Sila's Berdichevsky on Business Strategy

Bloomberg

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00:00In very simple English, yes, we just read a bit of Greek there.

00:04What do you guys do? What's the technology?

00:06Silicon anodes.

00:07Silicon anodes, yeah.

00:08So what does that mean?

00:09Inside every lithium-ion battery, there is a critical component,

00:13the anode material, that helps it store energy.

00:15For 34 years, that component has been graphite,

00:19predominantly made and refined in China, maybe 93% these days.

00:24We replace that with a silicon-based anode.

00:26That gives you much higher performance, 20% to 40% higher energy density.

00:31So think longer drive times, longer flight times,

00:34your laptop, your phone lasting longer.

00:36And it has a different supply chain that allows us to manufacture this in the West

00:41very cost-effectively, very cleanly,

00:44and display some of that critical dependence that the world has on Chinese graphite today.

00:49In terms of how it's processed,

00:51I mean, can you tell us a bit more about what that process looks like in the capacity that you have right now?

00:57Yeah, so the key challenge with this technology,

01:00you know, we invented it over the last decade,

01:02and we've now scaled it up about a million X from the lab scale where we made it in grams.

01:08We just opened a factory in Moses Lake, Washington.

01:11It produced several gigawatt hours equivalent,

01:14so it'll support quite a lot of batteries.

01:17And we process it really through a novel thermal process

01:25where we convert a silicon input gas into this material

01:30that then further goes into the battery maker

01:33and gets integrated into whatever kind of battery they want to make,

01:36whether it's an EV battery or a drone battery or a phone battery.

01:40In terms of the current applications right now,

01:43so just give us a sense of your current customer base.

01:45Who's using this stuff?

01:46Yeah, so so far we've launched in several million small consumer devices

01:50across a couple customers,

01:51so think wearable devices that are smaller because of this technology.

01:56But with this new factory coming online,

01:57we have a lot more production capacity.

01:59And so in our pipeline of customers,

02:01we have cell phones, we have power tools,

02:04we have satellites, we have drones,

02:06and of course electric vehicles,

02:08data centers as well.

02:10So when you're talking about AI data centers,

02:13they need better batteries because the workloads are so spiky,

02:17they cause a lot of issues with energy.

02:19And so silicon anodes can also help in that domain.

02:22So really anywhere where there's a lithium-ion battery

02:24can benefit from this technology,

02:25and you will see it diffuse over the next three to five years

02:29into every single aspect of our lives.

02:32How do you see the competition now in the EV battery space?

02:35I mean, everyone talks about China as CATL, for example,

02:38and where they're really leading and dominating

02:40when it comes to innovation and technology right now.

02:43How does it compare with what you're seeing over in the West?

02:46Yeah, so companies like CATL, Panasonic, Samsung, LG,

02:49those are ultimately our customers.

02:51So the battery makers buy anode materials.

02:53Again, today, they buy almost entirely Chinese graphite,

02:56Chinese-made graphite,

02:57but they can start to buy Western silicon to displace that.

03:02And so really for us,

03:04it's a performance and supply chain differentiation

03:08relative to the baseline.

03:10So for us, we're really looking at it more of a technology shift

03:14than direct competition with graphite anodes.

03:17I think over the next, again, three to five years,

03:19we're going to see silicon start to replace graphite

03:21in most applications.

03:24And in the West, the customer base is obviously very different.

03:28You know, LG, Panasonic, Samsung

03:30tend to be the leading battery players in the West.

03:33The pitch, obviously, we've spent just the better part

03:37of four minutes on this,

03:37so it's clearly not as comprehensive.

03:39But the pitch seems very straightforward.

03:41And the confidence I sort of get from you

03:43is that it's a matter of time and scale

03:46more than a matter of competition.

03:48So it seems straightforward,

03:49but when you pitch this to customers, for example,

03:51is there just a mental shift that needs to take place?

03:54What is that?

03:54What is that thing?

03:55Exactly right.

03:55So just like lithium-ion replaced nickel-metal hydride,

03:59right, that took time

04:00because lithium-ion was new, was different.

04:02Nickel-metal hydride batteries were very robust,

04:04very well understood.

04:05Customers have to work on adopting it.

04:07So that's one of the barriers

04:09is it's a different technology.

04:11You have to tune how the battery is made

04:13using this technology.

04:14But ultimately, you get to use the same factory,

04:16and that's really, really important.

04:17So if you built a gigafactory

04:18for conventional lithium-ion,

04:20you can implement silicon anodes there.

04:22But the other big barrier is just scale.

04:25So we've got a couple gigawatt hours

04:27of production capacity.

04:28Next up, we're going to 10x that

04:30to, say, 25 gigawatt hours.

04:32And then the world today

04:33needs about 2,000 gigawatt hours.

04:35So just thinking about

04:36how long it'll take to scale.

04:38Yeah.

04:38Right.

04:39And this sounds like,

04:41could be wrong,

04:42in a few years,

04:42this might become a political story

04:44just because of the type of things

04:46that goes into

04:47some critical technologies.

04:49Is that something that entertains you?

04:50I don't think it's in a few years.

04:52I think it's probably in a few months.

04:53Because just as with rare earths,

04:56if China were to exercise

04:59export controls on graphite,

05:00and they were included

05:01in the export controls

05:03that were released two months ago,

05:05but are paused,

05:06you would essentially

05:08shut down

05:09most Western battery factories

05:11and all Western EV factories.

05:14So you'd have

05:14hundreds of thousands of people

05:16unemployed the next day

05:17if graphite

05:18were restricted

05:20from being exported.

05:21Wow.

05:21So I think that,

05:22you know,

05:22it is less talked about

05:24than rare earths,

05:24but the concentration,

05:26the geographic concentration

05:28of supply chain

05:28is just as high.

05:30And so it's something

05:31that governments

05:32have to contend with,

05:34and this is one of the solutions

05:36is moving to this new technology.

05:37You mentioned

05:37it's a matter of months.

05:39Yeah.

05:39How are you preparing

05:40for any sort of possibility

05:41of heightened?

05:42So we're working very hard

05:44to design the next generation

05:45of our plant,

05:47the next plant,

05:48the 10X expansion.

05:49And so, you know,

05:50we have a lot of customers.

05:51Obviously,

05:52you can't build a factory

05:52like this in months.

05:54It's a very, very large facility,

05:55but I think we're keen to scale.

05:58And certainly, you know,

05:59I think cooler heads will prevail

06:00in the global trade scene.

06:02We're not, you know,

06:04as we've seen the pause

06:06with Rare Earths

06:07and other things.

06:08So I don't expect it to happen,

06:10but what I'm saying is

06:11I think this can be an issue

06:12at any moment.

06:13Yeah.

06:14And I think for us,

06:15we just have to focus

06:15on scaling up the production.

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