Apple puts batteries at the centre of its EV masterplan

Apple Inc 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.

The law suit filed by A123, signifies intensifying competition in the EV market, as firms seek to establish themselves in the industry ahead of what are 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.

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, is likely to put significant strain on upstream suppliers.

Battery supply chain: from mine to market 

Apple is the ultimate modern company in terms of supply chain management.

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

The distribution channels Cook and his team have developed – in addition to cutting manufacturing costs – has seen the portable electronics market boom to levels beyond even the most bullish of expectations. Industry spectators will be curious to see if this success can be replicated in the EV space.

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

The logistical operation to execute such huge numbers on a global scale is truly staggering and is one that sees Apple sitting on $178bn 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?

In Benchmark Mineral Intelligence’s opinion, there are not many options available and the EV sector is 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.

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

While building a team of battery experts is a start, new market entrants will soon find having supply chain visibility and control all the way upstream to the mine is crucial to any EV or battery plan and the only way to truly dominate the space.

Apple’s entry into this market will just intensify the search for a new generation of hi-tech raw material suppliers.

Benchmark Mineral Intelligence 

London

Created by Simon Moores, Benchmark Mineral Intelligence is the new standard in consultancy and market intel for niche, critical and industrial minerals and metals. An initial focus is on battery raw materials including graphite, lithium and cobalt. It will also analyse major industrial markets, emerging industries, and disruptive technologies.