Q3 2024 Enovix Corp Earnings Call
It is in California.
It's also a significant accomplishment that we shipped <unk> samples from fab two just weeks after the grand opening consistent with our plan.
The agility line is fully operational and.
And the initial yields and digitally line.
Our comparable the final levels, we achieved the first line in California, and with improvements expected from there.
The high volume line is also on track to complete site acceptance testing into different before which is consistent with our timeline.
And start mass production for smartphones Iot customers in late 'twenty five.
No we are thrilled to announce today that.
A farm out we formalized a strategic partnership is the second leading smartphone Oems now.
Lehman outlines the key milestones.
That we are working together with them and upon meeting them, we're set to enter in the smartphone market 25 with high volume production.
I've said many times before our first commercial smartphone deal would be the hardest.
You still have a lot of work to do in passing the customer qualification process.
And ramping in high volume line, but we're doing that together with our customer and we expect the first expected customer.
Now to further bolster our 2025 sales pipeline, we aligned on our production schedule with a leading Iot customer, which includes our mass production purchase order.
This partnership as well as the progress, we're making on the EV space underscores our ability to diversify into high value sectors beyond just smartphones.
Now I'm very pleased our recent commercial success and believe the opening of Fab two has been a very helpful. Contributor. We're also getting benefit from the recent surge in AI enabled smartphones, which is further validating our strategy and driving significant pool for us.
Our products and transfer and the transformation leap at energy instead, we can provide.
Now last quarter I mentioned that.
4000 to 5000 Williams or battery in smartphones in our pockets today could soon go to more than 6000 million Boston beyond your AI.
Here, we are just three months later I can report to you there are customers now asking us for 7000 Milliampere smartphone batteries.
Why is it important this is important because the smartphone size has not increased so the industry.
We'll need higher energy density batteries to fit this increased capacity in the same space, which bodes very well for <unk>.
Like I know, which works on producing high energy density batteries.
As I mentioned earlier, we've already started shipping of VX one of them.
As the needs of our customers continued increased they're also launching E X to them as fast as possible.
As I mentioned before <unk> will increase the energy density on top of VX one of them the.
First samples of fast sample shipments to select customers.
Speaker Change: Yes, two of them are scheduled in Q4.
Speaker Change: And these are key also to accelerating our timeline to full scale mass production in 'twenty five and beyond.
We also completed the product definition and roadmap.
Speaker Change: Beyond the X to Ria.
Speaker Change: Reaffirming our commitment to pushing the boundaries of innovation and delivering industry, leading solutions to our customers across a wide range of industries with that I'll turn it over to farhan for their financials.
Farhan: Thanks Raj.
Farhan: All the relevant financial information in the quarterly report in the shareholder letter So I'll keep my common shock.
Farhan: For Q T. We delivered revenue of $4 $3 million, which was above the midpoint of our guidance range.
Farhan: non-GAAP EBITDA came in at a loss of $21 $6 million.
Farhan: Above our guidance of <unk>.
Range of loss of 23 million to $29 million.
Farhan: And non-GAAP EPS came in at a loss of 17 cents at the high end of our guidance range of loss of 17 cents to 'twenty. Please.
Farhan: We ended the quarter with roughly $200 million of cash and equivalents.
Farhan: And we had capex of about $19 million and $31 million of cash used in operations during the third quarter.
Farhan: Our balance sheet is strong and gives us runway well into 2026.
Farhan: Now turning to the guidance for the fourth quarter of two of 2024, we expect revenue in the range of 8 million to $10 million.
And adjusted EBITDA loss of 19 million to $25 million.
Farhan: And non-GAAP EPS loss of 17 to 22 cents.
Speaker Change: Now I'll turn back to Raj to close.
Yeah. Thank you for that as you can see we made substantial progress in the third quarter by opening our fab to.
Raj: Securing our most meaningful customer commitment to date in the next major milestone this quarter on our journey to scale, we'll be completing besides acceptance testing of what high volume line and shipping the first samples of <unk> to our customers with that we can go into questions operator.
Speaker Change: We will now begin the Q&A session. Please note that this call is being recorded.
Speaker Change: Before we go lives two questions, we're going to read the two most highly voted question submitted by shareholders ahead of this call during the call registration.
