Fuel Cells/Micro/Medis 060206
Medis Presents its Micro Fuel Cell as
“ready-to-go” for the Retail Market
at the 2006 Consumer Electronics Show
by Shirley Georgi
The Power Pack - getting ready for prime time
At the Consumer Electronic Show in Las Vegas in January 2006, Medis Technologies exhibited its fuel cell Power Pack which is said to be “ ready for production and sale.” Although the announcement was made, the actual units will not be found in retail outlets until the second half of 2006, perhaps September. Even though the initial launch of the product will be small in numbers (about 100,000 ) , the units will be available in mass quantities in 2007.
Currently, the Power Packs are being manufactured on a semiautomatic production line at Medis’ facility in Israel, with a capacity of about 20,000 units per month, but the company is contracting with Ismeca Europe Automation for the large scale production and with Celestica for the management of that line’s production in Ireland. Production quantities are estimated at 1.5 million per month, starting in 2007 .
What can it do for portables?
The Power Pack can provide the user with a full charge on-the spot. This micro fuel cell is capable of charging an array of portable devices multiple times. For example, a cell phone could have its talk time extended by 20 to 30 hours( 6 - 9 charges) or an iPod could get 60 to 80 hours of additional music without having the user take time to take out the battery charger, find an electrical outlet and recharge the battery. A digital camera could get five charges from the 1.3 Watt Pack . Other devices with rechargeable batteries such as PDAs, MP3 players, and handheld video games could also be charged for added use time by the Power Pack - the portable non-plugin charging station.
How does it work?
The disposable and nonrefillable fuel cell, which measure 3.2 x 2 x 1.4 inches and weighs nine ounces, converts chemical energy into electrical energy. Based on an Alkaline fuel cell technology researched and developed by the company, the Power Pack uses oxygen and sodium borohydride to generate electricity. When a Pack is activated, it takes in air at the cathode to create hydroxide ions. These ions pass through an electrolyte to the anode. It is at the anode where the ions react with sodium borohydride to form electrons that flow through a circuit, thus creating a current. As the electrons pass to the cathode, they mix with oxygen, creating hydroxide ions.
Once activated, the unit should be used on a regular basis and not be kept on a shelf for long periods of time. After activation , the unit’s power capabilities could last about eight weeks, depending on the device being charged and its usage.
The DC-DC converter provides a power management system for responding to the different requirements of the various mobile devices. This connector cable will interface between the mobile device and the fuel cell. According to Andrew Udis, Medis’s sales and marketing representative at CES, there will be cables for each gadget (i.e., cell phone and PDA) which will have the correct charging connector and Voltage regulator so that a specific portable device will be properly charged.
Marketing - opportunity and challenge
A growing need
The power gap is growing; portable electronics are demanding more power and there is a “power frustration” amongst consumers. Medis notes that there are three forces driving increased capabilities and convergence which ultimately lead to the need for the longest “talk” and/or “usage” time.
• Competition among device manufacturers
• Mobile operators drive to increase ARPU (Average Revenue Per User)
• Convergence of content on a mobile platform
The company views the Power Pack as an enabling technology for the wireless evolution and/or revolution. The cell phone is becoming the necessary mobile device to keep in constant communication. The cell phone is no longer a device used occasionally; it is becoming a popular alternative to a land line phone. The advanced cell phones provide broadened communications such as email, text messaging, and digital photos. The phone is slowly becoming an entertainment center with video, music, movies, games and sporting events. The cell phone is destined to become the lifestyle device where even credit card transactions and airline ticketing will take place. The need is clear, more battery life is needed. Medis envisions megasales of Power Packs for “always on” connectivity.
Medis also sees the newly launched Windows MobileTM 5.0 by Microsoft as an added benefit. Microsoft’s goal is to have 100 million handheld devices in the market featuring its new mobile platform. Medis sees this as another expanding opportunity for Power Packs.
In his December 2005 letter to shareholders, Robert Lifton stated, “One of our targets for 2006 is to address emerging markets for our Power Pack product. Two of those lucrative markets are China and India. Last year China’s cell phone subscribers rose by 18 percent. In India, cellular services revenue will reach US$24 billion by the end of 2009; this is a compound annual growth rate of 35.6 percent, according to Gartner, Inc. In fact in only four more years, Gartner notes that India has the potential to increase its celluar penetration level to 30 percent, with 300 million connections.
Early market entry - affordable pricing - an initial order
Although DMFC (Direct Methanol Fuel Cell) technology for portable devices seems to be the most popular prototype, Medis’s non-DMFC fuel cell has an advantage in using sodium borohydride, a benign nonexplosive material, for its fuel cell. Although the Power Pack can be carried in the cabin of an airplane, DMFC units are not yet allowed there because of the methanol fuel which is a highly flammable liquid. Although progress has been made by the International Air Transport Association to get the approvals from the FAA (Federal Aviation Administration), the final approval for the methanol units is not expected to be complete at least until 2007. This gives time for Medis to launch its product and get commercialization well under way.
The approximate retail cost for the for the disposable fuel cell cartridge should be about $19.95. Medis notes that because of its simplistic design -- no pumps, moving parts or complicated membrane, the Power Pack is composed of inexpensive materials which cause the electrochemical reaction for power. The entire power pack, in volume, can be manufactured for $4.50. Vendors such as phone companies can purchase them in volume for about $7.50 a unit.
Robert Lifton noted in his December 2005 address to shareholders that based on the company’s pricing program, he believes a gross profit of about $3.00 a unit can be gained on the sale of Power Packs to customers. The $3.00 figure is a gross profit number before taking into account SG &A (operating expenses such as Sales, General and Administration).
ASE International, a distributor to drug stores and other retailers, has given Medis an order worth $57 million. ASE is scheduled to receive 200,00 Power Packs a month from Medis’s automated line in 2007 and 400,000 units a month in 2008. Pricing is about $8.00 per unit.
The military market
Medis has also been working with General Dynamics, a company which integrates secure communication and information systems and technology, to produce Power Packs for military use. Medis has an exclusive marketing relationship with General Dynamics C4 systems, “GD.”
“Once we have incorporated any responses to the military specification testing, we plan to submit Power Packs to the appropriate certifying authorities for them to test,” Robert Lifton said. “We expect that these tests and any responses we need to make will be completed by Mary 2006.”
The disposable Power Pack could provide extended power for GSM phones, unmanned sensors and other products. Another possible program would involve JTRS (Joint Tactical Radio System) where power is needed for lightweight, handheld radios for all military branches.
Recently, Medis received an order from General Dynamics C4 Systems to deliver prototype fuel cell power packs and associated cartridges as power sources for 10 prototype tablet computers in support of the United States Air Force Wearable Computer Power Program. The aim of the initial project is to demonstrate extended field operation and the potential to reduce reliance on battery operation.
Wall Street’s reaction
During the fourth quarter of 2005, Medis Technologies’ stock declined and reached a low of $13.00/share in early December. Since that time, the stock rose to over $17.00/share in early January, closing at $17.59 on January 19th, 2006. There has been a noticeable price escalation since early January when Medis participated in the trade show at CES in Las Vegas.
During the past 52 weeks, the stock traded on the NASDAQ under the symbol MDTL in a range from $11.67 - $21.60. Although the current price is not at an all time high, the trend appears bullish at this time (mid-January, 2006).
Consumers should begin to see the Power Pack on shelves of retail outlets this fall. The ultimate decision of how successful the Power Packs will be lies with the acceptance of the consumer.