CITIC SEC: The new generation of high energy density, high rate battery technology is accelerating research and development, and it is expected to drive an increase in both the quantity and price of consumer batteries.

CITIC Securities released a research report stating that there are many downstream sectors in the consumer battery industry, therefore, there are various materials and packaging technology specifications. By 2024, the overall technology is relatively mature, and the annual performance improvement is slowing down. However, since 2024, several downstream applications have entered a new round of functional innovation cycles, leading to the synchronized upgrading of consumer battery performance. Especially in the fields of mobile phones, wearable devices, PCs, tablets, power tools, and two-wheeled vehicles, new generations of high-energy density, high-rate battery technologies are accelerating research and development and application, which is expected to drive an increase in both the quantity and price of consumer batteries. Overview: Upgraded downstream demand, accelerating innovation implementation. There are many sub-sectors downstream in the consumer battery industry, leading to a variety of battery materials and packaging technology specifications. Combining category synergy and technological synergy, this report primarily focuses on soft pack and small cylindrical consumer batteries, particularly in core subsectors like mobile phones and wearables. Before 2024, the materials and packaging systems of consumer batteries were relatively mature, and the improvement in battery performance gradually slowed down. However, starting from 2024, the downstream sector entered a new round of technological innovation (such as edge AI, high-power power tools), as well as regulatory cycles (EU battery detachable legislation, revision of new national standards for two-wheeled vehicles), presenting new requirements for battery performance upgrading, thereby potentially driving an increase in both the quantity and price of consumer batteries. Soft pack batteries: Driving innovation in consumer battery technology, silicon-based negative electrodes, steel shells, solid-state, high-voltage positive electrodes gradually being implemented. Soft pack batteries are the mainstream technology route of consumer batteries, especially in sectors like mobile phones, PCs, tablets, wearables, etc. Specifically: 1) Mobile phones: The core hardware platform for edge AI, driven by the increase in energy consumption due to downstream AI function enhancement and the EU battery detachable legislation push, there is a high urgency for upgrades in silicon-based negative electrodes, solid-state batteries, high-voltage positive electrodes, and steel shell routes, making it one of the varieties with the highest potential for increasing single machine capacity among all consumer battery categories; 2) PCs + tablets: Due to differences in usage scenarios and device sizes, the potential for increase in energy storage capacity and the urgency are lower than in mobile phones. However, as the main office platform for edge AI, the increase in energy consumption will also increase the demand for energy storage capacity synchronously. Currently, various new technologies such as silicon-based negative electrodes, solid-state batteries, and high-voltage positive electrodes are under research; 3) Wearables, especially head-worn wearables such as smart glasses, MR/AR, are very sensitive to product weight, and with large energy consumption from edge AI applications but low battery costs (about 1%), the demand for battery performance upgrades and cost acceptability is very high. Currently, various projects such as silicon-based negative electrodes, high-voltage positive electrodes, solid-state batteries, and steel shells are under research, and multiple new technologies are expected to be combined for future applications. Small cylindrical batteries: Focus on high-rate, high-density batteries for two-wheeled vehicles, power tools, such as high-nickel, silicon-based, sodium-based, solid-state, etc. Due to advantages such as high consistency, high cost-effectiveness, and good heat dissipation, small cylindrical batteries are the main battery choice for small wearable consumer electronics devices that are cost-sensitive and slightly less weight-sensitive. Among them, two-wheeled vehicles and power tools are the two downstream applications with relatively large volume. 1) Two-wheeled vehicles: Currently, two-wheeled vehicle batteries are mainly lead-acid and lithium-based, but with the promotion of the new national standard for two-wheeled vehicles, it is expected that high-energy density, high safety sodium-based and solid-state batteries will be applied to high-end, long-endurance two-wheeled vehicles to address the current pain points of insufficient cost-effectiveness and safety in the high-end market. Top manufacturers are already beginning mass production; 2) Power tools: "Higher density, higher power" has become the core contradiction for further increasing the cordless rate of power tools. It is expected that there is still significant room for improvement in power, energy density, with multiple projects focusing on high-nickel, silicon-based negative electrodes. They are expected to be the first to be applied to high-end, high-power power tools. Risk factors: 1) Downstream demand recovery is lower than expected; 2) Increased industry competition; 3) Fluctuations in raw material prices, risking cost increases for companies; 4) Risk of technology leakage; 5) Influence from changes in geopolitical situations, risks in the delay of international market expansion. Investment Strategy: The consumer battery industry has a high concentration, high technological barriers, and a relatively stable industry structure. Currently, domestic consumer battery manufacturers are vigorously promoting capacity expansion, accelerating the integration trend of battery cells and PACK, and domestic manufacturers are expected to further increase their global market share. In addition, consumer battery technology is entering a new cycle of innovation, and the industry is expected to achieve both an increase in quantity and price. It is recommended to pay close attention to related targets in the consumer battery industry: 1) Leading companies with a share of battery cells and leading technological advantages; 2) Leading PACK companies benefiting from technological innovation driving value and quantity growth.