Samsung's Fuel-Cell Gambit

The South Korean outfit is backing a project to build handsets powered by fuel cells instead of conventional batteries

Samsung may soon be tapping a new power source for its cell phones. The South Korean handset maker on May 18 is announcing plans for building prototype mobile phones powered by fuel cells. It's one of the biggest publicly disclosed commitments to the technology by a major manufacturer in years.

Samsung, the world's No. 3 maker of wireless phones, behind Finland's Nokia (NOK) and U.S.-based Motorola (MOT), says it has signed an exclusive deal to use technology from MTI MicroFuel Cells of Albany, N.Y., a unit of Mechanical Technology (MKTY). The joint development deal will last about 18 months, and neither company will work with any other to develop fuel cells for use in wireless phones. Samsung is committing $1 million to the effort.

That may be small potatoes in terms of Samsung's research and development budget, but it marks a big step forward for a fledging fuel-cell industry that aims to supplant the batteries typically used in notebook PCs, wireless phones, PDAs, and digital cameras.


  As those devices incorporate brighter screens, more powerful wireless networking features, and other cutting-edge capabilities, it's getting harder to keep them running with conventional batteries, typically based on lithium ion and lithium polymer technology.

The deal also marks a huge vote of confidence in a little-known company. MTI Micro, which had sales of $8 million in 2005, is one of a handful of outfits seeking to bring hydrogen-based fuel-cell technology into more common use. Its Mobion fuel cells have already appeared in industrial handhelds from companies like Intermec, a unit of Unova (UNA), and have drawn the attention of military contractors developing devices that soldiers will use in the field.

Under the deal, which lasts through the end of the second quarter of 2007, the two companies will jointly research the use of methanol-based fuel-cell technologies for use in cell phones. Any patents that come as the result of the research will be assigned to MTI.


  MTI's technology harnesses a chemical process that combines water with methanol, a type of alcohol also known as methyl alcohol, to produce electricity. It's really just basic chemistry, but not always easy to set in motion. Often the presence of water requires a complicated set of micro-pumps and pipes to move the water to where it needs to be. MTI has developed a way to do it without the need for a pump, and without the need to carry water in the first place.

The relationship got its start with a device MTI engineers stitched together more than a year ago -- a Samsung PDA powered by a prototype Mobion fuel cell. "That caught Samsung's attention," says Alan Soucy, MTI Micro's chief corporate strategist. "Since then they've come here and done a deep dive with our technology, and obviously they see potential."

What Soucy and MTI CEO Peng Lim envision is a world where instead of recharging your phone's battery, you'll buy disposable fuel cells that last longer than the batteries that come with cell phones today and are more eco-friendly. Exactly how much longer they'll last the company won't say yet. "We've promised to demonstrate a fuel cell that is better than a lithium ion battery by the third quarter of this year, and we're on track to do that," Lim says.


 And in general, fuel cells have chemistry on their side, says Frost & Sullivan analyst Sara Bradford. "The batteries we have are starting to reach their theoretical limits," she says. "Plus, with the fuel cells there's the added benefit that there's no acids or heavy metals involved," she says. "The green factor is important."

Bradford reckons that by 2012, consumers may buy as many as 80 million fuel-cell cartridges like MTI's Mobion. Initially, she says, they'll cost more than lithium ion and lithium polymer batteries common today. "That's normal," she says. "When lithium ion batteries first came on the scene they cost more, too." And in some cases the fuel cells could be used to recharge and not replace the battery.

The alliance with MTI could be a sign that Samsung's own efforts to develop fuel cell technology are falling short, says Bradford at Frost & Sullivan. "Samsung went looking for partners, and this clearly doesn't say anything positive about their opinion of their own technology."

Samsung is only the latest large corporation to show interest in MTI Micro. Gillette (G), which owns the Duracell brand of batteries, is helping MTI Micro create a retail and distribution business for a market in disposable fuel cells. Flextronics International (FLEX) the Singapore-based contract electronics manufacturer, has signed on to build the fuel cells.

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