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Suntech's shipments of solar modules are currently estimated at 2.2 to 2.4 gigawatts in 2011, an increase of 46% over shipments of 1.5 gigawatts in 2010, and 700 megawatts in 2009.<ref>[http://www.wikinvest.com/wikinvest/api.php?action=viewNews&aid=933140&page=Stock%3ASuntech_Power_Holdings_%28STP%29&wire=1&format=html&comments=0 Penny Stock DD: "Suntech Forecasts 46% Shipment Growth Next Year" December 8, 2010]</ref> Suntech's shipments of solar modules are currently estimated at 2.2 to 2.4 gigawatts in 2011, an increase of 46% over shipments of 1.5 gigawatts in 2010, and 700 megawatts in 2009.<ref>[http://www.wikinvest.com/wikinvest/api.php?action=viewNews&aid=933140&page=Stock%3ASuntech_Power_Holdings_%28STP%29&wire=1&format=html&comments=0 Penny Stock DD: "Suntech Forecasts 46% Shipment Growth Next Year" December 8, 2010]</ref>
 +
 +==News==
 +Suntech agreed to pay [[MEMC Electronic Materials (WFR)]] $67 million and relinquish a $53 million deposit to cancel a 10-year wafer supply contract.<ref name=blooms>[http://www.wikinvest.com/wikinvest/api.php?action=viewNews&aid=2776620&page=Stock%3ASuntech_Power_Holdings_%28STP%29&format=html&comments=0 Bloomberg: "Suntech Agrees to Pay MEMC $120 Million to End Wafer Contract" July 1, 2011]</ref> Suntech expects to incur expenses totaling $212 million to end the agreement, which was signed in 2006 when silicon wafer prices were higher than today.<ref name=blooms/> Ending the contract will save Suntech about $400 million on the purchase of 4,600 megawatts of solar wafers over five years.<ref name=blooms/>
== Company Overview == == Company Overview ==

Revision as of 13:47, July 1, 2011

Suntech Power Holdings is the world's largest manufacturer of crystalline silicon photovoltaic (PV) modules, which convert light energy into electricity, and is China's largest U.S.-listed solar player by market capitalization.[1] Suntech's competitive niche is in the middle of the PV supply chain. Based in China, the company has been rapidly expanding in a highly competitive market, taking advantage of low-cost production availability and a high-demand Asian market.

Global demand for renewable energy is one of the main drivers of Suntech's business. Many nations, including China and the U.S., have passed or are in the process of passing legislation that mandates greater use of renewable energy and subsidizes its development. Companies like Suntech are highly dependent on these government subsidies to make their expensive technologies economically viable. However, demand for photovoltaic products has declined as a result of the global economic crisis, and PV projects have found it difficult to obtain cost-effective financing for large scale solar project installations.

Suntech is developing solar panels that are increasingly efficient. Its current line of products has an efficiency of 18%, which is significantly higher than its previous 14%.[2] Furthermore, sunlight is available in massive quantities for half the day, and is free, unlike oil. For these reasons, when oil and gas prices rise, solar power becomes a more viable alternative. As solar power's efficiency rises, it becomes more competitive with oil and gas.

Suntech's shipments of solar modules are currently estimated at 2.2 to 2.4 gigawatts in 2011, an increase of 46% over shipments of 1.5 gigawatts in 2010, and 700 megawatts in 2009.[3]

News

Suntech agreed to pay MEMC Electronic Materials (WFR) $67 million and relinquish a $53 million deposit to cancel a 10-year wafer supply contract.[4] Suntech expects to incur expenses totaling $212 million to end the agreement, which was signed in 2006 when silicon wafer prices were higher than today.[4] Ending the contract will save Suntech about $400 million on the purchase of 4,600 megawatts of solar wafers over five years.[4]

Company Overview

Suntech Power Holdings is a Chinese solar power company specializing in the production of photovoltaic (PV) hardware used to convert sunlight into electricity. It generates revenue by selling PV equipment and services to countries and companies that use solar energy. Its role in the solar power value chain is in the manufacture, distribution, installation, and service of solar cells, panels, and modules. Suntech sells its products all over the world, but is especially well positioned to take advantage of the growing Chinese energy market.

