Now that we have had some time to absorb new information from AGM 2023 Updates and also deliberated amongst friends/other investors/domain experts, let’s summarise some Key Information and go on to stick our necks out and make bold to present some Key Insights (forward-looking, that look clear to me, but of course will need some more field validation from domain experts, than what we have today!).
Disc: SBCL stock is currently at expensive levels. This post has forward looking inferences (which may all go wrong). Buying at these levels will be fraught with risks. Being Invested, my views are biased.
Key Information to focus on (only data/facts that move the needle the most!)
-
Isabellen Hutte commands 60-70% share of EV BMS shunts supplies to Tier1 EV BMS suppliers like Bosch, Hella, Continental that in turn supply to all major Auto OEMs. ISAH primary bonding tech is Hard Resistant Bonding, EBW bonding tech share is probably negligible. Has Patents around the Hard Resistant Bonding tech/processes.
-
EBW Bonding tech vendors (capable of EBW Shunt strips) include IsabellenHutte (1 EBW m/c), Vishay (3 EBW), Shivalik (8 EBW, also some are with multiple guns, so total is more like 11(?), Wieland Germany (1 EBW), Cyntech Taiwan (1 EBW), Korean (2 companies, 1 EBW each), Chinese (2 companies, servicing Chinese Market primarily).
-
Totally 8 Competitors globally (EBW Shunt strips capable) approved with OEMs. Effectively 5 players only in SBCL addressable market as Chinese players serve the China market, and ISAH concentrates on propagating Hard Resistant Bonding tech, has negligible EBW Shunts presence. Vishay is NOT a competitor but a win-win customer. Wieland (a major player) is a new entrant though to EBW Shunt strips, Cyntech was a SBCL customer before and new entrant, Korean players one of them also a SBCL customer before, and new entrant.
-
Typically the supply relationships between a Tier1 like Bosch and a Tier 3 supplier like ISAH (for a particular OEM platform) are contracted for the expected life of the product. So say for a OEM platform launched in 2015/16, the shunt supply contract is typically 10 years and running/in-force till say 2025/2026
-
Almost all OEMs have introduced/working on new Platforms that will be launched in 2025/2026 timeframes. Due to large number of sensors in BEV and Hybrid EVs and thus consequent proliferating errors, OEMs have now specified Automotive Safety Integrity Levels ASIL C standards with an aggregate desired accuracy 1% at the BMS level, and compartmentalised error levels for different components e.g. this 1% accuracy desired at BMS level translates to 0.05% accuracy level required at individual Shunt level (existing vehicles today have 1% accuracy requirements at Shunt level)
-
SBCL Tier1 customers like Bosch, Hella, Continental demand (but can’t measure) 0.05% shunt level accuracy but the OEMs can and do measure before approving. SBCL has passed this stage with all major global OEMs now.
-
For BEVs and Hybrid EVs that will be launched in 2025/26, it is imperative for the Tier1s like Bosch, Hella, Continental to be inspecting new supply lines (equipped for 0.05% accuracy fine tuning) at their respective Tier3s such as SBCL like NOW (read 2023 is almost over, only a year left).
-
ISAH has also been making Current Sensing modules (CSM) using their Shunts. And started offering the same (with BMS Housing) to the OEMs (effectively competing with other Tier1 suppliers like Bosch, Hella and Continental). OEMs ONLY care about ASIL C 1% accuracy at CSM/BMS level, they do not care whether Shunts came with Hard Resistant Bonding tech or EBW Bonding tech.
-
SBCL is watching the Current Sensing Module (CSM) play closely. They find that CSM design options for meeting (ASIL C with Tier1s) are still pretty much evolving and fluid. Once there is more clarity, SBCL is more likely to take a JV route with a Partner (as mentioned in AGM, left unsaid about nature of partner, any guesses?
) -
Wieland, Cyntech, and the 2 Korean companies (?) too have turned customers again to SBCL for some of the new platform requirements.
Key Insights to fix on (Inherently forward looking, please read disclaimer above, carefully)
We solicit more work and discussion around these with industry domain experts
-
SBCL is today approved/positioned well at every major Auto OEM for their EV forays through their Tier1s like Hella, Continental, Bosch and Others {need to nail these down}. For some, the positioning is very strong like in Continental and Hella (buttressed by forward visibility of 6-7 years), likely to become as big, or better than the Vishay relationship in a few years.
-
ISAH had been dictating terms with the Tier1s (for older launches say 2015/16 timeframes that are still continuing). For some designs (actually Tier1 provided), ISAH is known to have gone ahead and filed patents (tech process and even form-factor) with the consequence that the same Tier1 faced complete rigidity to change from ISAH, and even ended up paying Royalty to them (for their own design).
-
Post 2018 though - much of above has been changing drastically
a) ASIL C specs from OEMs forced redesigns on everyone (entire supply chain)
b) Other Tier1s found a way to shut out their vendor ISAH’s dominance/dictates/workaround patents
Requesting @GourabPaul to expand on this in a separate post (now you know where due credit needs to go for helping navigate through much in my above posts)
c) Is this why now EBW BMS Shunts comes into the picture big way? From 2025/26? So much so that SBCL declared in Mumbai Analyst meet that they have redefined their addressable market to EBW BMS Shunts.
(they actually had said they will now NOT focus much on the other (non BMS) EV Shunts, as that space is much more competitive (read margins not protected) and requires them to stock large number of SKUs; but this sort of narrow market focus was negated at AGM 2023) -
ASIL-C accuracy requirements are very stringent (it’s like a 200x jump from the older shunts tech) and thus very difficult especially for new EBW BMS Shunts entrants to muster, fine-tune, and deliver upon. Quite likely that some of the existing (shunts strip capable) players will drop out of this game.
-
Very likely a few years down the line SBCL will emerge as THE primary vendor for both Hella and Continental offerings to OEMs (in addition to being Vishay’s #1 supplier). Even for other Tier1s who have NOT yet warmed up to SBCL (??)
-
Let’s NOT forget the other big needle-mover Insight. SBCL Management has averred time and again theirs is now a Margins-protected play (unlike 2018 glut levels). In AGM 2023 they made the specifics clear that RM price-volatility-index is calculated separately by all Customers and paid for separately, in addition to Operating margins.
Requesting EV BMS domain Experts to take this forward with their friends/contacts in the OEM industry and collaborate with SBCL investors like us to make us all better-informed decision-makers! You can add super value by
a) filling in the gaps
b) correcting/modifying above hunches to be in-tune with Reality
c) confirm/demolish say this margin-sustainability premise
"Is this common to all Shunts suppliers of Tier1s (unlikely though); Or more likely a win-win special-arrangement with the current Cost-leader, Design-leader, Process-Automation-leader, Lead-time-leader, AND capacity-leader like SBCL -for securing hassle-free future EV supply chain by Tier1s
{SBCL is known for playing the win-win respect for Customer-IP game; known for helping improve customer-costing with SBCL redesigns; never-to-compete with customer game - unlike say the #1 incumbent’s game which is probably getting derailed as we speak)
For more exploration
- Wieland E-Mobility (EBW shunt strips, Shunts, Shunts-based Current Sensors)
- Cyntech ASIL C and ASIL D Shunt Modules