1 Apple Supplier to Buy on Its Solid-State Battery Breakthrough

A major supplier of batteries for Apple’s (AAPL) iPhone - namely, Japan’s TDK Corporation (TTDKY) - claimed several weeks ago that it had made a major breakthrough in the materials used in small solid-state batteries.

TDK was founded in 1935 as a provider of ferrite cores used to improve radio reception. The material did the same for TV reception and then recording on cassette tapes. It still forms a major part of the business today, for products such as transformers.

The company, of course, became a household name globally as a top cassette tape brand in the 1960s and 1970s. More than 50 years after the TDK brand became so well-known, it transformed itself into the power behind the world’s smartphones. And now it wants a big piece of the artificial intelligence (AI) market, too.

TDK has decades of experience in battery materials and technology. It currently has a 50% to 60% global market share in the small-capacity batteries that power smartphones. TDK also holds significant positions in technology niches, such as car sensors and power storage.

Now, the company is targeting leadership in the medium-capacity market, which includes energy storage devices and larger electronics, like drones.

The Apple supplier predicted significant performance increases for electronic devices, from wireless headphones to smartwatches, from its new solid-state battery breakthrough.

So, what exactly is this breakthrough?

TDK’s Breakthrough

The new material TDK discovered provides an energy density of 1,000 watt-hours per liter (Wh/l), which is about 100 times greater than TDK’s current battery in mass production. Since TDK introduced it in 2020, competitors have moved forward, developing small solid-state batteries that offer 50 Wh/l, while rechargeable coin cell batteries, using traditional liquid electrolytes, have about 400 Wh/l.

The batteries set to be produced by TDK will be made of an all-ceramic material, with an oxide-based solid electrolyte and lithium alloy anodes. The high capability of the battery to store electrical charge would allow for smaller device sizes and longer operating times, while the oxide offers a high degree of stability, and therefore safety.

This battery technology is designed to be used in smaller-sized cells, replacing the existing coin-shaped batteries found in watches and other small electronics.

Since it packs so much power in a small size, this new battery will pave the way for ever-smaller devices with longer running times. TDK plans to start shipping samples of its new battery prototype to clients from next year, and hopes to be able to move into mass production after that.

And who knows? Battery life may soon be measured in weeks, rather than days. Wouldn’t that be great?

Obstacles Still Ahead

But - and there’s always a but - there are still hurdles to be jumped by TDK.

There’s one problem with moving this kind of battery into commercial production. Making these batteries bigger to fit electric vehicles (EVs), or even just smartphones, is a major engineering challenge.

Solid-state batteries are safer, lighter, and potentially cheaper and offer longer performance and faster charging than current batteries, which rely on liquid electrolytes.

However, the ceramic material used by TDK means that larger-sized batteries would be much more fragile. This means the technical challenge of making batteries for cars, or even smartphones, will not be surmounted in the foreseeable future, according to TDK.

So while this battery breakthrough could easily become a major upgrade for small devices, the era of solid-state batteries in smartphones and electric cars is still a ways off.

But not too far off into the future now, thanks to TDK and fellow Japanese company Toyota Motor (TM). Earlier this year, the company announced that the solid-state battery it is developing could allow EVs to travel up to 750 miles on a single charge.

Industry experts believe the most significant use for solid-state batteries in the years ahead will be in electric cars. As I stated, Japanese companies are in the vanguard of a push to commercialize the technology: Toyota is aiming for as early as 2027, Nissan (NSANY) the year after, and Honda (HMC) by the end of the decade.

The auto manufacturers, though, are focused on developing sulphide-based electrolytes for long-range EVs, an alternative material to the oxide-based material that TDK has developed.

TDK’s Other Growth Businesses

In addition to this very promising solid-state battery technology, TDK also has other high-growth businesses.

Surging power requirements from AI smartphones, computers and chipsets are expected to boost demand for TDK’s batteries and materials, which can reduce energy demands and chip size. Orders for chip-related materials were already pouring in after talks with all the “major players” in the semiconductor industry, according to the company, which counts Nvidia (NVDA) as a customer. It has already begun selling thinner, higher-density lithium-ion batteries that can power AI phones and laptops. 

In addition to its AI push, TDK is looking to grow sales for its existing businesses, including capacitors and sensors for carmakers like Tesla (TSLA) and medium-sized batteries for energy storage and powering devices, such as drones.

Alongside its plans to push into new areas like solid-state batteries, the company has also increased its free cash flow and return targets, while planning to streamline its business portfolio.

The share price is up around 42% this year, and 95% over the past year. TTDKY stock is a buy anywhere below $73.

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On the date of publication, Tony Daltorio did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.