Suntech is developing solar panels that are increasingly efficient. Its current line of products has an efficiency of 18%, which is significantly higher than its previous 14%.[2] Furthermore, sunlight is available in massive quantities for half the day, and is free, unlike oil. For these reasons, when oil and gas prices rise, solar power becomes a more viable alternative. As solar power's efficiency rises, it becomes more competitive with fossil fuels such as oil and gas. Suntech stands to benefit from rising oil and gas prices; however, if oil prices stabilize, Suntech will have to increase solar efficiency greatly in order to stay competitive.

Geographic Segments

Suntech is focused on expanding by taking advantage of government clean energy mandates all over the world, especially in China. The company has greatly expanded its output, in anticipation of greater future demand. Suntech's commitment to R&D has led to lower cost cells with higher efficiencies; Suntech also has a natural cost advantage being based in China, where production prices are already extremely low. The company went from being an unknown competitor in 2005 to the third-largest PV producer in the world.

China (2% of sales)[5]

Suntech expects sales in China to rise to 20% of its total sales by 2012.[5] Suntech has started expanding a plant in Jiangsu Province in order to increase production capacity by 300% to 2000 MW in three years.[6] The Chinese government's subsidy program to buildings powered by solar energy is expected to stimulate the photovoltaic industry in China[6]

Europe (78% of sales)[7]

Germany accounted for 50% of Suntech's total sales, and Italy 13%[7]. Suntech created the Global Solar Fund (GSF), a European based investment fund, to make investments in private companies that develop projects in the solar energy sector.[8]

United States (7.5% of sales)[5]

Suntech continued to expand its national dealer network in the U.S. Suntech's network includes over 200 dealers.[8]

Canada

Suntech Power has signed a letter of intent to build a solar silicon manufacturing facility in Ontario, Canada with the only solar-grade silicon manufacturer in Ontario. The plant is expected to start production at the end of 2011. One of the key drivers for Suntech to invest in this manufacturing plant is Ontario's feed-in tariff, which provides contracts to clean tech companies in Ontario.[9]

Japan

Suntech entered into an agreement with House Care Co. Ltd. under which House Care will distribute 30 MW of Suntech solar products.[8] Suntech targets over 40 MW of sales into Japan in 2009.[8] Suntech also entered into an agreement with Yamada Denki, Japan’s most popular consumer electronics and home appliance chain, to provide sales and installation in 450 stores[7]

Products

Suntech produces PV cells and modules, and offers full systems integration services. In mid-2006, Suntech also acquired the Japanese solar power company MSK, which produces its own line of specialized PV equipment.

  • PV Cells: PV cells are plates that absorb energy (light of any kind, usually from the sun), and turn it into electricity. Suntech produces a number of cell types, sizes, and materials, each with different power capacities; it should be noted that Suntech has recently focused on thin-film cells, which require less material. However, they face competition from First Solar, the current market leader in thin-film cells.
  • PV Modules: Modules consist of a series of connected cells, designed to provide a higher level of energy output than a single cell. Suntech's modular capacities range from 32 watts (energy release per second) to 100 kilowatts, and can be applied to homes, apartments, military compounds, farms, and even different forms of transportation.
  • PV System Integration: Suntech provides services to help integrate solar power systems into buildings and compounds, as well as keep the systems properly running. In May of 2008, the company was contracted by Hanau Energies SAS to build a 4.5 MW integrated roof system for a farm in France - the largest building integrated photovoltaic system ever built.

Pluto Technology

Pluto is Suntech's patented, low-cost, high-yield panel technology developed in conjunction with the University of New South Wales. With current conversion rates of 18%, the company has the potential to expand production without using expensive silicon wafers while keeping product utility competitive. Suntech is in the process of retrofitting its manufacturing equipment to shift the majority of its current capacity to Pluto-based panel production.

