In accordance with what I anticipated in an interview with a Bolivian newspaper more than a year ago about the possible emergence of substitutes for lithium, Apple (NASDAQ:AAPL) has just announced the filling of two fuel cell patent applications that could radically change the prospects for lithium demand in the coming years.
With the first patent, Apple would incorporate, for the first time, a fuel cell into its most advanced laptops, iPad tablets and iPhones so as to extend - from hours to weeks - the duration of the electrical energy that feeds them. This invention will eventually lead to a full replacement of the lithium-ion batteries currently used in such electronic devices.
With the second patent, Apple would introduce a hybrid design consisting of the use of a fuel cell with a battery so that the former can continuously recharge the latter. This invention will tend to discourage technological development of lithium batteries because it would remove the need to increase the energy capacity of the battery.
In both cases, the more predictable result will be a decrease in demand for lithium in the coming years. According to data from the U.S. Geological Survey, in 2010 the demand for lithium carbonate used in batteries reached 23% of the total. It is estimated that the bulk of this demand came from laptops, tablets, iphones and regular cell phones.
While Apple currently controls only 10.7% of the market for personal computers and laptops, where the latter represent about 75% of its sales in the U.S., it is one of only two companies (of the top five) that have shown a sustained growth in the market shares in the last five years. With an increase in sales to skirt between 8.5 and 14.7%, compared with 3.3 and 3.7% of Toshiba (the other good performer), following estimates by gartner and idc, respectively, between the first half of 2010 and the first half of 2011, Apple is seen as the leader of the PC market in general and the laptop market in particular in the coming years.
The situation is even more promising for Apple in the case of tablets, in which, according to forbes Magazine, the company would control about 68.3% of the global market.
Finally, while Apple's share in the global market for iPhones is still very small (5.6% in the first half of 2011), it can be expected that in the next 2-3 years, mobile phones will be gradually displaced by iPhones, which could also contribute to improving the position of Apple in this market segment. According to Bloomberg, in the second quarter of 2011, Apple, the largest technology company in the world in terms of market value, was the only company of the four largest in the industry that registered a profit and record sales mainly due to demand for iPhones, one of its star products and its most important revenue contributor.
Therefore, the successful introduction of fuel cells with a substantial duration improvement over the most advanced lithium-ion batteries for Apple’s laptops, iPads and iPhones could have an almost immediate dissemination effect among competitors which would lead irrevocably to a decline in demand for lithium carbonate in the world.
As I argued in that interview, "it could be the case that by 2014, when the country is ready to advance in the third phase of industrialization, the world has evolved in another direction." Meanwhile, the national manager of Evaporite Resources just announced that the deadline for delivery of results corresponding to an experimental production of potassium chloride of lithium carbonate has been once again postponed.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.