Dabang Securities: Apple released the new iPhone 16, AI performance upgrade drives charging demand, steel shell battery becomes a new addition.

Debang Securities released a research report stating that with the release of the new iPhone 16 by Apple Inc., the upgraded AI performance has brought strong charging demand. This has led to higher requirements for batteries in terms of endurance, energy density, and replaceability. Under this trend, it is expected that Apple Inc. (AAPL. US) will extensively use steel-shell batteries in its future product line. With the trend of using carbon-silicon negative electrodes to increase energy density of battery cells, steel-shell batteries have several corresponding advantages, such as being able to withstand higher expansion pressure, higher battery compartment utilization rate, faster overall heat dissipation, and ease of disassembly for battery replacement. The trend of steel-shell battery application is expected to drive significant growth in the steel shell, battery cells, PACK, and other related aspects. The iPhone 16 and 16 Plus are equipped with the A18 Bionic chip, while the Pro series uses the more powerful A18 Pro chip, which not only provides strong support for AI functions but also increases the demand for battery endurance. The 16 series batteries have higher energy density. Compared to the previous 15 series, the standard version's battery capacity has increased from 3349mAh to 3561mAh and the Pro Max version from 4422mAh to 4747mAh. In July 2023, the EU officially issued new battery regulations (EU) 2023/1542, aiming to promote the battery industry towards a more sustainable and environmentally friendly direction, with requirements for battery replaceability and recyclability. Under this trend, Apple Inc. is expected to extensively use steel-shell batteries in its future product line. The upgraded AI performance has brought strong charging demand, making steel-shell batteries potentially a major trend. With the introduction of Apple Intelligence on iPhone phones, future iPhone models will be equipped with higher-performance main processors. The A18 chip, compared to the A16 chip in the iPhone 15, has improved CPU performance by 30%. To support the energy requirements of high-performance hardware and AI functions, high-energy-density batteries have become an inevitable choice. With the trend of using carbon-silicon negative electrodes to increase energy density of battery cells, steel-shell batteries have several advantages: 1) compared to aluminum-plastic film batteries, the surface is harder and deforms less after impact, able to withstand higher expansion pressure and have lighter swelling compared to soft packs. 2) higher battery compartment utilization rate due to better surface protection with metal, eliminating the need for extra "safety distance" reservations. In terms of wiring, the entire surface of a metal shell battery is negative, allowing for wiring considerations with the PCBA. 3) Using a steel shell with better thermal conductivity will result in faster overall heat dissipation, alleviating poor heat dissipation issues. 4) The hard surface provides better protection, increasing safety during disassembly, reducing the likelihood of deformation during installation, and making it easier to disassemble and replace batteries. Under environmental compliance, technological requirements, and the impetus from major manufacturers, the use of steel-shell batteries is expected to be a major trend. The trend of steel-shell battery applications is expected to drive significant growth in steel shells, battery cells, PACK, and other related aspects. 1) Steel Shell: The application of steel-shell batteries is driving an increase in demand for steel shell materials, promoting business growth for steel-shell manufacturers, stimulating the expansion of production capacities, and improving the quality of surface treatment technologies. 2) Battery Cells: Apple Inc. continues to iteratively upgrade battery capacity. By comparison, the latest iPhone 16 series has a battery capacity of up to 4747mAh for the iPhone 16 Pro Max. This is an increase of over 3000mAh compared to the first-generation iPhone. The increase in energy density and battery capacity upgrades lead to an increase in the value of battery cells. 3) PACK: The main components of a battery pack include battery modules, battery management systems (BMS), and casings. With the increase in value of steel shell and battery cells, the overall value of terminal battery packs is expected to grow. Investment Recommendations Optimistic about the steel-shell battery industry chain becoming the application solution for future high-capacity batteries. Key areas of focus include: 1) Battery Cells: Zhuhai CosMX Battery (688772.SH); 2) Steel Shell: Lingyi Itech (002600.SZ), Shenzhen Sunway Communication (300136.SZ), Shenzhen Everwin Precision Technology (300115.SZ); 3) PACK: Shenzhen Desay Battery Technology (000049.SZ), Sunwoda Electronic (300207.SZ). Risk Warning Lower-than-expected terminal sales; risks of technical route changes; intensified industry competition risks.