Speaker Change: The first question is what yields are we currently seeing on the agility line and when can we expect an update on H B M line yield.
Speaker Change: Yes, Hi, Jay do you want to take that yeah sure.
Speaker Change: As we communicated with you with you all.
Jay: Really the land completed the F N b during the quarter of last quarter, and we brought up the agility line on the <unk> technology node at yields little bit higher than where we left off year closer to 80%.
Jay: And the Yttrium line rich has identical journals.
Jay: Two the agility line.
Jay: Is in S. E T mode right now in in Fab, two and Theres No reason to expect anything lower than what the agility line was able to do.
So we feel pretty good about these yields how they're ramping.
Speaker Change: Yes, Thank you Jim.
Speaker Change: The second question is.
Speaker Change: Understand and Asics proprietary Terry process is patent protected where applicable how long of a first mover advantage. This analytics have before you see competition, we can utilizing silicone and batteries on a larger scale once and VIX and customers prove the technology works and there is a demand market and as you.
Speaker Change: With group 14th technologies afford analytics exclusivity in the markets, where you utilize their FCC 55 material.
Speaker Change: Yeah. Thank you for that question, yes, as a as a as you alluded to we have a patent protected process the significant amount of patents and more importantly significant amount of the.
Speaker Change: Trade secrets and industry Knowhow in not only how to manufacture a high energy density batteries, but also the machines that actually we used to manufacture batteries as you as I've mentioned before we first designed the machines and the design the machines that make the batteries. So our intellectual property is in both areas.
Speaker Change: Our unique architecture of.
Speaker Change: Of manufacturing the batteries allows us to use 100% active silicon we are the first ones to use 100% active silicon batteries in.
Speaker Change: In this consumer market and we are really excited by that accomplishment that the team has made.
Speaker Change: You know the competition that we've seen it's been mostly people who use 5% 10%.
Speaker Change: The best guess of.
S. I E like some farms silicon material doped on top of graphite. If you use any more than that what we have seen is the battery continues to swell up and it get the swelling cannot be controlled by traditional manufacturing process. We have a unique advantage there and that is why we feel strongly that we have this unique value.
Speaker Change: <unk>.
Speaker Change: As far as the agreement on with the group 14, we.
Speaker Change: We're working with grow 14, they provide great anode material. We also work with other suppliers of anode material that use silicon in some form of.
Speaker Change: Carbon so we have multiple suppliers that we use based on the market best of the end products and based on the requirements of the battery. So thank you.
Speaker Change: We will now go to the queue. If you would like to ask a question. Please use the raise hand feature on your screen. If you have dialed in via phone. Please you star nine to raise your hand questions will be answered in the order. They are received please ask one question and one follow up question Atmel.
Speaker Change: We will now pause for a moment to let the queue assemble.
Speaker Change: Our first question comes from Ananda Baruah with loop capital markets. Please on mute your line and ask your question.
Ananda Baruah: Yeah, Hey, guys. Thanks, a lot.
Yes, congrats on the new announcement and thanks for taking the question.
Ananda Baruah: Two if I could I guess I'll just start with the it's really a clarification.
Ananda Baruah: Around the announcements Raj So is is the <unk>.
Ananda Baruah: <unk> volume customer for December.
Speaker Change: December quarter 2025.
Speaker Change: Is that the new customer is that the new the new relationship or is it the prior relationship.
Speaker Change: Yeah.
Speaker Change: This is a new customer that we announced today.
Speaker Change: That is a commitment in the agreement that we made that once the batteries pads that we jointly agreed to that once the past qualification.
Speaker Change: Chemical into launching in the next year.
Speaker Change: The other customers we work with are also well along the way.
Speaker Change: And we hope to get more as as the year goes by just proving that the value of our technology is there for multiple customers in the smartphone market.
Speaker Change: Got it that's very helpful and.
Speaker Change: Yes.
Speaker Change: Can you remind us which which.
Speaker Change: Which batteries, you'll be going to market with next year.
Speaker Change: Yes at volume.
Speaker Change: And yes, two unless it goes.
Speaker Change: Everything goes well would start getting samples out.
Speaker Change: Yeah, as I mentioned <unk> one of them is a battery that we sampled our customers and people like the performance of the product people like what Theyre seeing.