In early 2009, the Fraunhofer Institute tested a mono-crystalline Pluto PV cell with a conversion efficiency of 18.8% and a multi-crystalline Pluto PV cell with a conversion efficiency of 17.2%.[8] Both were produced using standard grade silicon solar wafers on Suntech's commercial scale production line.[8] Suntech is collaborating with the Swinburne University of Technology in Australia to develop nanoplasmonic solar cells that are twice as efficient and run at half the cost of those currently available.[8]

In September 2009, Suntech announced it achieved a record 16.5% conversion efficiency for its multi-crystalline silicon photovoltaic module.[10] The module is powered by Suntech’s Pluto PV cells, which use solar grade silicon with each PV cell and have more than 17 percent conversion efficiency. This surpasses a record set by Sandia National Labs 15 years ago.[11] The company has initiated commercial shipments of Suntech Pluto solar panels and currently expects to ship 10MW to 15MW of the products in 2009.[11]

Trends and Forces

Suntech's wafer business is growing rapidly

Suntech has been increasing production of polysilicon wafers, which are used to make cells that are incorporated in solar modules. The addition of wafer manufacturing to Suntech's business is expected to raise Suntech's gross margins to 20-22% from 17.4%.

Suntech acquires IP from solar technology companies

The foundation of Suntech's aggressive expansion strategy is its acquisition of several manufacturers and photovoltaic technology companies. Suntech is looking to expand not only its manufacturing capacity by building new plants, but it is also intending to increase the efficiency of its solar panels by acquiring smaller solar technology companies with the potential to dramatically improve photovoltaic technology.

Suntech Power plans to open manufacturing plants outside of China

Prior to 2010, Suntech Power Holdings only had manufacturing facilities in China. However, the company has opened its first U.S. plant in Arizona. The state has actively promoted and supported clean energy companies with its Renewable Energy Tax Incentive Program, which offers a refundable income tax credit of up to 10 percent and a 75-percent reduction on real and personal property taxes to renewable-energy companies in Arizona.[12] Suntech Power's Arizona plant will be capable of assembling 30 megawatts of solar panels annually.

Suntech is considering setting up more manufacturing facilities globally to tap international markets, ease foreign political pressure, and mitigate currency volatility. Suntech is evaluating manufacturing opportunities in Europe, Asia and North America. Though it is more expensive to produce overseas than in China, Suntech can compensate by selling the product at a higher price because it is a local product. Exchange rate fluctuations also makes it beneficial to manufacture in the same country in which the products are sold.

Demand in Europe, the world's largest market for solar energy consumption, is expected to grow at a more moderate 20% partly due to cuts in government subsidies. But the U.S., Asia Pacific, Middle East, and African markets are expected to double by next year. Consumption in China is also expected to double to around 1 gigawatt this year. In response, Suntech is ramping up production, planning to expand production capacity to 2.5 gigawatts from 1.8 gigawatts.[13]

Demand for Renewable Energy and Clean Energy

Fossil fuels are limited in supply. As the world approaches the peak oil quantity, the quantity at which more than half of all oil reserves are depleted, the demand for renewable energy will increase. Solar power is a fully renewable source, and power from solar energy does not release pollutants like smog, carbon dioxide gas, and other byproducts of fossil fuel use. As both environmental awareness and worldwide energy demand continue to rise, governments and citizens are concerned with finding more environmentally friendly sources of energy. However, demand for photovoltaic products has decreased as a result of the global economic crisis, and PV projects have found it difficult to obtain cost-effective financing for large scale solar project installations.[14] Many of Suntech's key markets, including Spain, Germany, the United States, China, South Korea, Italy, the Middle East, Australia and Japan have experienced a period of economic contraction, which lowered the demand for Suntech's photovoltaic products.[14]

Despite the world's economic woes, demand for solar energy has started to rebound. The majority of the demand is from Germany, the world's largest solar market.[15] The U.S. government is planning to install 2.4 gigawatts of renewable projects in California that qualify for stimulus funding.[15] China could also see a large increase in renewable energy spending, as the Chinese government plans to double its environmental protection spending through 2015 to $454 billion.[15]

Chinese government concerned about overheating solar industry

The Chinese government has expressed concerns about the high cost of solar energy compared to fossil fuel-generated energy. According to China's energy bureau, the Chinese government will not continue to subsidize solar power on a national level. Currently, the government's annual subsidy for solar photovoltaic projects is 7 billion RMB ($1 billion).[16] If the Chinese government indeed cuts its subsidies to the solar industry, domestic solar panel producers could see sharp falls in profitability. Suntech Power is partially shielded from the changing Chinese government policies since China is a comparatively small customer for Suntech. Suntech Power estimates that only 5% of its sales will come from China in 2010, while 85% of sales will come from Europe and North America.[16]

