I'm one of the analysts and group head of the energy and sustainability sector and research for William Blair. And we have four different areas that we focus on: energy efficiency, energy generation, energy storage, and then energy services. And within the energy storage, my colleague Mark Schooter, who was designing solid state batteries, what, Mark? Four or five years ago, came to me and said, "You know, I think the next big thing in storage is gonna be the focus on the anode, moving to silicon and replacing from graphite." So Enovix here really embodies that thesis. We've written a white paper, and so we're lucky enough to have with us Raj Talluri, CEO of Enovix. Charlie Anderson's in the audience there, head of IR.
Compliance would like me to direct you to our website for any important disclosures, so I don't wanna be remiss in saying that. With that, I'd like to turn it to Raj to tell us more about how Enovix is going to disrupt the storage space with silicon anodes. Thanks.
Awesome. Thank you. Yeah, maybe I'll just speak from here. I do my presentations. Maybe I should do it from here so I can see it better. I can't see it very well from there. I get this guy. Awesome. Okay, thank you all for coming. My name is Raj Talluri. As I'd mentioned, I'm the President and CEO of Enovix. I've been there for about a year and a half now, close to that. I started last January. Quick, by way of a quick introduction, I've spent 30 years in semiconductors, you know, Qualcomm, TI, Micron, running large divisions. I'm super excited by this company. I'm gonna.
I'm not going to read this to you guys, but I will tell you this much: I'll make some forward-looking statements today on our technology and the products and customers. You know, there's risk associated with that whenever you make those. Please look at our SEC filings for all the detailed disclosures that we are making there. Okay, so I'm gonna give you an introduction to the Enovix battery. The company has actually been around for 16 years. They have been working on the concept of replacing graphite with 100% active silicon as a means to increase the energy density in the battery.
Some of you may know this, lithium-ion batteries have been there for a long time, but the anode has always traditionally been graphite. There was always this concept that if you replace graphite with silicon, you can get higher energy density because silicon has the ability to handle a lot more lithium than graphite, in the way it stores lithium in the silicon structure. One of the problems, though, is that, when you put more lithium into silicon, silicon actually swells up to the point where the battery is not usable. It just balloons up like that.
So the company has come up with an approach to allow the battery to use 100% active silicon by solving the problem of it swelling, and I'll talk a little bit more about how we stop it from swelling. Basically, it's an architecture-first approach, where we cut the anodes and the cathodes into really thin strips, and we stack them differently. And then we constrain them with a mechanical stainless steel constraint, a very thin foil, that holds the battery together. So when the silicon tries to swell, it doesn't let it swell, and I'll talk more about that as we go along. In addition to that, we have other advantages. It's a safe battery. We stop the battery from going into thermal runaway. So it has enhanced thermal performance.
It can dissipate heat much better than traditional batteries. We have a patented manufacturing process, as you see on this slide. We'll laser pattern the anodes and the cathodes, and we stack them, and then we, you know, do high-volume manufacturing by putting these together. The company has a global footprint now. We have manufacturing that we are now setting up, the factory just coming up in Malaysia, in Penang. And then we have a very good R&D team in Hyderabad, in India. We have coating lines where we are able to coat the electrodes with the material we need in Korea. Lots of the leadership team and R&D is in Fremont, California.
The leadership team has tremendous amount of experience, like I said, you know, from Micron and Qualcomm, the board, also from Enphase and Tesla, and, Ajay, my COO, is from AMD. T.J. Rodgers, who's the chairman of the board, is from Cypress. So lots of experience between the board and the management team in taking things to high-volume manufacturing. All right, let me now switch gears and talk to you about the market opportunity and why we are interested in, in making these, high-performance, lithium-ion batteries. If you look at the smartphone market, and I came from spending almost over 20 years selling processors and memories into smartphones. I worked on the OMAP processor at TI, worked on Snapdragon at Qualcomm, worked on the memories at Micron.
So it's a market I'm intimately familiar with. For those of you... In the U.S., a lot of people think of Apple and Samsung, but they're not familiar with the other brands. But the smartphone market is a huge opportunity for batteries. It's a $12 billion+ opportunity.... 1.2 billion smartphones shipped roughly in 2023. And if you look at the list of customers here, you know, Apple, Samsung, Xiaomi, Oppo, you know, Transsion, Vivo, Honor, Lenovo, those are probably the top eight. And they represent, you know, close to a billion units, 80% of the market. If you look at the size of the lithium-ion battery market, it's $12 billion, you know, give or take, if you assume average battery, like $10 or so. $9.5 billion is that in the top eight customers.
So that's the TAM we are addressing. We're focused on the top eight. And the other interesting thing is that these customers make a lot of smartphones. I mean, there's 280+ models of smartphones shipped. Some of them are only shipped, like 2-3 million units, which is different from like an Apple or, you know, a Galaxy phone, which ships in tens of millions, each, each unit. And why is it interesting? That's interesting because for an early-stage manufacturing company like ours, we can address, you know, a few models and, you know, fill our manufacturing lines and continue to grow that. Where are we now?
