摩根士丹利-中国投资策略-锂电池设备：通过周期寻求Alpha

Foundation

June23,202209:00PMGMT

ChinaIndustrials

LithiumBatteryEquipment–SeekingAlphaThroughCycles

Inthisreportwehighlightthreetrends–technologyiteration,overseastailwinds,andclientdecentralization–thatwebelievewillbringlong-termstructuralopportunitiestoChineseplayers.WeseeWuxiLeadandHangkeasbestpositioned,andweinitiateonHangkeatOW.

MorganStanleydoesandseekstodobusinesswithcompaniescoveredinMorganStanleyResearch.Asaresult,investorsshouldbeawarethatthefirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofMorganStanleyResearch.InvestorsshouldconsiderMorganStanleyResearchasonlyasinglefactorinmakingtheirinvestmentdecision.

Foranalystcertificationandotherimportantdisclosures,refertotheDisclosureSection,locatedattheendofthisreport.

+=Analystsemployedbynon-U.S.affiliatesarenotregisteredwithFINRA,maynotbeassociatedpersonsofthememberandmaynotbesubjecttoFINRArestrictionsoncommunicationswithasubjectcompany,publicappearancesandtradingsecuritiesheldbyaresearchanalystaccount.

2

Foundation

Contripntor2

MorganStanleyAsiaLimited+

JoyZhang

EquityAnalyst

+8523963-0338

Joy.Zhang@

MorganStanleyAsiaLimited+

JackLu

EquityAnalyst

+8522848-5044

Jack.Lu@

MorganStanleyAsiaLimited+

ShengZhong

EquityAnalyst

+8522239-7821

Sheng.Zhong@

MorganStanleyAsiaLimited+

ChelseaWang

EquityAnalyst

+8522239-1118

Jinlin.Wang@

MorganStanleyAsiaLimited+

WeiningCHEN

ResearchAssociate

+8523963-1463

Weining.Chen@

Foundation

MorganStanleyResearch3

LithiumBatteryEquipment–SeekingAlphaThroughCycles

China'slithiumbatteryequipmentindustryhasunderperformedbat-terymakersinthelastfouryearsduetoweakerbargainingpowerandhighcyclicality.However,webelievethreestructuralchangeswillgeneratemorealphaamongleadingplayersgoingforward:

IndustryView(1)Technologyiterationwillsetahigher

ChinaIndustrials|threshold.Theincreasedapplicationof

AsiaPacificstackingmachines,risingpenetrationof

In-Line4680-speccells,andemergenceofnewly

formedcellswillhelpmaintainthecompeti-tivenessofleadingnamesintermsofmarketshareandmargins.Technologyreforminvolvescontributionoftechnicalbreakthroughsfromequipmentsuppliersinmultipleprocesses.

(2)Internationalmarketstobecomeanothergrowthdriver.

FollowingcapacityexpansioninChina,globallithiumbatterymakershaveannouncedtheirownlarge-scaleexpansionplans.Emergingcellmakersprovideanopportunityforequipmentsupplierstopenetratetheoverseasmarket,sincenewentrantswilllikelyhavelittleexperi-enceincellmanufacturingandhencewilldependonequipmentsup-pliers.Comparedwiththeirglobalpeers,China'sleadingequipmentsuppliershaveprominentadvantagesinR&D,production/after-salesservicecapacity,andcosteffectiveness.Overseasexpansionwouldprovidebroadermarketpotentialandhelpoffsetthedomesticdemandslowdown.

Exhibit1:What'schanged?

Rating

PT

WuxiLead

MSnew

MSold%change

OW

OW

CNY90.0

CNY93.0

HangkeInitiation

OW

CNY115.0

Source:MorganStanleyResearchestimates.

(3)Benefitingfromadecentralizedcellmanufacturingmarket.

