Silicon Kings: Amprius And Enovix (NYSE:AMPX) (NYSE:ENVX)

Is it just an incredible coincidence that Fremont, California, has two of the most valuable battery design companies on the planet? They’re right down the road from each other, and Elon Musk’s Tesla (TSLA) is just a stone’s throw away. The companies are Amprius (NYSE:AMPX) and Enovix (NASDAQ:ENVX), and both have invented a revolutionary silicon battery that will cause a major step-change in the industry in the next two years. Amprius and Enovix’s nascent tech doubles current battery power while using the same form factor, and greatly reduces or eliminates the threat of thermal runaway. The battery market is huge, so there’s plenty of room for these two silicon kings to prosper – as soon as they can build their next-gen factories to massively scale production; that is the next goalpost on the horizon.

The fall of QuantumScape (QS) from the ~$100’s to single digits with a Goldman Sachs downgrade, along with Solid Power’s (SLDP) CEO abruptly leaving, does not look good for SSB (Solid State Battery) tech. The Solid Power CEO’s new position is “Professional Recreationist” which is unbelievable, especially if you consider what his company was promising to deliver. These latest negative events show that SSB (Solid State Battery) tech may have a ways to go, but they also help promote silicon battery tech which seems to have a more visible future.

Solid Power was successful scaling from 0.2- to 2-Ah, but from 2- to 20-Ah, they’ve had issues; it’s a “10x increase in really everything – sensitivity to any form of defect goes up quite a bit“, and the goal is 100Ah for BEV companies like Ford (F), BMW (OTCPK:BMWYY) and SK Innovations. They’ve delivered ~150 20Ah batteries to Ford and BMW this past quarter, both of whom “increased their orders” with Solid Power; still, the abrupt CEO departure and the production issues cast a shadow on the company, even though increased orders are a show of confidence. The CEO stated before he left that “there remains a lot of work for our team both in terms of technology development as well as in the scaling up of our production processes“.

In 2017 when Enphase Energy (ENPH) was imploding, new Director T.J. Rodgers brought in Badri Kothandaraman to replace Paul Nahi as CEO to take the company to the next level, and the transition was done smoothly. It matters, especially if you look at Solid Power’s latest share price. Other reasons for the stock crash should be noted: an interview article from 2017 with then CEO Doug Campbell is very telling. Even then, before the pandemic, recruiting talent was extremely tough, and the CEO lamented that “Silicon Valley and Boston” were the hotbeds for battery tech; this spotlights a hidden advantage that both Amprius and Enovix enjoy – they’re in Silicon Valley.

It’s interesting to note that Solid Power’s future plans include introducing a silicon anode for the EV battery market; this is basically an endorsement of the tech that Amprius and Enovix have been working on for over a decade. Solid Power is in the midst of SSB production issues now, so it’s doubtful they’d be able to switch tech and catch up to these silicon contenders.

Amprius Technologies, Inc., was founded in 2015 in California; a SPAC, Kensington Capital Acquisition Corp. (KCGI), a Cayman Islands exempted company, struck a deal with Amprius on May 12, 2022, for $939mm – called “Kensington IV“.

Amprius is a Delaware corporation and private US company that was founded in 2008 in California; it has a sole operating asset, Amprius Technologies, Inc. Amprius, Inc. spun-off three companies which operate separately: Amprius Energy, Inc., Amprius (Wuxi) Co., Ltd., and Berzelius (Nanjing) Co. Ltd (formerly known as Amprius (Nanjing) Co., Ltd.) Amprius (Wuxi) Co. Ltd. is located near Shanghai and Berzelius (Nanjing) Co. Ltd. is in Nanjing.

Amprius Technologies, Inc. completed its business combination with Kensington Capital Acquisition Corp. IV on September 14, 2022. On September 15, 2022, Amprius Technologies’ common stock began trading on the NYSE under the ticker symbol “AMPX”. It is worth noting that Kensington Capital Acquisition Corp’s first SPAC deal was with QuantumScape or “Kensington I“.

Amprius Technologies, Inc. currently has ~$73mm cash and ~84mm shares issued as of last quarter, and insiders own ~94% of the company.

Enovix, Inc. was founded in 2007; the Enovix SPAC with Rodgers Silicon Valley Acquisition Corp. occurred in February 2021, for $1.13B; Enovix has ~$350mm in cash and ~152mm shares as of last quarter, and insiders own ~25% of the company.

The two companies have totally different battery architectures. Amprius has invented a 100% silicon anode battery and Enovix a 100% active silicon anode battery. Some of their competitors like Group14 (MSFT) (OTCPK:POAHY) or Panasonic (OTCPK:PCRFY) use silicon coating on carbon which is inferior. Enovix has never claimed a 100% silicon anode because their anode contains inactive materials, i.e., materials that dilute the silicon capacity but stabilize its structure. Although it’s easy to confuse the two, they are very different, because diluted silicon has a lower theoretical and practical performance limit compared to pure or 100% silicon. However, Enovix’s thermal runaway solution is hardware-based using an army of resistors unique to its architecture, and it is superior to Amprius’ which could prevent ~70% of thermal runaway issues versus Enovix’s ~100%.