We are in the middle of making samples from our Malaysia manufacturing line, and by third quarter this year, we expect to send those samples out to top 6 of the 8 top makers and work on getting them qualified so we can get them to, you know, production sometime next year. So that's a $7 billion TAM that we are addressing with this. Now, in addition to phones, there is an adjacent TAM for this market. This includes IoT devices. This is think like think smartwatches, think AR/VR glasses, think of digital cameras, think of medical devices, think of you know, industrial IoT, like the person who brings the thing that you need to sign on when the UPS guy delivers a package.
You know, all those kind of products are also TAM. That's an $8 billion TAM that the same battery that we are building, the same technology can address. And then the computing market. Computing market is another, you know, $4 billion TAM in 2026. Growing, because now you can see people want more and more higher and higher performance batteries because of all the Gen AI applications coming into the PC, as you guys have seen recently with the Microsoft Copilot announcement and so on. Clearly, AI is driving a lot of performance in these end devices, in particular, Edge AI, and battery is quickly becoming the bottleneck. So it's a good tailwind for lithium-ion battery manufacturers like us, that the TAM is expanding actually.
Now, I want to spend a few minutes on what the lithium-ion battery market has done over the last many years. If you actually look at this, from 2025 to 2023, I'll kind of—we kinda put there the kind of features and innovations that have happened on the smartphone. You know, they went from 2-inch display to today, 6.1-inch HD display to, you know, a few hundred megahertz CPU to, you know, multi-gigahertz octa-core processors, and so on. The battery went from 900 mAh to today, over 5,000, and I see people now launching even 6,000 mAh batteries. So clearly, the battery cap size—the battery capacity kept growing. So the battery capacity grew, I'd say here, this slide shows you, like, 11% CAGR.
But the interesting metric is, although the battery capacity grew 11% CAGR, the phone size also grew because of display, which means the battery got bigger and bigger in physical dimensions over this time. So if you divide the battery capacity by the volume, like how much it actually grew, it only grew, like, 2%-3%. So basically, the milliamp hours per liter grew very anemic for like, you know, a couple of decades. So it hasn't really kept up with the innovation in the other aspects of the market in the smartphones. Now, the problem gets worse. Now, here we shows you that, the growth of AI apps. Now, we did all this growth, and we were able to keep all-day battery life.
That means you charge the battery, you charge the phone in the night, you can use it all day before you have to charge it again. That's under threat now, because if you look at the new apps that are coming... Actually, this is some data we had a research firm work for us. It actually shows you the conventional apps in the middle, and you can see the AI-enabled apps, how much more perform- much more battery draw they have. ChatGPT takes more than YouTube. I mean, it's, it's just unreal, and that's just the beginning.
So if you think about the next-gen AI apps and all the generative AI apps, and here, if you look at the slide on the left side, output of video and image in billions, 2024-2028, it's expected to be a 150x growth, in just images and videos generated. Which basically means, with this 2% growth in battery life, you're not gonna get all-day battery life, when you start running AI apps. That is the real problem we have, and, that's why all, all our customers are super interested in us producing a higher energy density battery. So how do we do that? Well, first thing, what we do is, we take anodes.
Let me say, before I talk about how we do it, basically, in the market, how people make batteries is they have a cathode, they have an anode, and they get a big roll of cathode, big roll of anode, and they put one on top of the other, they put some electrolyte and roll the battery into jelly roll and cut it. And that's the battery. Now, if you just replace the graphite with silicon, because silicon can hold more lithium, and you did the exact same thing, it'll, you know, grow like this because the silicon will expand and push the battery out. So what we did here is actually cut the anodes and cathodes this way. So what you see in the middle is actually a bunch of thin batteries laid on the side.
There's like 170-180 batteries laid this way, and we have a mechanical constraint that holds that, and we connect the anodes and the cathodes. Now, when the silicon tries to expand, it expands the thin side, not the thick, the flat side. So the amount of force it applies is a tenth of the force it would apply if it went this way. So we can hold it down with the constraint. So that's actually the key innovation, and that's what this talks about here. You can see that, instead of a conventional jelly roll, what we do here. Now, what we have seen in the market is some of the peak competition, which has been making traditionally the lithium-ion batteries using graphite, have started adding some amount of silicon to get more energy density.
But after they put anywhere between 3%-7%, it starts swelling again. We use 100% active silicon because we can hold it down, and that's the key innovation of the company, is that we can put a lot more silicon and get higher energy density to meet the requirements of this growing, you know, AI-enabled edge computing markets. How good is this battery? Here's the data that shows that we had a technology called EX-1, you know, EX-1 , which had 500 cycles, that means you charge and discharge 500 times. And standard charge takes the time it takes to charge. And if we baselined it with average capacity, you know, of a whole bunch of smartphones, we found the EX-1 was 18% better.