Thelithiumbatterymanufacturingindustryisbecomingcrowded,withnewentrantsfrombothemergingcellmakersandOEMs.Themarketwillbecomemorefragmentedinthenextfewyears,espe-ciallyinviewofincreasingLFPbatteryadoption.Wethinkthiswillpushcellmakerstofocusmoreonproductdifferentiationinsteadofexistingtechnologyduplication,wherenewequipmentcancon-tributegreatervalueandenjoystrongerbargainingpower.

Webelievemostinvestorsarefullyawareofapotentialdomesticcapacityexpansionslowdownin2024.Inlightofthepotentialposi-tivesurpriseswithalphaemergenceinthelongterm,wepreferWuxiLeadandHangkeduetotheiradvancedtechnology,highmargins,andqualityclients.

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Contents

5KeyExhibits38Hangke(688006.SS):BeneficiaryofOverseas

CapacityExpansion

6ExecutiveSummary

39Hangke:FinancialSummary

8MissingAlphainthePast

40RiskReward-ZhejiangHangkeTechnology

11Trend#1:TechnologyIterationtoHelpMaintain(688006.SS)

LeadingPosition

42Hangke:OperationalReviewAndInvestment

17Trend#2OverseasExpansionisAnotherPositives/Concerns

GrowthDriver

44Hangke:Valuation

23Trend#3:BenefitingfromaDecentralizedCell

ManufacturingMarket45Hangke:CompanyBackground

25StockImplications46IndustryForecasts

34WuxiLead:FinancialSummary48LithiumBatteryIndustryEcosystem

35RiskReward-WuxiLeadIntelligent49LithiumBatteryEquipmentIndustry101

(300450.SZ)

MorganStanleyResearch5

EVOEMs

RenaultVolkswagenTesla

Domesticplayers

Envision…

GuoxuanFarasis SvoltCATL

Emergingplayers

InoBatAutoStatevolt ItalvoltVerkor

FREYRBattery

MorrowBatteries

BritishvoltNorthvoltACC

Mature

foreign

players

LGChemSKI

SDI

Panasonic

WuxiLead

YingheHangke

Domesticplayers

Lyric

CIS

PNE

Foreignplayers

CKD

Source:Companydata,MorganStanleyResearch.

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KeyExhibits

Exhibit2:WeestimategloballithiumbatteryequipmentsaleswillreachRmb280bnby2025andRmb400bnby2030

450

400

350

300

250

200

150

100

50

0

401

341

280290

232

194

145

85

55

388

304

202020212022E2023E2024E2025E2026E2027E2028E2029E2030E

Marketsize(Rmbbn)

Source:MorganStanleyResearchestimates.

Exhibit4:Weestimateover2TWhofnewcapacityisplannedwithin2022-30inoverseasmarkets

050100150200250300350400

Source:MorganStanleyResearchestimates.Note:Teslaannouncedplanstoindependentlyproducebatterycellsat100GWhscaleby2022and3TWhby2030.

Exhibit6:R&DinvestmentfromChineseequipmentsuppliersismuchhigherthanforeignpeers

R&Dexpense(inUSD,mn,2021)

136.50

51.00

40.90

33.70

20.40

8.90

0.50

Exhibit3:Cellsmadebystackingmachinesenjoylowerinternalresistance,highcapacitydensity,andhighdischargeplatform

Source:Grepow.

Exhibit5:Chineseequipmentsuppliershaveprominentadvan-

tagesinproductioncapacity

#ofemployees

64%

70%

16000

14000

12000

10000

8000

6000

4000

2000

0

8%

1%

YingheHangke

Domesticplayers

CKDHirano

Tecseed

Foreignplayers

WuxiLead

Lyric

43%

34%

44%

2018201920202021CAGRin2018-21

60%50%40%30%20%10%0%

Source:Companydata,MorganStanleyResearch.

Exhibit7:IncreasingLFPbatteryadoptionlowerstechnicalentrybarriers,whichislikelytoresultinthedecentralizationofthebatterymanufacturingmarket,benefitingequipmentsuppliers

GWh

30

25

20

15

10

5

0

80%70%60%50%40%30%20%10%

0%

NCMbatteriesLFPbatteries%ofLFP

Source:GGII,SNE,MorganStanleyResearch.

