Venture arm Intel Capital has funded battery, energy storage, and alternative energy companies, and Intel certainly has the balance sheet for big R&D bets
Like any emerging industry, the cleantech world tends to accuse newcomers of being interlopers, and that's probably the initial thought many had when news hit that former Intel chairman and plug-in advocate Andy Grove is advising the company to move into the electric vehicle (EV) battery market. Realistically, what could the world's largest chipmaker, which makes the bulk of its revenues on digital communication technology, do to help transform our beleaguered car industry into an electric wunderkind?
A lot, actually. While the move would be risky, it could have a monumental effect on the slow-moving electric vehicle battery industry, particularly in the U.S.
Intel has already moved closer to the EV battery market with some recent investments through its venture arm, Intel Capital. The investment group has funded battery, energy storage, and alternative energy companies including the solid-state battery startup Cymbet, fuel-cell membrane company PolyFuel, and Chinese flow-battery maker Net Power Technology. Intel Capital's solar investments—like SpectraWatt, SulfurCell and Trony Solar—are also tied to batteries, as solar production needs to store energy overnight when the sun doesn't shine.
"We certainly consider battery technology important," Intel spokeswoman Christine Dotts told us. "Whether we will do anything more in this area we can't say at this time. However, it should be noted that battery technology developments for computer uses and for automotive applications are not necessarily mutually exclusive." That means if Intel does put significant efforts into battery development, the company believes it could use those innovations for computing, mobile technology, and networks (all industries where Intel already has a significant presence), not just transportation.
Intel certainly has the balance sheet to make large research and development bets. For the fourth quarter, Intel is expecting revenue of $9 billion, and for 2007, Intel generated $38.33 billion in revenue. Last year Intel spent $5.76 billion, or a whopping 15.03 percent of revenues for the year, on R&D.
At the same time, the market itself is crying out for an aggressive, smart company to solve some of electric vehicles' fundamental issues. The battery is one of the most expensive and technically difficult aspects of EVs, and it's one of the biggest reasons there are so few electric vehicles on our roads. As Rob Enderle from the research firm Enderle Group says: "Battery technology has significantly lagged," while other technologies have advanced. Most of the next-generation battery technology from startups like A123 Systems and Altair Nano, or energy storage devices like EEstor's, are still years away from commercialization.
With the right bets, Intel has the ability to become one of the largest U.S. electric vehicle battery makers. The big companies that are currently moving to dominate the battery industry—like Sanyo, LG Chem and Panasonic—largely come from Asian countries. Electric carmakers like Tesla have complained that the cost of transporting batteries from international producers drives up manufacturing costs, and Tesla said it has actively (and so far unsuccessfully) looked for a U.S. manufacturer. Many of the large U.S. automakers slowly getting into electric vehicles could also be interested in domestically-made batteries. U.S. electric vehicle battery production could also be ripe for U.S. subsidies or benefit from Obama's green stimulus.
For Intel, moving into electric vehicle batteries could help the company diversify beyond chips for computing, which it has so far largely been unable to do successfully yet. Other chip companies have succeeded in diversifying through green tech businesses: Applied Materials diversified its chip equipment business several years ago with a solar gear bet and now is seeing solar as one of its fastest-growing areas. Chipmaker STMicroelectronics is working with LG Chem on battery packs for hybrid and electric vehicles.
That's not to say it wouldn't be a risk for Intel to make a substantial EV battery move. Clearly this isn't exactly the best time to be making large, capital-intensive bets on new fields. Intel actually lowered its fourth quarter outlook from early expectations of $10.1-10.9 billion, citing in part "significantly weaker than expected demand in all geographies and all market segments." Because batteries are a rather specialized field and one that Intel doesn't know that much about today, moving into the space would likely be a very expensive play.
With vehicles contributing more than a quarter of the world's carbon emissions, electrifying our cars could be crucial to fighting climate change. If the company that revolutionized computing could help put a small dent in global warming by producing a reasonably priced, U.S.-made battery, it could potentially kick-start an era of cheaper electric-vehicles for the average consumer and establish a significant place for the U.S. in leading that market.