But it did not have the ability to charge fast and go for many more cycles. So we now started working on something called EX-1M, where we keep comparable energy density, but really increase the number of cycles it can go and really increase how fast it can charge. And that's the one that we'll be sampling this year in 3Q from Malaysia. And then we have in our R&D labs ways to put even more lithium into the battery, so we can get up to over 30%+ over these average batteries out there. So that's really the what we're working on, and that product, we expect to go to production in 2026 time frame. And then we have a few more ideas of how to get to EX-3M.
The whole concept is that since silicon can take more and more lithium, we incrementally keep improving that to put more lithium in, you know, and also all the material advantages to get to higher performance battery. Very exciting, and all our customers are super excited by this concept that we can increase this, particularly now when everybody needs higher density. We also find that this architecture is fairly well-suited not just for consumer electronics, but also for EVs. Interestingly, the advantage we have is a lot more than energy density. It has a thermal advantage that because of the way we make the battery and the way we stack the batteries, we find that they can be charged very fast compared to traditional graphite batteries.
And they also dissipate the heat much better, which means that we are now able to make a car with this kind of technology, and we're successful launching. You can start at a gas station and charge much faster. You don't have to wait in line that long, I guess, the EV charging station. And that's a huge TAM by 2040. We are working with the EV OEM to commercialize this concept, and at this point, it's still early stage development. Again, the materials that they use in EVs are quite a bit different, but they are super excited by the advantage we couldn't possibly provide. And our strategy is probably to have a licensing model where we get this to a stage where it's
OEMs are happy with it, and we license to somebody to manufacture the batteries. Our factories, we are building to manufacture consumer batteries. So this is a nice adjacent opportunity for us. This basically, you know, digs a little deeper to see how we actually manufacture the batteries. You can see on the left side, we get rolls of anode and cathode. They come in like big rolls like this, and we have a laser that cuts them into really thin strips, and you can see what the thin strips looks like in the top view there in blue. We do the same thing for cathodes. We do the same things for separators.
The thing in the middle shows you we have an anode and a separator, and a cathode and a separator, and we kind of stack them one on top of the other. Then we get a whole stack of batteries, we push them out, and then you can see we got a stack of batteries like this. Then we take this steel metallic constraint, and we put it around that. Then we connect all the anodes, connect all the cathodes with busbars, and we fill the electrolyte, and then we have the battery. Now, the interesting thing about this is there is no standard battery machines that actually cut the electrodes like this, stack the electrodes like that. So we had to design the machines first and have our suppliers manufacture the machines, and then we make the batteries.
So the intellectual property of the company is in not only the battery and the electrochemistry of the battery, but also in the way we manufacture it, because they're custom machines that are designed to our specification. Where are we in this? So, as I mentioned, we built a line called the Agility Line, which is a line that can make very small batteries to very big battery, like batteries this big. Because what you find is that in the lithium-ion battery market, there's no standard size battery, you know, like a AAA battery or like a cylindrical cell battery. So each battery in every phone or a laptop is slightly different in its shape and size. So our factory has a machine called the Agility Line, which can actually make different shapes and sizes of battery based on the customer requirements.
Those are the ones that will... we'll be sampling in Q3. The OEMs will get those, then they tell us exactly the shape they want, and our plan is to give them manufacturable parts next year and get into production in the second half of next year. Now, at the same time, we're also working on the EX-2M, which is the advancement from our EX-1M in terms of energy density and some other features that we needed. We expect to sample those towards the end of this year in our labs. Of course, we need to work on testing and productization before we give to customers, and we expect those to go into production in 2026. That's the timeline that we are working on.
As I mentioned, U.S. is mainly corporate headquarters, process engineering, materials research, some automotive work. Hyderabad is where we have our modeling AI work in how to actually come up with a battery that we know what it's gonna perform way before it's actually done, because we're building a lot of battery models. Malaysia, in Penang, is where our factory is, and the majority of the team will soon be there. Nonsan City in Korea is a battery company that we purchased called Routejade, which has the ability to coat anode and cathode material on electrodes. As I showed in the previous slide, we buy powders of anode and cathodes, and we coat them on metal strips, and then we cut them.
The coating process is itself very integral to battery manufacturing, and we really needed to have that in-house, and that's why we acquired this company. And it helps us vertically integrate our manufacturing. That's a very exciting team. They've been making batteries for over 20 years, and we acquired them last year. Now, when we get to producing, you know, lots of millions of batteries, and this is our target smartphone production line unit economics, we have work ongoing where we can reduce our cost of our line to $60 million per line CapEx. That can produce 1,650 units per hour of these big batteries.