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6

ExecutiveSummary

Duringtheaggressivelithiumbatterycapacityexpansionin4Q20-2021,thesharepricesofequipmentmakersalmosttripledbeforeencounteringamajorpullbackthisyear.Apartfromshort-termmacrouncertaintycausedbythelockdownsinChina,wethinkthede-ratingisattributabletomarketconcernsaboutacapacityexpan-siongrowthslowdownin2022-24.OverallweexpecttheglobalequipmentmarkettoreachRmb280bnin2025andRmb400bnin2030,upfromRmb85bnin2021.Inthisreportwewillfocusmoreontheindustry'slong-termtrendsinsteadoftheindustry'scyclicality.Wenotethatequipmentnameshaveshownlittlealphaandhavealwaysunderperformedbatterymakersinthepast.Fromthisview-point,weseecurrentvaluationsasattractivedespitetherecentrebound,andhighlightthreetrendsthatwillgeneratestructuralchangeintheindustry.

(1)Technologyiteration

Themarketisconcernedthatcompetitionamongequipmentsup-plierswillintensifyasmoreplayersjointheindustry.Wethinkitera-tionwillhelptheleadingnamesmaintaintheircompetitivenessintermsofmarketshareandmargins.Equipmentsuppliershavebeenpursuinggreaterprecisionandconsistencyinmanufacturing,evenastheyexpandcapacity.Weseethreemajortrendsemerginginthisarea–includingtheincreasedpenetrationofstackingmachines,4680-speccells,andsolidbatteries–thatwillliftthemanufacturingthresholdforequipmentmakers.

•Cellsmadebystackingmachinesenjoylowerinternalresis-tance,stablecellstructure,andlessdeadspace,resultinginhigherenergydensity.However,theyarecurrentlyusedlessthanwindingmachinesduetotheirlowerconsistencyandproductionefficiency.Aslargerandthinnercellsarelaunchedbycellmakers,webelievetheadvantagesofstackingmachineswillbecomemoreapparentandtheywillgainshare.

•4680-speccellshavehigherenergydensity,asimplerpro-ductionprocesswithlowercosts,andbetterresistancetotheswellingofsiliconanodes.MultipleOEMshaveannouncedplanstoadoptthisformatfrom2022attheearliest.Given

that4680productionlinesarenotcompatiblewiththoseof2170-speccells,theincreasingpenetrationof4680cellsislikelytogenerateextraequipmentdemand.Also,entrybar-rierswillberaisedinanumberofprocesses,suchascoating,rolling,lasercutting,andtabwelding.

•Solidstatecellsreplacetheliquidelectrolytesolutionwithasolidelectrolyte,whichalsoactsasaseparator.Thesolidelectrolyteeliminatestheriskofexplosionsandfires,savingspacethatwouldotherwisebeusedbysafetycomponentsandtherebyincreasingenergydensity.Thatsaid,solidstatecellsarealonger-termstoryastheyarecurrentlyexpensiveandmultipletechnicalissuesremainunsolved.

(2)Overseastailwinds

FollowingtheaggressivecapacityexpansioninChinasince4Q20,amassiveexpansionoverseashasstartedthisyear,withplansfornewcapacityofover2TWhby2030.Thiswillmainlybecontributedbyleadingglobalcellmakers(i.e.,LGandSKI),emerginginternationalcellmakers(i.e.,NorthvoltandACC),Chinesecellmakers(i.e.,CATL,Envision,etc),andglobalOEMs(i.e.,Tesla,Volkswagen,etc).ThisprovidesanopportunityforChinesecellequipmentsupplierstoexpandinternationally.TheglobalmarketiscurrentlydominatedbyKorean/Japaneseequipmentnames,especiallyatthehigherendofthemarket.However,limitedbytheircapacityscaleintermsofbothproductionandafter-salesservice,globalequipmentpeersareunabletofulfilloverseasexpansiondemand,leavingroomforChina'sleadingsuppliers.

