4 production lines. With these lines, ENVX will be able to manufacture between 38m-75m battery cells per year — 38m large cells with an ASP of ~$10 or 75M small cells with an ASP of ~$5.

Besides consumer electronics, the company claims its novel cell architecture is well suited to EVs. ENVX is actively working with industry leading OEMs with a focus on JV/licensing. To date, the company’s EV claims are: 1) ~10x improvement in cell internal temperature gradient, 2) 0-80% charge in 5.2 minutes demonstrated, 3) 1,500 cycles reached with 88% capacity retained, 4) projected 10+ year calendar life based on high temp testing.

Here are some non-financial metrics to examine in the coming months. The funnel looks like this: 1) engaged opportunities: a potential customer has determined that the ENVX battery is applicable to their product and is actively evaluating our technology, 2) Active Design: completed tech qualification,  identified and end product and has begun design work, 3) Design win: Committed to custom design or standard battery for an approved product. In January 2023, the revenue funnel was 1.42 billion. It would be a great win to see Apple, Samsung and/or Telsa moving through this funnel.  

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