Green battery maker ready to scale up production

Cymbet, one of Minnesota's more promising developers of green technology, will launch high-volume production in 2011 of its next-generation, rechargeable energy cells. They're designed to supplant larger, less-efficient coin cells and other batteries as backup and, eventually, primary power sources that should last as long as the cellular phones and other hand-held devices they power.

The disappointing news: The manufacturing expansion will occur in Texas.

Cymbet has reached an agreement with X-FAB Texas in Lubbock, a huge semiconductor contract manufacturer in a former Texas Instruments plant, to supply what Cymbet says is growing global demand for its solid state energy chips.

Chief Executive Bill Priesmeyer said the 40-person Elk River company remains committed to Minnesota as its headquarters and base for research and development, engineering, sales and small-scale manufacturing. The company, which has attracted $60 million in three rounds of venture capital financing since 2003, increased its Minnesota work force 20 percent this year and also added contract workers.

But Priesmeyer said it needs large-scale manufacturing capacity to serve big markets like semiconductor backups, sensors and medical devices that could require tens of billions of units a year. The kinds of semiconductor "foundries" that can handle that are mostly in China or other distant parts of the world.

"We're committed to do this in the U.S.," Priesmeyer said. "But there aren't really any facilities in Minnesota, other than captive facilities owned by Honeywell, Seagate and a few others. We'd have to try and build and replicate this capital-intensive infrastructure ourselves."

In Texas, Priesmeyer said Cymbet will invest up to $25 million in plant expansion, which is being subsidized by the state of Texas and Lubbock. Officials there welcomed the investment.

Officials said Cymbet also has invested in upgrading the Elk River plant and will add an unspecified number of jobs next year.

"This is not negative for Minnesota," said Dan Carr, CEO of the Collaborative, the forum that brings together emerging Minnesota companies and financiers. "Cymbet was built and is growing in Minnesota, and it's a pragmatic reality that Priesmeyer may have to expand where he can best build business ... through contract manufacturing down there because that's where he can get it done without going offshore.

"Cymbet has figured out how to extend the life of these tiny, low-power battery cells. And they are on the cusp of a huge market. This is a coup for Minnesota."

X-Fab, with 2,500 employees worldwide and about 350 in Lubbock, says it is the "world's leading foundry group for analog/mixed-signal semiconductor applications. X-Fab manufactures wafers for the automotive, industrial, consumer and medical industries.

In January, Cymbet snared its third and largest round of $30 million in venture financing led by Perseus, a Washington, D.C.-based private equity fund manager, and Intel Capital of Santa Clara, Calif. Other investors include Texas Instruments and existing investors Bekaert NV; Helmet Capital; Cedar Point Capital, an original 2003 investor that is rooted in the former Miller Johnson Steichen Kinnard; Dow Chemical Co.; and the Ignite Group.

In addition to requiring less energy to charge thousands of times, the company's EnerChip is free of lead and other hazardous materials. One type of solid-state chip uses "energy-harvesting" technology to supply the energy to sustain itself via ambient light, heat and motion over the life of the device it powers.

Cymbet was conceived by a former Honeywell scientist more than a decade ago, based on microbattery technology developed by federal researchers at Tennessee's Oak Ridge Laboratory. A first round of $4.5 million of financing enabled it to expand from a small northeast Minneapolis business incubator in 2003 to its Elk River campus.

Neal St. Anthony • 612-673-7144 • nstanthony@startribune.com