Newandemergingcellmakersprovideanopportunityforequipmentsupplierstopenetratetheoverseasmarket,sincenewentrantswilllikelyhavelittleexperienceincellmanufacturingandhencewilldependonequipmentsuppliers.TheoverseasexpansionplansoftheirexistingdomesticclientsprovideanotheropportunityfortheleadingChinaequipmentsupplierstopenetratetheoverseasmarket,particularlygiventhestickinessoftheirrelationships.Wethinkover-seasdemandmayalleviateordercyclicalityintheChinesemarket,whichhasbeenaconcernofinvestorsforseveralmonths.

MorganStanleyResearch7

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(3)Diversifiedclientmarketlandscape

OEMsareactivelyparticipatingincellmanufacturingthesedays.Second-tierbatterymakersarealsoaggressiveonmarketshare,withmassivecapacityexpansionplans.AsincreasingLFPcelladoptionlowersthetechnicalentrybarriers,weforeseeintensifyingcompeti-tionamongcellmakersandamorefragmentedcellsupplyland-scape.Thiswillfavorequipmentsuppliersinthattheywillbelessdependentonasingleclient.Furthermore,theaggressivecapacityexpansioncurrentlyunderwayinChinausesexistingtechnology.Wethinkcellmakerswillbemorefocusedonseekingproductdifferenti-ationviatechnologyupgradesanditerationsoncecapacityexpansionslowsandcompetitionheatsup.Thisiswheretheimportanceofiter-ationcontributedbyequipmentsupplierswillcomeintoplay.WethinkleadingequipmentmakerswithstrongR&Dcapabilitieswillenjoygreaterbargainingpowerandhighercustomerloyalty.

Stockideas:Basedonthethreemajortrendsmentionedabove,wepreferWuxiLeadandHangke,whichhaveprovedthemselvesto

qualityclientswithsolidproductsandenjoyhighmargins.WethinkthekeystostayinginthefrontrankwillbestrongR&Dcapabilitiesandqualitymanagement.WuxiLeadandHangkeshouldbenefitfromoverseastailwindsandstandahigherchanceofmaintainingtheirleadingpositionsintechnologywithstrongprofitabilityinthelongterm.Currentvaluationslookattractive,asWuxiLeadistradingat25x2023P/Eand0.5xPEGin2021-24,wellbelowits7-yearhistoricalaverageof34x.Hangke's18x2023P/Ealsolookscompellingcom-paredits3-yearhistoricalaverageof37x.

Wherecouldwebewrong?

•Worse-than-expectedNEVsalesvolume,whichwouldleadtoweakercapacityexpansion.

•Furtherconsolidationinthelithiumbatterymarket,whichwouldresultinstrongerbargainingpowerforcellmakers.

•Slower-than-expectedtechnologyiterationwithintensifiedequipmentmarketcompetition.

•Geopoliticaltensionsconstrainequipmentexports.

Exhibit8:WeinitiatecoverageonHangkeandreviseourpricetargetforWuxiLead

Rating

PT

2022E

Revenue2023E

2024E

2022E

NetProfit2023E

2024E

WuxiLeadMSnew

OW

CNY90.0

16,223

24,240

29,359

2,550

4,065

5,223

MSold

OW

CNY93.0

17,883

23,168

26,568

2,844

3,719

4,403

%change

-9.3%

4.6%

10.5%

-10.3%

9.3%

18.6%

Initiation

OW

CNY115

0

4,366

7,364

9,249

689

1,563

2,214

Source:MorganStanleyResearch.E=MorganStanleyResearchestimates.

