Since the beginning of last year, I have identified six major investment themes that have taken turns leading the technology market rally. These themes have gained increasing recognition and their performance has gradually been validated. These six themes include semiconductors, computing power and algorithms, humanoid robotics, commercial spaceflight, solid-state batteries, and biotechnology, representing sectors poised to benefit in succession during the AI era.
Today, I will discuss the fifth major theme: solid-state batteries. What are solid-state batteries? In simple terms, they are a next-generation battery technology that replaces liquid electrolytes with solid electrolytes. Currently dominant lithium-ion batteries use liquid electrolytes, which have several limitations: a ceiling on energy density and certain safety hazards, such as the risk of fire or explosion upon impact, a concern for many new energy vehicle owners. Solid-state batteries are designed to address these pain points. From a technical principle perspective, the advantages of solid-state batteries are evident. First, they offer higher energy density, theoretically significantly surpassing that of liquid lithium-ion batteries. This means more energy can be stored in the same volume, promising a substantial increase in driving range. Second, they provide better safety, as solid electrolytes are non-flammable, fundamentally reducing the risk of thermal runaway. In other words, vehicles equipped with solid-state batteries are less prone to fire or explosion in a collision. Third, they have a longer cycle life, allowing for many more charge and discharge cycles.
I have previously discussed a core analytical framework for technological substitution: for a new technology to replace an old one, it must possess a generational advantage in key dimensions. Solid-state batteries indeed have such advantages in energy density and safety, but they also face their own technical challenges to overcome. The solid-state battery supply chain partially overlaps with the traditional lithium-ion battery supply chain but also introduces new segments. Upstream involves raw materials, including metals like lithium, zirconium, and lanthanum, as well as precursors for solid electrolytes. The midstream involves cell manufacturing, which is the segment with the highest technical barriers. Downstream encompasses application scenarios, including new energy vehicles, energy storage, consumer electronics, robotics, and drones. Simultaneously, the solid-state battery industry chain features several new segments worth watching. For example, solid electrolyte materials represent a completely new market absent in traditional lithium-ion batteries. Another example is the manufacturing process; solid-state batteries require new equipment for coating, sintering, and packaging. The emergence of these new segments signifies a restructuring of the industry chain. Solid-state batteries represent a substitution technology, and such technologies often lead to the emergence of new industry maps and a reallocation of value from old segments. This makes it a fascinating subject for industrial analysis.
Based on public information, corporate mass production timelines are generally concentrated between next year and the year after. Japanese companies are relatively advanced in the sulfide-based technical route, while Chinese companies have their own characteristics in the oxide-based route. When evaluating an early-stage technology, the focus should not be solely on the specific date of mass production but rather on its technology maturity curve. From laboratory breakthroughs to small-batch trial production and then to scaled mass production, each stage is separated by numerous technical hurdles and engineering challenges. Mass production is a key milestone, but the journey from mass production to large-scale substitution still has a distance to cover. Costs must be reduced, yield rates must be improved, and supply chains must be established—all essential processes in industrial development. According to plans, next year, 4,000 electric vehicles in China will be equipped with solid-state batteries, with a total driving range exceeding 10,000 kilometers. According to a founder of a major lithium battery company, the conditions for mass production are now in place, and next year could be a significant time node.
The substitution of solid-state batteries for liquid lithium-ion batteries is not the first instance of technological substitution in history. One example is the replacement of feature phones by smartphones. The iPhone was launched in 2007, but it took approximately five to six years for smartphones to fully replace feature phones, with key nodes being the improvement of industry chain support and cost reduction. Another example is the replacement of polycrystalline silicon by monocrystalline silicon in the photovoltaic industry. Monocrystalline silicon had advantages in energy conversion efficiency but initially had high costs. Later, as processes matured and economies of scale were achieved, the cost of monocrystalline silicon decreased, allowing it to gradually complete the substitution. The substitution of solid-state batteries for liquid lithium-ion batteries shares many similarities with this case. Another process was the substitution of lithium iron phosphate (LFP) batteries by nickel-cobalt-manganese (NCM) ternary lithium batteries. Initially, NCM batteries rapidly replaced LFP in the passenger vehicle segment due to their higher energy density. Later, LFP batteries, through technological advancements, consolidated their advantages in safety and regained some market share. This indicates that technological substitution is not a one-way process; it may involve reversals.
This historical review is not intended to predict the path of solid-state batteries but to help establish an analytical framework: what stages a technological substitution typically undergoes and what the key signals are at each stage. As a new generation of energy storage technology, solid-state batteries have received significant policy attention. Many countries have listed them as a key supported direction, and several provinces and cities in China have also released industrial development plans for solid-state batteries. In terms of application scenarios, once the technology matures, solid-state batteries will have a very wide range of applications. New energy vehicles represent the most significant downstream market because consumer demand for range and safety continues to rise. Beyond this, energy storage, consumer electronics, humanoid robotics, and drones are also strong application areas. When analyzing a new technology, an important dimension is the breadth of its application scenarios. The wider the application scenarios, the larger the industrial space once the technology achieves a breakthrough. The application scenarios for solid-state batteries, spanning from transportation to energy to consumer electronics, are quite broad.
We should also discuss risks and challenges. The technical challenges currently faced by solid-state batteries are objective realities. Issues like interface contact, ionic conductivity, equipment processes, and cost control are all problems that need to be solved. These challenges cannot be resolved in a day or two; they require continuous technological accumulation and engineering breakthroughs. Another point to note is that liquid lithium-ion batteries themselves are also advancing. While solid-state batteries are catching up, liquid batteries are not standing still. If the energy density and safety of liquid batteries continue to improve, the urgency for solid-state battery substitution may be less compelling. This is a core uncertainty I have previously mentioned regarding substitution technologies: the technology being replaced is also evolving. Therefore, overall, as a technological revolution in the energy storage field, once solid-state batteries achieve a technical breakthrough and enter mass production, costs may see a significant decline. This would accelerate the substitution of solid-state batteries for traditional liquid lithium-ion batteries. However, this substitution process is not instantaneous nor a matter of one or two years; it may take 5 to 6 years to unfold. This presents development opportunities for related companies but also entails many challenges, which may be reflected in potentially significant investment volatility. This is something investors should closely monitor.
However, the emergence of a new technology also brings a new round of opportunities. After this new technology appears, traditional leading lithium battery companies possess advantages in capital, technology, channels, and customer base. There is a certain probability they may remain industry leaders. Of course, whether new contenders will emerge and rise to become new industry leaders following technological progress is a question worth watching.
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