Both companies’ products have their pros and cons; there are many factors that must be considered. Both companies have revolutionary technologies to make a silicon anode battery possible, but it’s hard to discern which one is truly better, and the successful scaling of product should be the telltale. If you compare the two companies in Amprius’ Investor Presentation and Enovix’s Investor Presentation, you can surmise one thing: both Amprius and Enovix are superior to current battery tech and there is demand for their products. I wanted to be fair with both companies in this article, but it was almost impossible to develop a side-by-side comparison due to the varying attributes and lack of public information available.

Both Amprius and Enovix plan on building factories starting in 2023. Amprius plans on building a Gigafactory in Georgia or Texas. In October 2021, the Department of Energy awarded Amprius Technologies with a $50mm “cost sharing grant” as a “first funding recipient” to build their factory; Amprius has estimated their “capital equipment expenditures will range between $120-$150 million to achieve 1-GWh annual manufacturing capacity“.

Amprius has a big task ahead which should take a couple of years to complete. Enovix is in a similar situation but smaller in size. Since Enovix is focused on the consumer electronics market, they don’t need a Gigafactory and will begin building their factory in H2-2023 to start production in 2024; they’ve already ordered some of the necessary equipment. Enovix has estimated the cost of their “Gen2” production line at $50-70mm in their Shareholder Letter; a “Fab-2” factory will likely consist of multiple lines.

The consumer electronics market is where the real profit is, not EVs. Selling millions of batteries to Apple (AAPL), Samsung (OTCPK:SSNLF), HP (HPE), Dell (DELL), Garmin (GRMN) et al. cannot compare to a Solid Power, for example, selling hundreds of EV batteries to Ford or BMW. Enovix has already produced 4,163 batteries with no defects and can produce ~10,000 per month, whereas Solid Power stated their pilot EV line would only produce 300 cells per week or ~15k per year.

Enovix clearly has the cash to meet its production goals and has a perfect track record for meeting its IPO milestones. The Executive Chairman, T.J. Rodgers, will give an update on the company on January 3rd, so that will be very important for Enovix investors.

Like Enovix, Amprius has a profitable market of their own in aerospace and has already produced over 10,000 batteries. Consider just one of Amprius’ three aerospace markets – drones. Ukraine has really been a drone war, so if the drones could make it to Moscow, that might be the lynchpin for ending the conflict. Amprius should do well in this market considering the advantages of their silicon battery tech and the recent 2023 NDAA bill passing to the tune of $858 billion.

Both Amprius and Enovix already have large and reputable customers; Enovix mentions five “Strategic Accounts (MegaCap) technology companies” in their latest Shareholder Letter, and Amprius mentions 30+ customers including Airbus (OTCPK:EADSF), AeroVironment (AVAV), BAE Systems (OTCPK:BAESY), and Teledyne (TDY) in their latest Investor Presentation. Both have the U.S. Army as a customer and have received funding from the Department of Energy vis-a-vis IRA 2022, with a “Phase II” level of funding being disbursed in 2023; thus, more cash may be forthcoming to Amprius and Enovix in the new year.

We’re in tax-loss season, and the Fed’s interest rate hikes have depressed the markets. Green Energy companies offering huge potential windfalls in the future with little-to-no revenue now are getting hit hard. Enovix has dropped from the $30s to ~$11. Amprius has been cut down to ~$8. QuantumScape has crashed from a high of $114 down to ~$5. Solid Power (SLDP) has plummeted to ~$2 a share and is selling for less than its cash value. Like Enphase Energy in 2017 at ~$1, these downtrodden stocks could be great bets.

The questionable ESG tactics are being exposed with the Vanguard news, and at least 14 State treasurers are calling for Larry Fink to resign at BlackRock. This won’t hurt green energy companies that can stand on their own like Enovix or Amprius, so that’s a good thing; here’s a microcosm of why forcing ESG upon the economy is unnecessary: Enphase Energy is releasing an IQ Battery 5p in 2023 that will double the power of their batteries at possibly half the price. Imagine an Enovix or Amprius 5p doubling power again and halving the price. These advancements will eventually make residential storage much more affordable. A 50-Amp generator costs ~$2.2k; using residential storage, it would cost ~$30k. If that $30k is halved with the 5p, then halved again with a silicon battery, that’s ~$7k; when compared to a generator with a lifetime of fuel costs, that is where free markets reign and adoption occurs, not using ESG ideas to force people and inhibit economical, infrastructure progress!

In summary, the markets are so vast that Amprius and Enovix are not really competitors yet. Both companies have produced batteries and successfully sold them commercially demonstrating proof of product. Their silicon anode batteries beat carbon ones at least twofold or more. Now, both companies must move to the mass production phase. Scaling production is a huge endeavor, but that is where veterans like T.J. Rodgers, Harrold Rust, Ashok Lahiri, Murali Ramasubramanian, Ajay Marathe, Dr. Kang Sun, Dr. Ionel Stefan, Dr. Weijie Wang, Dr. Wen Hsieh, Dr. Steven Chu, et al. can make it happen in 2023. As an investor in Enovix or Amprius, this is what you believe and who you believe in.

As always, do your own due diligence. I wish both Amprius and Enovix good luck – 恭喜发财.