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8

MissingAlphainthePast

Overthepastthreeyears,thesharepricemovementsoflithiumbat-teryequipmentstockscanberoughlydividedintofiveperiods:

•September2020–January2021:InSeptember2020,thecentralgovernmentannouncedanaimtohitpeakemissionsbefore2030andreachcarbonneutralityby2060.Also,NEVsalesrecoveredfromtheCovid-19pandemicandleadingdomesticlithiumbatterymakersstartedtheiraggressivecapacityexpansions,whichtogetherdroveupthesharepricesoflithiumbatteryequipmentplayersacrosstheindustry.

•January2021–March2021:Therewasapullbackinshareprices,whichwethinkwasmainlyduetoconcernsoverweakNEVsalesandsomeprogressonsolid-statecelldevelop-ment.

•April2021–December2021:MoreChinesecellmakersstartedexpandingcapacity.OnthebackofabullishmarketviewforNEVdemandinthenextfiveyears,somefurther

raisedtheirmid-termtargetsinabidtogainmarketshare.Meanwhile,globalcellmakersalsoannouncedlarge-scaleexpansionplanstoacceleratetheirenergytransitions.Thissignaledthestartofthesecondcapacityexpansioncycle,andsharepricessurgedinresponse.

•December2021–April2022:ThelithiumcarbonatepricesurgeconcernedthemarketintermsofbothNEVdemandandthemarginsoflithiumbatterymakersinthenearterm.Investorsworriedmarginpressurewouldgraduallybepassedontoequipmentsuppliers.Thesharepricesoflithiumbatteryequipmentplayerscorrectednotablytogetherwiththecellmakers.

•May2022–present:SharepricesrecoveredslightlyasNEVsalesreboundedinMayasdailyCovid-19casesinChinadeclineandontheoilpricesurge.ConcernsaboutEVdemandandtheinterruptionoftheautomanufacturingsupplychainwereslightlyeased.

Exhibit9:Historicalstockpriceperformance(peersvsindex)

330%

280%

230%

180%

130%

80%

30%

-20%

-70%

Aug-19Oct-19Dec-19Feb-20Apr-20Jun-20Aug-20Oct-20Dec-20Feb-21Apr-21Jun-21Aug-21Oct-21Dec-21Feb-22Apr-22Jun-22

WuxiLeadYingheHangkeLyric.SSEC

Source:Refinitiv,MorganStanleyResearch.

MorganStanleyResearch9

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Lackofalphaandunderperfor-

manceversusbatterymakers

Overthepastfouryears,thesharepricesofChina'slithiumbatteryequipmentmakershaveunderperformedbatterymakers,regardlessofwhetherthebatteryindustrywaspullingbackorsurging.Wehaveseenlittlealphagenerationbyequipmentstocks,evenamidthestrongcapacityexpansionplansannounceddomesticallyin2021.Wethinkinvestorspaidlessattentiontoequipmentstocksthanthebattery-makingnamesduetothemuchsmallermarketsize,weakerbargainingpower,andcyclicalitycausedbybatterymakers'capacityexpansionplans.Priorto2021,mostofthecapacityexpansionwasfromCATL,andequipmentorderswerelimitedtoaroundRmb40bn/yearonaveragein2018-20,comparedwithalithiumbatterymarketworthRmb156bn/yearinthesameperiod.Investorshavebeentreatingtheleadingequipmentmaker,WuxiLead,moreasaproxyforbatterymakerCATL.MostofWuxiLead'sequipmentpeersarerelativelysmallandhadonlyrecentlyjoinedtheEVbatteryindustry.Asaresult,theMorganStanleyequipmentindex(weightedbymarketcap)hasunderperformedtheMorganStanleylithiumbatteryindexforfouryearsdespitetherespectiveindustriessharingsimilartrends.

Exhibit10:Thelithiumbatteryandequipmentindustrieshaveseensimilartrendsoverthepastfouryears

Battery

1400

1200

1000

800

600

400

200

0

Equipment

300

250

200

150

100

50

0

index-batteryindex-equipment

Source:Wind,MorganStanleyResearch.TheMorganStanleyequipmentindexincludeWuxiLead,Yinghe,Hangke,Lyric,HNACTechnology,UnitedWinners,NebulaElectronicsandKanhoo;TheMorganStanleybatteryindexincludeCATL,GuoxuanHigh-techandEVEEnergy.

