Enovix: An Overview

Enovix is far from being a household name. Nonetheless, it is a company which, in my opinion, has a great amount of potential but also a high amount of risk. In today’s article, I am going to provide a brief overview of Enovix and discuss the reasons I am bullish on Enovix.

What is Enovix?

Enovix is a battery company headquartered in Fremont, CA that become public via a SPAC merger in 2021. It currently has a production facility in Fremont and is planning on opening a more advanced production facility in Malaysia. Enovix is still in the early phases of its life. It currently produces relatively few batteries and doesn’t generate very much revenue. Hence, my thesis on Enovix is all about the future, about what Enovix might become.

What makes Enovix noteworthy is its technology. Enovix has technology that allows it to produce batteries with a 100% active silicon anode and with technology that is to significantly reduce the likelihood of its batteries catching on fire, a technology it calls BrakeFlow. Enovix batteries have the potential to offer both greater energy density as well as being safer than batteries currently being used.

Enovix hopes to produce batteries that will be used in various types of devices, such as smartwatches, medical monitoring devices, smartphones, tablets, and laptops. It also is looking to form an agreement with an OEM to form a joint venture or license its technology to allow for EV batteries to be built using its technology.

Why I’m Bullish on Enovix

The Technology is Potentially Game Changing

Enovix’s technology looks to be potentially game changing. If it can do what Enovix claims, Enovix’s batteries have the potential to offer both greater energy density as well as improved safety. This is huge. Currently, many devices are limited by their batteries. In essence, a smartwatch or smartphone can have limited computing power because it has limited battery power. Increase the computing power too much and the device will use up its battery power too fast.

Enovix has the potential to help improve this situation. By significantly increasing energy density, Enovix can enable devices to have greater computing power, which in turn can allow devices to do things which they currently can’t. The ability to have more energy dense batteries which subsequently leads to the ability to make more capable devices may be a major incentive for companies to choose to use Enovix’s batteries.

Companies which try to offer top of the line performance and technology will need to have batteries which have similar levels of energy density as their competitors. If one company had access to substantially more energy dense batteries than its rivals, it would have a significant advantage over its competitors. The point being that leading wearable and mobile device makers will have a very strong incentive to choose the most cutting edge batteries on the market. This is why I believe that it is a very real possibility that numerous leading technology companies, including Apple and Samsung, end up being major buyers of Enovix’s batteries.

Also, having batteries which are much less likely to catch on fire is very significant. No one wants a device they have to all of a sudden go up in flames. Furthermore, as energy density increases in batteries, fire risk increases too. Enovix’s BrakeFlow technology aims to stop situations of thermal runway causing a fire. This added safety benefit may also be a major selling point for Enovix since having a device catch on fire is a major safety, liability, and reputational risk for device makers.

In essence, I believe that Enovix has very valuable technology which many companies will want to utilize in their devices. I think Enovix technology will give them a very significant advantage over many current battery companies and will allow them to take market share in the future.

Impressive Leadership

Enovix has an impressive leadership team, in my opinion. T. J. Rodgers is Chairman of Enovix. Rodgers has an impressive track record, having been the CEO of Cypress Semiconductor for over three decades. Furthermore, Rodgers, as a board member, was instrumental in helping to turn around Enphase Energy. Rodgers became more active in Enovix toward the end of 2022 when he saw that the company wasn’t living up to its potential. Rodgers’s willingness to get more involved showed me that he believes in the potential of Enovix. Furthermore, Rodgers was instrumental in helping to select Enovix’s new leadership team.

Raj Talluri is Enovix’s CEO. He took over the role in January of this year. Before that, he had leadership roles at both Micron and Qualcomm. Ajay Marathe, Enovix’s COO since November 2022, has a track record that includes leadership roles at Western Digital Corporation and AMD.

Rodgers put an emphasis on finding leaders who can bring a semiconductor mentality to Enovix. The semiconductor industry is fast paced with frequent technical innovations. This is the type of mindset that Talluri and Marathe, two semiconductor veterans, are trying to instill at Enovix.

Talluri and Marathe have a history of scaling production, and I believe that they have the experience, knowledge, and mindset necessary to successfully scale production at Enovix. From the times I have heard them speak, they both give me the impression of being very focused, no-nonsense types of leaders.

Large, Growing Market

Batteries are becoming increasingly important and prevalent. Enovix estimates that their total addressable market for IoT, mobile, and computing as being at $23 billion by 2026, and that does not include the market for EV batteries.