Speaker Change: They're giving us some feedback on things to tweak and updated to better fit those particular smartphone models and we're continuing to work with our customers on that.
Speaker Change: <unk> is our next technology, which we will be sampling this year and we expect that to go to production in 2006, and we are working hard to get that accelerated also.
Speaker Change: Got it that's helpful. Thanks, so much I appreciate it.
Speaker Change: Our next question.
Speaker Change: It comes from Colin Rusch with Oppenheimer.
Speaker Change: Your line and ask your question.
Colin Rusch: Thanks, So much guys as you look at initial yields as well as development stacks from your customers and what's happening with pricing on batteries.
Colin Rusch: Talk a little bit about how does the pricing dynamics are trending and how that rolls through into your target gross margins previously.
Colin Rusch: Previously communicated.
Speaker Change: Yeah, you know we have started the pricing discussions now with our customers of this of this.
The products that we're expecting the margin next year, we will also close pricing with some of the other customers on the Iot space.
Speaker Change: We are continuing to be able to command a premium for our four hour batteries, because we provide much higher energy density and that's very valuable and premium tier smartphones, which is where we are focused on.
Speaker Change: Where the value will provide translates into value for the end customers. So our customers are able to.
Speaker Change: Give us the price premium because they are able to take advantage of the higher battery density. So we feel we feel pretty good about it.
Speaker Change: As for the gross margins as we've mentioned in the last quarter.
Speaker Change: Our long term.
Speaker Change: Our gross margin profile that we expect to get to as we get to these premium tier smartphones in the in the 50% range and at scale, we still expect to get to them.
Speaker Change: Okay Fantastic and then.
Speaker Change: $9 million.
Colin I think 500 I just wanted to make sure that <unk> got that its cash gross margin of 50% and plus not just gross margin.
Speaker Change: We.
Speaker Change: And then like Rod said.
Speaker Change: We expect that like you know if we can get there and already in the market. What you see very clearly is that the.
Speaker Change: The batteries, which are higher energy density get a premium and so we expect to get a premium as well as this market is sensitive to energy density and for us to achieve our long term target we have to get there.
Speaker Change: <unk> types energy density and beyond and get to scale like we said.
Speaker Change: We expect that we can get those margins once it Scott.
Speaker Change: And that's it I appreciate the clarification and then in the guidance for fourth quarter in revenue in that $8 million to $10 million you just break out what's coming from <unk> and how much is coming off the agility line Andrew.
Speaker Change: Driving Aragon.
Andrew: Yeah, it's mostly coming from.
Andrew: Rugged there's a small amount that is coming.
Andrew: From the agility line, but at this time, we have been mainly sampling.
Andrew: And so the revenue contribution is mostly coming from Roger.
Speaker Change: I appreciate it.
Speaker Change: Okay.
Speaker Change: Our next question comes from Bill Peterson with Jpmorgan. Please on mute your line and ask your question.
Bill Peterson: Yeah, Hi, good afternoon, and thanks for taking my questions and nice to see the additional announcements.
Bill Peterson: I wanted to ask about sampling so I guess, how many of the top eight smartphone Oems have received excellent samples thus far what's.
Speaker Change: What's the initial feedback that I think you're looking at samples six out of the top eight if you sample the large Korean or the large U S priority pretty much all in China, and I guess are there other form factors or device type C. Also sample in the quarter with similar technology.
Speaker Change: Yeah, and you know as I mentioned, we just got it up and we have sampled some customers and we'll continue to and will continue to sample and more and more.
Speaker Change: There is interest from many many different people and it's just we're trying to make them as quickly as I can I can really give you all the details of who are we sample do it wouldn't be fair to say that but I can assure you. There's a lot of demand and we're trying to make them as quickly as we can and maybe for Honeywell No I just wanted to say that we have sample like we said the two customers that we have disclosed our.
Speaker Change: Top five Oems in smartphones, so they're not like.
Speaker Change: Some tiny company and they are not they are companies that are very prominent in the premier beer.
Speaker Change: <unk> phones in China, and so that's something that we can tell you. That's what we're prioritizing first because that's where this year I estimate.
Speaker Change: Okay, I guess on the commercial side, given your expectations with the new smartphone OEM announcements plus.
Speaker Change: Plus I guess some early Iot production schedules can you give us a sense of what kind of volumes, you're expecting expecting broadly in 2025.