Exhibit11:TheMorganStanleyequipmentindexhasunderperformedtheMorganStanleybatteryindexsincemid-2018.Itsonlyperiodofoutperformancewasin1Q21.

1400%

1200%

1000%

800%

600%

400%

200%

0%

-200%

index-batteryindex-equipment

Source:Wind,MorganStanleyResearch.TheMorganStanleyequipmentindexincludeWuxiLead,Yinghe,Hangke,Lyric,HNACTechnology,UnitedWinners,NebulaElectronicsandKanhoo.TheMorganStanleybatteryindexincludeCATL,GuoxuanHigh-techandEVEEnergy.

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Whatconcernsthemarketatthispoint?

Investorsareworriedthattheequipmentindustryneworderswillpeakin2023andtheequipmentsuppliers'marginswillbesqueezedduetothelithiumcarbonatepricesurge.Whetherorderspeakin2023ornotwilldependonthelevelofoverseasordersChineseequipmentmakerscanattain.Inthemeantime,weseealimitedimpactonequipmentmarginsfromthelithiumcarbonatepricesurge,asbatterymakersusuallyseparatetheirbudgetformaterialpurchasesfromthatforcapacityexpansion.Wedonotthinkbatterymakerswillsacrificepotentialmarketsharegainsforshort-termprofitabilitysolongasthestrongEVoutlookremainsintact.

Inthisreport,wewillfocusmoreonthelong-termtrendsthanontheequipmentindustry'scycles.Wethinkconcernsofanewordergrowthslowdownandmarginpressurearefullypricedin.Webelievetheindustrywilldelivermorealphainthemediumtolongtermbasedonthreemajortrends–globalgrowth,technologyiteration,andthedecentralizationofcellmanufacturing.

Exhibit12:2023P/Eestimates

80.0

70.0

60.0

50.0

40.0

30.0

20.0

10.0

0.0

CATL

EVE

Guoxuan

WuxiLead

Yinghe

Hangke

Lyric*

Nebula*

Hymson*

Cellmakers

Equipmentsuppliers

CellmakersPEaverage

EquipmentsuppliersPEaverage

Source:Refinitiv,MorganStanleyResearchestimates.*DenotesstocksnotcoveredbyMorganStanleyResearch,usingdatafromRefinitivconsensusestimates.

Whyarewewritingthisnotenow?

Thesharepricesofbothcellmakersandequipmentsuppliershavedroppedsharplyoverthepastsixmonths,despiteamildreboundinrecentweeks.Webelievethiscreatesanattractiveentrypointforequipmentsuppliers.Inthenearterm,equipmentsuppliersshouldenjoystrongersalesgrowthandabettermarginoutlookthancellmakers,yettheyaretradingatbelow-averagediscountstocellmakersintermsofbothP/EandPEGin2021-24.Leavingasidetheprobabilityofanear-termmarketpeakin2024andmarginpressurefrommaterialpricehikes,webelievetheequipmentmarketasawholewillseeanotableexpansionoverthenextfewyears.

Exhibit13:2023PEGestimate

3.5

3.0

2.5

2.0

1.5

1.0

0.5

0.0

CATL

EVE

Guoxuan

WuxiLead

Yinghe

Hangke

Lyric*

Nebula*

Hymson*

Cellmakers

Equipmentsuppliers

CellmakersPEGaverage

EquipmentsuppliersPEGaverage

Source:Refinitiv,MorganStanleyResearchestimates.*DenotesstocksnotcoveredbyMorganStanleyResearch,usingdatafromRefinitivconsensusestimates.

