Batteries at the centre of Apple’s EV master plan

28th February 2015

By: Henry Lazenby

Creamer Media Deputy Editor: North America

  

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TORONTO (miningweekly.com) – Consumer electronics giant Apple is being sued by lithium-ion battery producer A123 Systems for "systematically" poaching employees to establish a new battery division, expected to power the company’s foray into the electric vehicle (EV) sector.

The venture, reportedly named ‘Project Titan’, has already seen Apple recruit “hundreds of employees” according to the Wall Street Journal.

In an opinion piece released this week, London-based research house Benchmark Mineral Intelligence said the lawsuit filed by A123 signified intensifying competition in the EV market, as firms sought to establish themselves in the industry ahead of what were expected to be significant growth rates over the coming years.

“As these project developments expose a shortage of skilled battery experts in today’s market, attempts by major technology firms to develop battery capabilities increases the potential for tightening supply conditions in raw material markets,” Benchmark analyst Simon Moores explained.

With established producers, such as Tesla Motors, Foxconn, LG Chem and Boston Power, already developing battery megafactories, the introduction of major new, financially powerful producers, such as Apple, was likely to put significant strain on upstream suppliers.

FROM MINE TO MARKET
Moores stressed that transferring supply chain excellence to the EV market would be key to get ahead in these early days, with Apple being the ultimate modern company in terms of supply chain management.

Since becoming CEO in mid-2011, Tim Cook had turned Apple into the most profitable company in history. He had taken the innovative products created by former CEO Steve Jobs and commercialised them to a level never seen before in consumer electronics.

According to Moores, the distribution channels Cook and his team had developed – in addition to cutting manufacturing costs – had seen the portable electronics market boom to levels beyond even the most bullish of expectations. Industry spectators would be curious to see if this success could be replicated in the EV space.

Through the company's efficient supply chain management and close partnership with manufacturer Foxconn Technology Group, Apple, between October and December 2014, made $18-billion in revenue, selling 34 000 iPhones an hour, on average. That equated to 74.5-million units over the quarter.

Moores noted that the logistical operation to execute such huge numbers on a global scale was truly staggering and was one that saw Apple sitting on $178-billion in cash.

“So the question is what new global growth market can Apple invest its huge sums of cash in while playing to its strengths?” he asked.

In Benchmark’s opinion, there were not many options available and the EV sector was the strongest viable market.

“In essence, an EV is more akin to an iPhone than a car – it is an iPhone on wheels. The software that drives the car's efficiency is nearly as important as the batteries that power it. Yet EVs are a new technology entering a very well established auto industry that has not seen true disruption since it was founded. 

Tesla Motors has already proven what slick design, innovative thinking and good software can do for a high-end EV market bereft of major improvements in batteries. These are all hallmarks of Apple,” Moores noted.

Tesla had also identified that cheaper and better batteries were the only way that the mass market EV space would succeed and had, therefore, invested $5-billion in building the Gigafactory – a lithium-ion super-plant that would require huge volumes of high-specification graphite, lithium and cobalt to fuel it.

"While building a team of battery experts was a start, new market entrants would soon find having supply chain visibility and control all the way upstream to the mine would be critical to any EV or battery plan and the only way to truly dominate the space,” the analyst said.

And the ultimate boon to the mining sector would be that Apple's entry into this market would only intensify the search for a new generation of hi-tech raw material suppliers.

Edited by Tracy Hancock
Creamer Media Contributing Editor

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