Suntech faces commoditization of photovoltaic technology and intense competition in the solar industry

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Megawatts of PV shipped, 1988 to 2005[17]

The rapid growth of the photovoltaic industry is a sign of the intense competition Suntech Power faces. Despite a challenging economic climate, there are many new entrants into the PV market.[18] For example, some start-up companies are beginning to compete with Suntech Power and other established competitors in the PV market. Over a dozen startups are working on ways to use mirrors and lenses to concentrate sunlight hundreds of times onto tiny, highly efficient solar cells.[19] These start-ups are working to provide solar systems at a lower cost per watt by producing as much or more power from the same amount of silicon.[19]

Also, some household names in the technology industry have become competitors in the PV market. IBM announced plans to make thin-film solar panels.[20] Intel spun off a new solar tech company called SpectraWatt, which was born with $50 million in investment capital from Intel, Cogentrix Energy LLC, PCG Clean Energy and Technology Fund and Solon AG (SOO1-FF).[20] Additionally, Hewlett-Packard Company (HPQ) began licensing technology to Xtreme Energetics, Inc. designed to help that start-up company deliver rooftop solar energy systems that produce twice as much energy as conventional solar panels at half the cost.[20]

As competition grows in the market to deliver solar cells, Suntech Power must relentlessly cut costs by improving manufacturing processes, investing in research and development, while its competitors are moving production to low-cost countries. IBM, Intel and HP are well-positioned in the solar market, and could foreseeably commoditize the solar market in the same way they commoditized the personal computer industry.[20] They also have extensive research and development budgets and operations in low-wage countries such as China and India.

Governments worldwide increasingly provide financial incentives to solar manufacturers

One of the most pressing issues associated with energy production is global climate change, caused by the warming of the earth's atmosphere. The vast majority of climate scientists agree that global warming is human-caused and can be stopped by drastically reducing the amount of greenhouse gas (carbon dioxide, ozone, water vapor, etc.) emissions.[21] Education on the issue is creating pressure for governments and energy companies to regulate greenhouse emissions. This movement is having a worldwide impact on energy regulation in the form of increased government subsidies for clean energy sources and global emissions caps. Even China has begun to implement similar standards. Suntech is well positioned to take advantage of this trend in the long run.

Competition

Suntech recently claimed to be the world's third-largest solar manufacturer; ahead of it stands Sharp and Q-Cells. Suntech has stated that its goal is to control 10% of the global market by 2010. The market for solar equipment is highly competitive, with many companies across the world; some major competitors include Kyocera, BP Solar, Shell Solar, Mitsubishi Electric, and Sanyo. There are also a huge number of small competitors that have entered the market, contributing to increased price competition and lower profit margins for Suntech. These smaller competitors include SunPower, First Solar, and Evergreen Solar. In order to raise profit margins and increase revenue, Suntech will have to pursue a course of action that focuses on greater efficiency for their PV cells. It will also have to pursue acquisitions of smaller competitors in order to beef up its product line and competitive strength. Only by reducing the number of competitors and distinguishing its products in a definite and powerful way can Suntech compete effectively.

Comparison to Competitors
Operating Metric Suntech Power Holdings (STP) (2008)[22] EMCORE (EMKR) (2008)[23] Energy Conversion Devices (ENER) (2008) [24] Evergreen Solar (ESLR) (2008)[25] First Solar (FSLR) (2008)[26] JA Solar Holdings, (JASO) (2007)[27]
Annual Manufacturing Capacity (MW) 1,000 N/A 118 85 1,150 175
Average Sales Price Per Watt $2.84 N/A N/A $3 $2.49 $3.08
Number of Manufacturing Plants 6 13 4 3 5 2
Revenue (millions) $434.51 $43.28 $66.01 $55.81 $418.21 $160.02
Net Income $55.8 -$23.74 $1.33 -$64.29 $164.6 $22.03

The most effective way to distinguish solar cells is by their conversion efficiency, though these distinctions are very small, leading to the increased commoditization of the industry. This is a measure of the electrical energy generated from the solar cell against the light energy input (a combination of light intensity and the area of the solar panel).

