Electricity storage system company, RedFlow Limited (ASX: RFX), has today appointed Jabil Circuit Inc. (NYSE: JBL) as its outsourced manufacturing partner for its core zinc-bromine battery modules (ZBMs).
The Manufacturing Services Contract with Jabil is an acceleration of RedFlow?s expansion plans outlined in the November 2010 IPO prospectus. Outsourced production of ZBM components by Jabil will commence in Q3 2011 and progressively expand, which is well ahead of the prospectus schedule for outsourced manufacturing to be operational in 2013.
This early expansion of manufacturing capacity is expected to accelerate RedFlow?s entry into international markets by progressively reducing production costs of the Company?s ZBMs.
RedFlow expects to achieve unit cost savings through a combination of:
- Reduced product costs through manufacturing expertise, high labour productivity and the buying power of a international supply chain;
- Consistent high quality of components and assembly; and
- Reduced exposure to additional capital costs for plant expansion.
Jabil is a multi-national (55 factories in 22 countries) global Electronic Manufacturing Service (EMS) provider with current fiscal year revenue of approximately $16 billion/year. Large scale outsourcing is common in the electronics sector and is becoming increasingly used by cleantech companies.
Speaking from the Electricity Storage Association conference in San Jose, California, RedFlow?s Chief Executive Officer, Phillip Hutchings, said: “It is pleasing that we have been able to appoint an outsourced manufacturer earlier than planned and accelerate our transition into higher volume, lower cost production.
“Jabil brings to RedFlow low-cost, high-quality manufacturing, a well-developed supply chain and a demonstrated ability to ramp up production to meet customer needs. RedFlow selected Jabil as its manufacturer of choice in part because of Jabil?s commitment to the cleantech sector.”
Jabil is separately negotiating with RedFlow to integrate ZBMs for products in the telecommunications market.
Jabil has agreed to purchase sixty ZBMs for trials and delivery of these has been rescheduled to the second half of 2011. RedFlow is further developing its product and market entry plans for the off-grid telco sector and these arrangements are one component of the broader plan.
RedFlow has been fully engaged over the past five months in preparing for outsourced manufacturing, with a specialist project manager in this area. The appointment follows expanding technical interchange between the two companies and agreement on commercial terms.
Jabil will initially manufacture RedFlow ZBM components at its specialist plastics plant located in Taichung, Taiwan. It will build to RedFlow orders, with rolling production forecasts and clearly defined quality and delivery terms.
RedFlow retains its core intellectual property. The Company?s production engineers will collaborate with Jabil experts to deliver cost savings well in excess of those which RedFlow could achieve on its own.
RedFlow?s existing workforce and Brisbane production facilities will progressively switch to large-scale prototype production of enhanced „next-generation? ZBMs before handover for outsourced manufacturing.
“In recent years, cleantech companies have outsourced manufacturing to take advantage of cost, quality and supply chain benefits. As an example, Jabil itself has become one of the world?s leading manufacturers of solar photovoltaic (PV) panels for clients in this sector,” Mr Hutchings said.
“This step is a further differentiation of RedFlow from its global competitors and will give RedFlow the production capacity and quality to progressively expand its international markets.”
The outsourced EMS model has been enormously successful in the electronics industry over the past two decades and has been a key driver in the proliferation and in the low cost of consumer electronics. This model is now spreading to other sectors with similar characteristics (refer to the attached Introduction to the Electronic Manufacturing Services (EMS) Sector).
RedFlow?s Chief Technology Officer, Chris Winter, is addressing the Energy Storage Association Conference in San Jose today and will highlight RedFlow?s leading position in the roll-out of grid-connected energy storage solutions using ZBMs.
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