Foundation

MorganStanleyResearch11

Pouchcell,7%

Trend#1:TechnologyIterationtoHelpMaintain

LeadingPosition

Itiswidelyknownthatequipmentsuppliersstarttofacepricingpres-sureonceatechnologyiswidelyadopted,typicallywithin2-3yearsafterlaunch.Lithiumbatterymanufacturingtechniqueshaveseenlimitediterationinrecentyears.Thisexplainsamajorconcerninthemarketregardingdepressedmarginsinthelongterm.However,webelieveseveraltechnologyiterations–4680-speccells,thegreateruseofstackingmachines,andtheapplicationofsolidstatecells–willhelpmaintainthecompetitivenessofleadingequipmentnames,alle-viatepricingpressure,andcreateextraequipmentdemandoverthenextfewyears.

Exhibit14:Prismaticcellsarethe

majorEVcelltypeinChina,representing

86%oftotalcellinstallationsin2021

Cylindricalcell,6%

Prismaticcell,86%

Source:GGII,MorganStanleyResearch.

(1)Stackingmachines

Thankstobetterproductionefficiency,higheraccuracyandlowercosts,windingmachinescontinuetodominateprismaticcellmanu-facturing,whilestackingmachinesareusedmoreformakingEVpouchcells,astheyarecoatedbyaluminumplasticfilm,whichhasweakermechanicalpropertiesthancylindricalandprismaticcells'steeloraluminumshells.In2021,prismaticcellsmadeup86%ofChina'sEVcellinstallations,upfrom80%in2020.Globally,pris-maticcellshavearelativelylowshareatnearlyhalfofthemarket.Pouchcellsaremorepopularinternationally,witha28%globalshareversus6%inChina.Hence,windingmachinesarestillthemajorpro-ductiontechnologyusedforcellassemblyworldwide.

Exhibit15:Globally,prismaticEVcellsaccountedfornearlyhalfoftotalcellinstallationsin2020

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

80%

49%

28%

23%

13%

6%

Cylindricalcell

Prismaticcell

Pouchcell

ChinaGlobal

Source:SNEResearch,MorganStanleyResearch.

Exhibit16:Windingmachinestomakecylindricalcellsandpris-Exhibit17:Stackingprocess

maticcells

Source:VDMA.

Source:ResearchGate.Note:1.roundwinding;2.prismaticwinding.

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Exhibit18:ComparisonofWuxiLead'sstackingandwindingmachines

Products

Capacity

Electrodeendfacealignment

Laminating

alignment

(between

Ca&An)

Overall

alignment

Windingalignment

Accuracyof

electrodecutting

position

StackingMachine

StackingMachine0.45-0.6s/pcs/station±0.2mm±0.4mm

Stacking&Slitting

Machine

0.45-0.8s/pcs/station

±0.2mm

±0.4mm

ContinuousThermal

LaminationStacking0.125s/pcs±0.5mm±0.6mm

Machine

HeatLaminatingMachine(Stacking,SeparatorCutting

Type)

0.2s/pcs

±0.6mm

±0.3mm

WindingMachine

6PPM,electrodelength≤7000mm

±0.3mm

±0.5mm

PrismaticAluminum

ShellCellWinding

Machine

18650/21700

CylindricalCellWindingMax45PPM±0.2mm±0.2mm

Machine

DigitalCellIntegrated

WeldingandWindingMax20PPM±0.15mm±0.2mm

Machine

Source:WuxiLead,MorganStanleyResearch.

Whatarethebenefitsofcellsmadebystackingmachines?(1)Lowerinternalresistanceduetoitsparallelstructureamongmanysmallelectrodepieces;(2)higherconsistencyofstressareasbetweentheelectrodeandseparator,withnosignificantstresspoints;and(3)higherenergydensityduetobetterutilizationofa

cell'sinternalspace.Evenso,applicationsforusingstackingmachinesinprismaticmanufacturingarelimitedowingtolowpro-ductivityandstability.Forthesameproductionline,astackingmachinecostsatleast30%more.

MorganStanleyResearch13

Stackingtechnology

Itisequivalenttoapluralityofsmallpolepiecesconnectedinparallel,whichreduces