Speaker Change: Are these you can easily in the millions I guess in the smartphone side or how should we think about volumes.
Speaker Change: Yeah, you know, it's a it's very difficult to know exactly that I think we will get more and.
Speaker Change: More clarity as we move along so you know as I mentioned last time I think it's important to understand the process of how smartphone penetration happens right. So we give them samples you know theyre going to test them, then we're going to get from them.
Speaker Change: Specification of the exact battery size that they would like to use in the phone that's going to launch in late 'twenty five and that'll usually come beginning of 'twenty five that's when they'll finalize what the model would be what the size would be when we made that cell in order in our high volume manufacturing line.
Speaker Change: And they'll go through another set of series of tests within the phone model itself.
Speaker Change: Based on the performance and based on which model that targeting and the volumes will vary based on which regions at lunch and so on.
Speaker Change: At least the initial ones and then through 2006, you will see them build up and go into more and more models. That's typically how the smartphone ramp works they start small, but they keep going up.
Speaker Change: And.
Speaker Change: The other thing I would just add like Rod mentioned earlier, though we have.
Speaker Change: All this stuff that the hardest.
Speaker Change: Part of the ramp is getting the first customer.
Speaker Change: Once you have the first customer you can.
Speaker Change: Your value proposition to customer changes before that there is good for our customers is hey, this is a battery that nobody else is using.
Speaker Change: Well, if I use it and something goes wrong then.
Speaker Change: There's a lot to lose.
Speaker Change: If on the other hang the best battery goes in a smartphone and it launches in.
Speaker Change: And it's proven than you know the equation changes then if you don't use it then.
Speaker Change: Following behind so that's how we have approached them you know it's a.
Speaker Change: Very encouraging to see at least one customer.
Speaker Change: Has gotten over that hump and so.
We.
Speaker Change: Build the batteries in their form factor and if they meet the performance.
Speaker Change: That is in line with the expectation and based on my initial samples they feel good about.
Speaker Change: Engaging with us.
Speaker Change: With the intention of launching a form and quantifying.
Speaker Change: That's it.
Speaker Change: Thank you.
Speaker Change: Our next question comes from George January 1st with Canaccord. Please mute.
Speaker Change: Your line and ask your question.
Speaker Change: Everyone.
Speaker Change: Thank you for taking my questions.
Speaker Change: Just to maybe.
Speaker Change: Tack onto that the previous question.
Speaker Change: To the extent you wanted to failure revenue pipeline. Additionally for next year given how late we are in 'twenty 'twenty four and how long it takes to qualify and get designed in and is there still potential if customers come to you. There are testing your samples to fill the 2025 revenue pipeline between.
Speaker Change: Now and the end of the year or wherever that deadline kind of meets thank you.
Speaker Change: Yeah and it is.
Speaker Change: It's all going to be based on how quickly the batteries that qualify in the customers' products right.
Speaker Change: Most important thing people need to realize about this market.
Speaker Change: Batteries people take very seriously and when they put it in a device and the qualification process is very strict and takes a certain amount of time.
Speaker Change: A lot more stringent than semiconductors for example.
Speaker Change: Because of safety and so on but.
Speaker Change: I do believe that.
Speaker Change: We do a lot of the testing in house to make sure that what we're giving is what people really want and ourselves. So if things go well it could be much faster.
Speaker Change: But we are planning.
Speaker Change: Planning that will be late next year.
Speaker Change: But I will tell you one thing the first ones are the hardest with any customer because once you're a supplier that is that it in their system and they have launched some batteries with us the following models come much faster and much quicker.
Speaker Change: So I think that's the most important thing so.
Speaker Change: And maybe as a follow up to that does the same logic apply to additional Iot customers, who could fill the revenue pipeline for next year. Thank you.
Speaker Change: In some Iot markets the testing could be a little lesser less stringent because you know for example in smartphones customers want 810000 cycles. So to test eight hundreds of thousands of cycles takes months, because you can charge and discharge and charge in this stage you know 800000 tons. Some Iot markets people only one 500.
Cycles because.
Speaker Change: Maybe the product doesn't last that long or not charged every day.
They could be lesser so in that in that one example, there you could launch the product sooner because the testing cycles will be shorter.
