Should Apple watchers be taking note of a UK IPO?
Michael McManus, DIGITIMES, Taipei [Monday 7 July 2014]

On July 3, England-based Intelligent Energy offered up 16.2 million shares, or 8.76% of the company’s capital, to raise approximately US$92 million and put the overall value of the company at more than US$1 billion, making it one of the UK’s biggest green energy debut’s ever. The IPO is interesting in that Intelligent Energy specializes in the development of modular, fuel cell systems and works with leading partners that include US-based airplane maker Boeing and Japan-based automaker Suzuki. What may make it especially interesting for the IT industry is that Intelligent Energy is also working with a leading international CE device OEM, which sources close to the situation say is Apple.

While it is no secret that Apple has been pursuing the development of fuel cells for use in mobile devices, it would be noteworthy if the consumer-electronics giant is pursuing development so closely with a partner. Neither company responded to requests to confirm the report at the time of publishing.

According to the sources, the relationship between intelligent Energy and Apple began with a joint development agreement in 2009. In 2013, the two companies jointly acquired a significant patent portfolio from a battery maker relating to fuel cells and the related power systems, cartridges and fuels for use in the fuel cell systems. While Apple acquired a small proportion of the patent portfolio, Intelligent Energy acquired the remainder and each of the buyers secured rights to the entire portfolio pursuant to suitable cross-licensing arrangements, the sources claim.

The sources added that in talks Apple said it aims to release mobile devices powered by fuel cells by the first quarter of 2016, with notebooks probably being the first platform supported. However, it should be noted that the sources admitted to not having seen an Apple roadmap.

Still, the sources believe Apple is keen to the idea of developing more environmentally-friendly power solutions, while also creating alternative revenue streams through the sales of energy products. The sources indicated that Apple has already done studies that show mobile device users would be willing to spend an additional US$20 per month if they had the convenience of not having to re-charge their batteries on a daily basis. This service could be provided by the telecom provider or by third parties. The business model would have customers recharging their devices through service providers or agents such as Starbucks, which could provide fuel cell cartridges every 7-10 days. The device itself would have a re-chargeable battery and a fuel cell.

Intelligent Energy forecasts that disposable chemical hydride cartridges will reach an annual volume shipment volume of 55-60 million fuel cartridge units in the medium term. The company believes that these chemical hydride fuel cartridges will be initially priced at approximately US$7.7-8.6 per unit, but will trend down in price over time.

Before Intelligent Energy makes the leap into the mobile market, where fuel cell cartridges are expected to be manufactured as internal devices, the company plans to initially launch an external fuel cell solution called the Upp fuel cell charger. The company has stated its external Upp device will offer USB charging for a wide range of USB compatible mobile devices and is expected to be launched in Fall 2014. Depending on usage and charging variables, a single external Upp fuel cartridge can provide approximately one week’s worth of energy to a smartphone and can keep a feature phone powered for a longer period, the company believes.

The business model for the external Upp device and separate fuel cartridge is based on a razor-blade model, where revenues are generated from both the sale of the device itself and from repeated refillings of the cartridge (and, when available, sales of disposable cartridges). Since a fuel cartridge can typically provide approximately one week’s worth of energy for a smartphone, multiple fuel cartridge refills would be required for the ongoing use of the Upp device. Intelligent Energy expects peak annual sales volumes of 3-4 million units of Upp devices in the medium-term.

Currently, a number of companies are looking to get fuel cells into the CE supply chain, as the advantages are numerous. For example, operating times based on fuel cells are much longer than those of batteries; replacement cartridges mean instantaneous refills and no time required for charging; and the fact that fuel cell reactions do not degrade over time means longer lasting solutions that are more environmentally friendly and more efficient than related battery solutions.

Of course there are various issues that still need to be addressed before fuel cells can be easily deployed in the mass market, and it is interesting to see how industry players are constructing their roadmaps with the goal of achieving more market acceptance. For Intelligent Energy, the future development of its Upp device follows two strands. The first is to reduce the size and cost of the existing product so that it can be offered at a price level acceptable for the mass market, which it expects by late 2014. The second is to increase the power available through the USB so that Upp devices can offer multiple charges to devices such as tablets and low power notebooks, which the company expects in 2015.

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