Lithium-ion battery maker Enovix Corp. said Wednesday, Sept. 20, it has acquired Korean battery component manufacturer Routejade Inc. for about $98 million in a bid to speed up its revolutionizing of the battery industry.

The deal, for which Enovix will pay $16.5 million in cash and 6.2 million shares of its common stock, will expand the buyer’s production capacity and cut costs via vertical integration, CEO Raj Talluri told The Deal.

For instance, the electrode coating process, which Enovix had previously been outsourcing to Routejade, is typically a major expense for battery manufacturers. Moving that process in-house will save around $35 million in expenses per year, Talluri said. It also will ensure the quality of Enovix’s battery materials, allowing the company to increase manufacturing yield and throughput.

Enovix, which had a roughly $2 billion market capitalization as of Wednesday’s close, is working to improve the current battery technology that is used widely in consumer devices such as mobile phones.

The company is partnering with Android phone makers including Xiaomi Corp. and Lenovo Group Ltd. and has been building a Malaysian factory where it plans to be fully online by the first half of 2025 and one day produce about 36 million batteries per year.

Fremont, Calif.-based Enovix hopes to replace the graphite anodes of batteries with a silicon equivalent in an effort to give batteries more energy density. With greater density, batteries can last longer or supply greater power, functions that will be useful as the popularity of high-compute processes such as artificial intelligence grows.

Enovix claims its patented design allows batteries to hold between six to nine times more charge than graphite-based batteries used today without typical drawbacks of silicon-based batteries.

Nonsan, South Korea-based Routejade makes graphite-based lithium-ion batteries for consumer electronics such as wearable technology, as well as in medical, industrial military applications. The company’s patented encapsulation technology complements Enovix’s goal to offer multiple types of batteries in the future, Talluri explained.

Enovix will effectively capture a vertically integrated factory in Nonsan via the deal and be able to tap into Routejade’s electrode coating and battery pack manufacturing capabilities and its diversified consumer base.

The transaction is expected to close in the fourth quarter and be immediately accretive.

Talluri said the transaction will increase its production from thousands to of batteries per year to millions. The chief executive also said one of its Malaysian assembly lines will be online by 2024 and will produce 9 million batteries per year alone.

Enovix will primary target the Asian market to start, given the continent’s immense demand for consumer electronics and the convenient location of both the South Korea and Malaysia factories, but Talluri said there are global expansion aspirations on the table.

To be sure, there are some hurdles ahead of the company, which has not generated positive Ebitda or earnings per share in the past three years and has faced blowback from its U.S. investors. Earlier this year, investors filed a class-action lawsuit against the company for misleading them about its U.S. production capacity after it went public through a special purpose acquisition company.

“Our manufacturing footprint is growing and we’re investing a lot, so I expect our revenue to show results in a 2025 timeframe,” Talluri said.

With the surging global demand for electric vehicles, EV and battery makers also have come under fire for questionable raw material sourcing of lithium and other materials.

“Most of the shortages have been when people want it in large amounts like in EVs, and the amount of these raw materials that go into an EV is almost 10,000 times the amount that would go into something like a smartphone, so shortages are not so much of a problem right now,” Talluri argued. “We also see other companies recycling as much as 80% of the lithium in existing batteries. So, when our production increases, we may do the same.”

Enovix may primarily still be a growth vehicle, but Talluri said their competitive mote is built on the back of their extensive intellectual property.

“The innovation in our company lies in how we make these batteries via the 150 or so patents we have on the process,” he said. “Not only do we make the batteries, but the machines used to make them are custom-made. So, it’s a lot of intellectual property. We’ve been working on this for quite a while.”

Enovix, which exclusively negotiated Wednesday’s deal outside of an auction process, turned to a Baker McKenzie LLP for legal counsel on the transaction.

Editor’s note: The original version of this article, including advisers and other details, was published on Sept. 21 on The Deal’s premium subscription website. For access, log in to TheDeal.com or use the form below to request a free trial.