Speaker Change: I'll give another example, like in a portable device like a smartphone people do a lot of.
Speaker Change: Safety tests like drop test you know like a you know thermal abuse test and and so on if it's a larger portable electronics device, maybe that's not as important so.
Speaker Change: Again, it all comes down to the.
Speaker Change: The nature of the device the how many cycles has to go through how much testing so customers want to do and how the device is used and that is what gets how quickly across our product and go to production. After we give them samples that qualify.
Speaker Change: Our next question comes from Gus Richard with Northland. Please UN mute your line and ask your question.
Speaker Change: Yes, thanks for taking the question.
Gus Richard: Now that you're getting visibility into 25.
And given the mix you're expecting.
Gus Richard: What do you think the.
Gus Richard: The revenue potential for that line would be given the mixture youre looking into both Iot and mobile.
Speaker Change: I think we mentioned before our line is capable of running at 13, 50, youll be etch and.
Speaker Change: And that is for large sized batteries.
Speaker Change: We mentioned roughly like a 9 million units at the $10 is what we can get the lineup too.
Speaker Change: But again I think our.
Speaker Change: The gating thing is not so much the line, but the gating being to how much revenue is the customer qualification timelines and and we take that very seriously and we spend a lot of time on making sure. The batteries are safe and our customers to go through all the tests you know for the <unk>.
Speaker Change: First time first time around when we had the new supplier.
Speaker Change: But once we get there I think the revenue will be much much quicker.
Speaker Change: Okay got it and then just thinking about the second line.
Speaker Change: I think you had talked about that starting.
Speaker Change: Starting production maybe at the end of next year and I was wondering if those plans are still on track.
Speaker Change: Yeah the way the way we think about second line is is this again.
Speaker Change: As we get more and more visibility you know through.
Speaker Change: <unk> 25, as the customer qualifications are going for example, if you are getting into very high volume phone.
Speaker Change: We all know that and when we know that we need to quickly start investing on the second line to build it up.
Speaker Change: And if it is a lower volume and then the next model is higher we have probably have a little bit more time. So the whole and also we want to make sure that the second line is much lower cost in the first line ICI and Steve have some great.
Ideas on how to commodity costs reduce the line, but make it faster.
Speaker Change: So all those things were taken.
Speaker Change: In our account and we'll give you more color through 25, how we are building those lines and in 'twenty six and seven.
Speaker Change: I also want just to add to what Roger said.
Speaker Change: Working.
Speaker Change: Learning from the line number one the high volume line.
Speaker Change: Rick can recall studios this lines significantly and you already said that.
Speaker Change: What is the plan and we are executing to that plan now to substantially reduce the like number two so we don't want to rush into ordering line too which is exactly replicate of LN, one because you know them.
Speaker Change: It would not be right, we need to cost reduce it and we have a lot of good ideas, which are actually in the works right now before reorder the second life.
Speaker Change: Okay.
Speaker Change: And many of those concepts, which will be in the line pool, which cost reduces the line.
Speaker Change: <unk> had been tested through proof of concept for the POC that we typically build.
Speaker Change: And.
Speaker Change: Yeah.
Speaker Change: Finishing that up before you really go to the line too.
Speaker Change: Our next question comes from Gabe Daoud with Cowen can you. Please UN mute your line and ask your question.
Speaker Change: Okay.
Speaker Change: Everyone.
Gabe Daoud: Thanks for the time, maybe just going back to the order.
Gabe Daoud: Maybe talk a little bit about.
Gabe Daoud: What exactly has to happen from here at a <unk> 25, obviously, they're going through a qualification.
Gabe Daoud: But maybe some of the milestones that need to be achieved whether it's specific targets on energy density or cycle life for fast charge capability I know it may differ depending on specific model, but curious if there's any kind of brackets you could put around that yes.
Gabe Daoud: Important milestones from our in the first quarter.
Gabe Daoud: We will get the dimensions from the customer.
Gabe Daoud: And.
Gabe Daoud: Based on those dimensions, we will meet the samples to Cuba will ship to them and pre Gabe we expect.
To get the final order is that right. Yes. So those are the milestones there for you.
Gabe Daoud: We do have clear targets on on.
Gabe Daoud: Energy density and a fast charge and.
Gabe Daoud: Tiger life. So we do have those targets from them and we are working with them to deliver those to them.