Industry Conversion Efficiencies
Manufacturer Conversion Efficiency
SunPower(Polysilicon) 23.4%[28]
Suntech Power Holdings(Polysilicon) 18%[29]
Sharp (Polysilicon) 13%[30]
Kyocera (Polysilicon) 18.5%[31]
Solarfun (Polysilicon) 17.2%[32]
JA Solar Holdings (Monosilicon) 17.7%[33]
Trina Solar(Mono & Polysilicon) 16.6%[34]
Evergreen Solar (String Ribbon) 15%[35]
EMCORE (GaAs Concentrated Solar System) 37%[36]
Energy Conversion Devices (Amorphous Silicon Thin Film) 8.5%[37]
First Solar (CdTe Thin Film) 10.5%[28]
DayStar Technologies(CIGS Thin Film) 14% [38]
Ascent Solar (CIGS Flexible Thin Film) 9.5% [39]




Notes

  1. Street Insider: Suntech Power (STP) Rises After Q3 Results and Shipment Outlook (Update)
  2. 2.0 2.1
  3. Penny Stock DD: "Suntech Forecasts 46% Shipment Growth Next Year" December 8, 2010
  4. 4.0 4.1 4.2 Bloomberg: "Suntech Agrees to Pay MEMC $120 Million to End Wafer Contract" July 1, 2011
  5. 5.0 5.1 5.2 Smartrend: "Suntech Power Hopes China Will Account for 20% of Sales Within Three Years"
  6. 6.0 6.1 Alibaba: "Suntech Power expands Suzhou plant, eyes China market" 19 January 2010
  7. 7.0 7.1 7.2
  8. 8.0 8.1 8.2 8.3 8.4 8.5 8.6
  9. [http://online.wsj.com/article/BT-CO-20101019-714635.html Wall Street Journal: "Suntech-Calisolar To Fund Calisolar Solar Silicon Plant In Ontario" Oct 19, 2010
  10. Suntech surpasses its own module efficiency record
  11. 11.0 11.1 STP Pluto Breaks Solar Panel Efficiency Record
  12. Get Solar: "Suntech to Make Solar Panels in Arizona, Open Shop in America" 23 September 2010
  13. [http://online.wsj.com/article/BT-CO-20110128-712430.html Wall Street Journal: "DAVOS: Suntech Power Chairman: To Set Up More Manufacturing Facilities Overseas" January 28, 2011]
  14. 14.0 14.1 Suntech Power 2008 Annual Report 20-F, "Risk Factors"
  15. 15.0 15.1 15.2 Sumfolio: Chinese Solar Stocks See a Bright Future
  16. 16.0 16.1 GreenTechMedia: "Is China Putting the Brakes on its Solar Program?" 22 April 2010
  17. Energy Portal: European solar photovoltaic industry ready for further growth despite credit crunch
  18. 19.0 19.1 Earth2Tech
  19. 20.0 20.1 20.2 20.3 Companies that Mass Marketed PCs Turn to Photovoltaics
  20. Micronesian Seminar: Climate Change is Real
  21. Wikinvest Data: STP
  22. Wikinvest Data: EMKR
  23. Wikinvest Data: ENER
  24. Wikinvest Data: ESLR
  25. Wikinvest Data: FSLR
  26. Wikinvest Data: JASO
  27. 28.0 28.1 [http://www.renewableenergyaccess.com/rea/news/story?id=46286
  28. Forbes - Sun King; SunPower's New Solar Panel Is 22% Efficient
  29. SharpUSA Product Brochure
  30. Kyocera - Solar Timeline
  31. Solarfun Website
  32. http://jasolar.com/Web/products-en.asp
  33. TSL 20-F 2007 Pg. 7
  34. ESLR 2007 Earnings Call Transcript, Page 1
  35. EMCORE.com: Terrestrial Solar Cells and Receivers"
  36. ENER F1Q08 Earnings Call Transcript, Page 5
  37. DSTI 10-k 2007 Pg 1
  38. Ascent First Quarter 2008 10-Q Pg 23
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