As I mentioned, we are seeing the ASP of the batteries increasing over time because people will want, I believe, not just 5,000 milliamp hours, 6,000 milliamp hours, even 7,000 milliamp hour batteries to keep up with the AI demand. At that point, if you get an average battery price of $13, you can see that leads to about $150 million of revenue per line on a $60 million CapEx. That leads to a 50% gross margin, cash gross margin. The estimated payback per line is a year at that rate. Super exciting economics, and we expect to scale this way in the next lines and so on.
We have one line now that we're building, and we continue to build these lines over the next few years so that we can get to a very profitable business, over the next many years. That's actually my last slide, and, thank you for that.
I think... Is this on? Raj, I think, by the way, we'll have a proper breakout session upstairs in the Richardson breakout to ask more questions. But there's been some volatility and some confusion around the timing and adoption of EX-1M versus, you know, EX-2M. So could you maybe talk about customer needs a little bit in terms of who the customer base would look like and why somebody might take an earlier stage material versus waiting for one that would have, you know, a greater density and cycle life?
Yeah. So, it's a great question. You know, in my experience in cell phones and other consumer electronics, that there will continue to be innovation in products. You know, like Qualcomm used to produce a new processor every year, and Micron went from LPDDR3, LPDDR4, LPDDR5. That's the way I look at EX-1M, EX-2M, and maybe EX-3M afterwards. This is progression in continuing to improve the energy density and cycle life and fast charge capability, and so on. EX-1M has a certain set of characteristics that we're bringing to market, talking to many customers, a lot of interest in that. But, you know, it takes time. It takes 9-12 months for each one to qualify.
And then we'll come with EX-2M, and that'll take it some more time to qualify. So I feel like these are more yearly cadences of technology roadmaps that we provide the customers to assimilate and make products as time goes on. It's not like, "Okay, we got a better one, let's just all wait for that." So it's not like a point in time, it's a continuous evolution. That's why we feel that customers will continue to work with us one step at a time as we increase it.
Maybe if you could just also, I know you touched on it with the timeline, but it seems critical in terms of the ramp of Malaysia and the fab. Any additional data points in terms of where you're at from a sampling perspective? And you know, yeah, and maybe tie that into recently Farhan reduced the burn and talk about what type of runway with respect to-
Yeah.
to that ramp.
Yes, absolutely. So we are super excited by how things are going in Malaysia. Actually, it's, you know, truly amazing. You know, just last year, when we first started working in Malaysia, I mean, we had, like, a big, empty shell building, nothing there. In fact, there were some birds flying at the top, and it's kind of crazy. In 100 days, I went back, it's a brand-new, clean facility operating with machines in there. It's actually unbelievable, the rate at which the infrastructure exists to build factories in Malaysia. For those who don't spend too much time in the Asia region, I was at Micron, they had a factory in-- they built a factory for SSDs very quickly. My CEO, Ajay, spent decades in Malaysia working on this.
So we were super excited by how quickly we bought the factory up. And what that enabled us, that enabled us to do is to reduce our burn, of the factory we had in Fremont, which was never really going to be our main manufacturing facility, but we needed something to give customer samples. But Malaysia came up quickly, so we reduced our burn quite a bit, like $35 million is what we said, per year, this year. And that gives us, enough cash and enough runway till mid-2026 before we need to raise, any more money to do this. And the good thing about the mid-2026 is, by that time, if everything goes well, we would have gotten our first line up, we would have gotten some customer qualifications done.
So it's much easier to get other non-dilutive forms of financing to actually, you know, ramp the next few lines. So that's the exciting part. Where we are in Malaysia, actually, you know, I, Ajay is there right now. I just got a video from him this morning, of the batteries coming, early batteries coming off the line. Super exciting to see. We did a lot of good work this time in making sure before we accepted the machines from our vendors, that the FAT was done right, the factory acceptance test, the yields were done right. So we only accepted the machines after they were all good. And now the vendors are all in Malaysia with the machines that we ordered, and they're putting them together. Our expectation is that in...
FAT is done for the Agility Line, so which means we feel very good about all the unit processes. Site acceptance, where we string all these machines together and put batteries, you know, get batteries out of the line, should happen in 2Q this year. Then we're gonna go through extensive testing of the batteries, because batteries, you want to be super safe. They have to be super safe. You don't want to give cells to customers without testing everything. And we have the test criteria from our customers of how they should be tested. We're gonna do those testing, and we give the cells to our customers in at the end of, like, sometime in 3Q. And from then, typically it takes nine to 12 months for our customers to actually start the qualification and get to full production.
That's how we come up with the launch next year.
All right. Well, listen, a lot of good points that hopefully we've inspired some questions from you in the breakout that we can dig into. Let's thank our speaker, and we'll move up to Richardson. Thanks.
Thank you.