Speaker Change: Okay and then just.
Speaker Change: Just a quick follow up to that so we expect to get the order and procure and any kind of range on the specific models and what they do in terms of shipments a year just to try to get a sense of what the actual size of the order could look like.
Speaker Change: Yeah, I think I answered that question. It is hard to tell that now we'll know more about it I can tell you it's in the premium tier.
Speaker Change: That's where we provide most value and that will give you more color as we get closer mhm.
Okay. Okay. Thanks, Roger and just a quick follow up any comments on our capital needs and maybe option to bring in additional capital in the door. If you think you need it thanks guys.
Speaker Change: Yeah. Thanks, Gabe. So you look like we have runway to 2026, and we will continue to evaluate.
Speaker Change: More capital if we need it like as I've mentioned in the past remain even more capital to get to profitability.
Speaker Change: And you know so.
Speaker Change: So at some point, we have to raise capital the three avenues open to the company the capital markets the governments and the.
Speaker Change: Customers and we are pursuing all of them and you know.
Speaker Change: To see what makes the best sense for the company and provides the most efficient path of at least amount of possible our dilution.
Speaker Change: Managing the risk for the business. So we will continue to evaluate that.
Speaker Change: One big thing that we are very particular about is delivering on the milestones before we go and raise capital.
Speaker Change: So you know that's something that is also important to the company.
Speaker Change: Okay. Thanks, guys.
Speaker Change: Our next question comes from Derek Soderberg with Cantor. Please on mute your line and ask a question.
Derek Soderberg: Yeah, Hey, guys. Thanks for taking the questions.
Derek Soderberg: Just regarding the smart glass opportunity for you guys I'm curious how investors should think about the addressable market there.
Derek Soderberg: There you know maybe relative to smartphones.
Derek Soderberg: If you could talk about.
Derek Soderberg: The size of that market today versus what maybe you guys expect over the next 10 years or so and then from a content standpoint, you know Raj it sounded like these.
Derek Soderberg: The smartphone grasberg want a pretty sizeable battery cell, but for the smart glass devices.
Derek Soderberg: Sort of capacities are those devices targeting.
Speaker Change: Yeah, Great question. So first I wanted to you know kind of maybe add a little bit color to the.
Speaker Change: <unk> of the smartphone glass market, what sort of the smartphone market.
Speaker Change: When you look at this.
Speaker Change: A R. A re our XR as some people call it a mixed reality headsets.
Speaker Change: Requirements at the draw on the battery is actually much much higher than smartphones at any given point of time and the reason for that is.
Speaker Change: They don't have like standby modes like you know like my phone is right now these things that when they're on they're on fully on and the processes on the memories on the displays on and you're getting a real experience. The gpus running full speed. So the power draw on the battery is very high and and the batteries last in a very short period of time.
And there are also smaller because you have to put them inside the glasses. So it's a market that's very ideally suited for a four hour kind of batteries, which Delaware high energy density even in small form factor.
Speaker Change: That's a market we're really excited by I've seen some industry reports this will be multiple tens of millions in the next few years like 20 30 million units is what I saw in out years I think this market is still being built out.
Speaker Change: I've seen demonstrations of the after products.
Speaker Change: Answer customer.
Speaker Change: I think last quarter or the quarter before I forget.
Speaker Change: That wasn't a certain of our product and then that theyre, making custom sells for them.
Speaker Change: They look amazing I think there's a lot of progress has been made and we have got optics or the experience who get is really really good and I expect a lot more customers to start making those products, particularly with <unk> you can use speech to navigate now and Thats looking really really good and that also demands a lot of battery life. So in that sense I think there'll be small.
Speaker Change: Batteries when they look like glasses that can be a bigger batteries. When they look like are we at a headset.
Speaker Change: If their form factors, where the batteries and the site and you plug it in like a vision broad those could be bigger batteries. If the batteries inside the head you know they may be slightly different battery. So I expect there to be multiple form factors of batteries in those kind of devices, but all of them have this this need for high energy density in a small form factor so something.
Speaker Change: So its well for us so it is a market I'm quite personally quite excited by it.
Speaker Change: It may take a little bit longer to become a really large market but.
Speaker Change: But I think it's a good market for us.