Additionally, innovation may grow the market for batteries. I don’t know what types of devices might be invented in the next decade, but it is very possible that a new portable device will get invented that becomes very commonplace and significantly increases the total addressable market for Enovix. Hence, I think it is very possible that Enovix’s total addressable market grows considerably faster than most people expect.

EVs

Making electric vehicle batteries is not, in my opinion, essential for Enovix to succeed. The market for IoT, mobile, and computing is large enough for Enovix to become a very valuable company without ever getting into the market for EV batteries. Nonetheless, if Enovix is successful with their efforts in EV batteries, the reward could be considerable and may add significant upside to the stock.

Enovix’s strategy with regard to EV batteries is to either form a joint venture with an OEM or to license their technology to an OEM. Building a factory to produce EV batteries would be very expensive, and Enovix’s primary focus has been on IoT, mobile, and computing batteries, so it likely will require more research and development spending before Enovix would be prepared to start building EV batteries. For both reasons, seeking either a joint venture or a licensing agreement with an OEM would allow Enovix to avoid having to shoulder the entirety of the expense to produce EV batteries while still allowing it to expand into the EV battery space.

Enovix’s technology does potentially offer some significant advantages for EV batteries. Faster charging times, longer battery lives, and increased resistance to fires are all potential benefits that an Enovix EV battery may have over its conventional competitors. Due to these potential advantages, I believe that Enovix has a real chance at capturing a significant share of the EV battery market. However, since it seems to me that the advantages that Enovix has with regards to EV batteries are not as great as with IoT, mobile, and computing batteries and because Enovix does not seem to be as advanced in their research in EV batteries as with IoT, mobile, and computing batteries, I believe Enovix’s chances of successfully become a significant company in the EV battery market is less than with regards to IoT, mobile, and computing batteries.

Can It Scale Production?

Can Enovix successfully scale production of its batteries? This is the biggest, most significant question with regards to Enovix in my opinion. I personally believe that it can. I believe that Raj Talluri and Ajay Marathe have the experience and knowledge to succeed with regards to scaling production, and my confidence is boosted knowing the TJ Rodgers is keeping an eye on the company in his role as Chairman.

Despite my belief in Enovix’s ability to scale production, I recognize that there is a very real chance that Enovix fails at being able to successfully scale production. In that scenario, I would expect that Enovix’s stock performs terribly and loses most, and potentially even all, of its value.

Conclusion

Enovix still has a lot to prove. I expect the next one to two years will be critical for the company. It is my hope that Enovix succeeds in scaling production and wins significant contracts from Apple, Samsung, and other leading companies. However, I know that Enovix might fail and fall far short of my hopes. Due to Enovix still being a largely unproven company which needs to show that it can scale production, I view Enovix as being a very risky stock. I am looking forward to seeing what the future has in store for Enovix.

Disclaimer: This newsletter is for illustrative, discussion, education, and entertainment purposes only. Nothing contained in this newsletter is financial advice, investment advice, tax advice, or any other kind of advice. Nothing contained in this newsletter should be considered a recommendation to buy or sell any stock. Nothing contained in this newsletter should be considered a recommendation to undertake any type of financial activity. The author is not a financial advisor. The views expressed are solely the opinion of the author, and the author’s opinion may change at any time. The author has no responsibility to update this newsletter if his views change. The author does not guarantee the accuracy of the information contained in this newsletter. Investing, including investing in stocks, involves risk. The potential to lose capital invested is a risk of investing in stocks. Past performance does not guarantee future results. Before making any investment decision, a person should do their own research, consider their individual circumstances, and strongly consider seeking the advice of a properly licensed professional. The author is not responsible for any decisions made by the reader. The author is not responsible for any actions of the reader. The author is not liable for any loss a reader may suffer from buying or selling stocks. The author is not liable for any loss a reader may suffer from any financial decision made by the reader. Once again, this newsletter is NOT financial advice, investment advice, tax advice, or any other kind of advice. As of June 8, 2023, the author is invested in Enovix Corporation (NASDAQ: ENVX) stock. The author’s portfolio of stocks may change at any time, and the author does not have an obligation to inform readers if and when the author’s portfolio changes. Likewise, the author does not have an obligation to update this article if the author buys or sells any stock, including but not limited to stock of the companies mentioned in this article.