Speaker Change: And the S. B, it's a market where we can get a very nice ESB premium and I think we are seeing that in our first batteries that recorded.
Speaker Change: Yeah.
Speaker Change: Got it and then as my follow up just regarding the announcement around the Iot customer.
Speaker Change: Some of the wording that's been used as mass production and I'm curious if you can sort of quantify what that means by mass production is it sort of a million battery units annually something like that is or maybe something we should go off of and then also I'm curious if you can speak to which kind of device other Iot devices.
Speaker Change: Yeah. Unfortunately, they're.
Speaker Change: Not at a liberty to speak to otherwise I know, there's a question I get often which device, which customer and I and I promise you I'll work hard on trying to get an answer from the customer see if we can mention them like you know you got to understand we're early stage company and when you get customer samples into these products. The customers that are a little hesitant about really letting us speak to them speak exactly.
Speaker Change: What they are but I would say that we are excited that it is something that that will be in the market.
Speaker Change: You know you should be able to buy.
Speaker Change: By somebody that I know everyone's looking forward to that but that's probably all we can say at this point in terms of where the customer is and how big it is.
Speaker Change: Yeah.
Speaker Change: Our next question comes from Sean Milligan with Janney Your line and ask your question.
Speaker Change: Hey, thanks for.
Speaker Change: Taking the question does have been from another call. So sorry, if you already answered this but can you kind.
Speaker Change: I'll go over the remaining capex to deliver the first auto line.
Speaker Change: And maybe how that splits up into in terms of like both fourth quarter and what's first half next year.
Speaker Change: Yeah. So most of the Capex will be in this year. So you know the reaffirming for the lining ourselves.
Speaker Change: No we expect that the capex will be somewhere about $80 million to $90 million this year.
Speaker Change: And then for next year, we are expecting.
We are not expecting a lot for this line.
Speaker Change: It should mostly be done this year, maybe 5 million or so might carry on through next year and then next year, the capex should be fairly small.
Speaker Change: Well until we get to the Gen. Two line and rent and we are ready to order that then we may have a okay.
Speaker Change: But overall the way it is most of that at least one yeah. Sorry go ahead, how much of that is left to be spent of the 80 to 90.
Speaker Change: Sounds like next year is only like about 5 million. So you can look at the Capex for this year.
And we are expecting like about.
Speaker Change: $80 million to $90 million for the year.
Speaker Change: Okay, and then as you start to order additional lines, how should we think about the.
Speaker Change: The payment splits you know how much as an order how should we think about that cadence.
Speaker Change: No. The next line is not on order are again like I said, we have been.
Speaker Change: Doing proofs of concepts of how to do this second line look more economical.
Speaker Change: And that's the only thing that we have spent on is so pure CS actually proof of concepts.
Speaker Change: The way to think about line two is the target we're expecting relying too high volume line led to real fall.
Roughly 60% of the line one roughly.
Speaker Change: So I'm wondering how are you.
Speaker Change: So what we'll do is actually will manage the cash flow in such a way that the long.
Speaker Change: Lead time items, we will order probably earlier on in the year growing 25%.
Speaker Change: And so the proof of concepts will pan out through the year and as we get closer to the end of the year call. It Q3, we would place orders for the remaining parts of the life.
Speaker Change: That's how typically and again this is all going to be driven by the by how the demand shapes up in the profile of it around.
Speaker Change: Okay. That's helpful. Thank you.
Speaker Change: Our last question comes from Mark shooter with William Blair.
Speaker Change: Your line and ask your question.
Mark Shooter: Alright, Thanks, Tim.
Mark Shooter: Congrats again on the second customer.
But more details than that engagement. So should we read this as more concrete or is this customer more eager than the others is there an opportunity here to stay.
Mark Shooter: These two against each other in a race for qualification.
Speaker Change: I mean every customer is a little bit different there mark and I think.
As you know I have relationships with all of them.
Speaker Change: Everyone asthma is a little bit different customer than a little bit different stage.
Speaker Change: I think that's the way you should read it.
Speaker Change: Our goal of course is to you know.
Speaker Change: <unk> be a sizable player in the smartphone market. So it's just a question of who.
Speaker Change: Who does first versus next so.
Speaker Change: That's probably the best way to describe it.
Speaker Change: Yes.
Speaker Change: Yeah, and I would just add to it like you know like earlier answer Rod mentioned and I mentioned that.
Speaker Change: First one is August and the equation changes once you get one it goes from.
Speaker Change: Bush people. The first one is like you're not like you have to convince them and you have to cross all the hurdles, but once you get past that from.
Speaker Change: On the next one that becomes a lot easier.
Speaker Change: Yeah, and you know my experience both at Micron Dia and Qualcomm as we launch the first one and pretty much most of the market tends to use the technology. Once it is differentiated and they see the value. So.
Speaker Change: That's just the way the smartphone market works.
Speaker Change: Got it thank you both.
Speaker Change: Silicon has a slightly lower production potential and so lower voltage profile and I know smartphones are a high power devices and high voltage more I'm wondering if customers have brought this up is there any pushback in terms of the voltage profile or are they open to modifying the power management and the electronics and many.
Speaker Change: Any conversation like that with your customers.
Speaker Change: Yeah, Yeah, we've had a lot of conversations with them and it's an area, where we work very closely with the other components and ecosystem. For example, Qualcomm next process in P mix and and we work with our customer and Qualcomm. So I think people have realized now that silicon is going to be in the smartphone market. So the P mix of already.
Speaker Change: Made the adjustments to actually be able to get that last bit of energy from silicon, So which is what we've been doing through last year, and we're pretty happy that that.
Speaker Change: That should not be a problem anymore.
Speaker Change #100: Got it thanks for the color.
Speaker Change #101: We have one final question from Tony Stoss with Craig Hallum Your line.
Speaker Change #102: And ask your question.
Tony Stoss: Raj I wanted to follow up on your comment about the several thousand dollar add batteries I'm curious kind of when you think it could be producing something.
Tony Stoss: So that density and also what was the ASP would be like on that are we kind of stuck in that $10 per battery ASP here would be higher densities markedly move up from that $10 number.
Speaker Change #104: Yeah, I'll take the comment on when and I'll, let Farrell talk about Asp's is pretty passionate about that.
Speaker Change #105: But that but yes. It is about launching next year. We are actually talking about next year are 7000 million for batteries and I actually think is going to keep going up if we can produce higher and higher energy higher.
Speaker Change #105: Capacity batteries in the same footprint I think there is still a lot more demand for energy our.
Speaker Change #105: Capacity in the smartphones because the applications, we see in our just trying more and more power from the battery.
Speaker Change #106: Yeah, no. So I would tell you that if you look at five to five and a half million Empire. So.
Speaker Change #106: Those batteries.
Speaker Change #106: Well it is what we said like you know when we said that $11 5 million.
Speaker Change #106: Units and 150 million.
Speaker Change #106: Revenue, so about $13 nasty.
Speaker Change #106: It would get you to a doctor coming out.
Speaker Change #106: And if you look not.
Speaker Change #106: Our silicon batteries, but what's in the graphite and silicon space.
Speaker Change #106: Those batteries are in the 10 to $12 kind of range.
Speaker Change #106: The higher performing peers.
Speaker Change #106: On the market.
Speaker Change #106: <unk> and so you know getting like little bit of a premium to that is what we are expecting.
Speaker Change #106: And so you know and by the way the commodity batteries that are like seven you'd kind of range. So already higher energy density batteries getting a premium is already validated.
Speaker Change #106: We will have a significant energy density advantage so.
Speaker Change #106: What we were facing is not that much off now switching to 7000.
Speaker Change #106: It's a higher energy density and higher.
Speaker Change #106: Amount of material goes and so it's fair to think that.
Speaker Change #106: Pricing should be higher and exactly how much it remains to be seen it's probably too early to say because at that point to the best of my knowledge, there's nobody else who is providing those batteries. So.
Speaker Change #106: Once they get there.
Speaker Change #106: They have more ability to price and get a better place, but you know.
Speaker Change #106: It will definitely be higher than the.
Speaker Change #107: What you're charging for five five and a half.
Speaker Change #107: Amp ourselves today.
Speaker Change #108: Great. Thanks, Sarah.
Speaker Change #109: There are no further questions at this time with that I'd like to turn the call over to Dr. Raj tolerance for closing remarks.
Speaker Change #110: A great quarter and thank you all for patiently listening to US and was Dr to you next quarter. Thank you.