SeekingAlpha  Nov 13  Comment 
newratings.com  Jun 25  Comment 
BEIJING (dpa-AFX) - Chinese solar wafer maker LDK Solar Co., Ltd. (LDKYQ) announced that its board of directors has elected Zhibin Liu as its new Chairman, and appointed Yunsong Ao and Yan Xiong, both currently executive vice presidents, as...
SeekingAlpha  Aug 1  Comment 
By Doug Young: The war of words against Chinese solar panel makers is heating up from both sides of the Atlantic, with growing signs that Europe may reconsider anti-dumping duties as the US moves closer to imposing its own new duties on the...
Green World Investor  Jun 5  Comment 
LDK to again get financial aid from Chinese banks? LDK Solar may get a $320 million loan from a consortium of Chinese banks, led by the China Development Bank (CDB). LDK Solar (LDK) has been running of fumes for most of the last year, as massive...
StreetInsider.com  Apr 25  Comment 
Visit StreetInsider.com at http://www.streetinsider.com/Corporate+News/LDK+Solar+%28LDK%29+Reports+Jiangxi+LDK+Solar+Enters+Wafer+Supply+Agreement+w+Solartech+Energy/9411270.html for the full story.


LDK Solar is a Chinese company that sells multicrystalline polysilicon wafers to solar panel manufacturers.[1] With margins over the last year consistently above 30%, it's clear that LDK's strategy of using cheaper, recycled polysilicon to produce its wafers in a low-wage, Chinese environment is paying off by keeping costs down without affecting wafer quality.[2] 63% of LDK's revenues come from Asia, with almost half that coming from China, while another 27% comes from Europe.[3]. The rest comes from North America, a still-emerging market for renewable energy technologies, and a region with high future growth potential.

Demand for LDK's wafers is greatly affected by demand for solar panels. Rising oil and gas prices, fears of climate change, and political support for alternative energy sources are all playing a part in helping the budding solar market develop. Countering these forces, however, is a shortage of refined polysilicon, which is the principal input needed to produce multicrystalline wafers and solar panels. This shortage has driven up prices for all three, making solar energy less appealing than other power sources. LDK's main competitors in the multicrystalline silicon wafer market are Renewable Energy Corporation, SolarWorld AG, PV Crystalox, Kyocera, and Sumco Corporation.

Business Financials

LDK sells multicrystalline silicon wafers used primarily in the production of photovoltaic solar power cells. It also offers production services to other wafer manufactures. Multicrystalline silicon wafers are refined from multicrystalline ingots and blocks; LDK buys polysilicon feedstocks from silicon producers and refiners like MEMC, turns them into multicrystalline blocks, and either sells them to other wafer manufacturers or produces its own wafers to sell to solar panel producers.

LDK is greatly affected by the silicon industry. The silicon industry is essentially a commodities industry: one company's silicon can only be differentiated from anothers' by price.

The multicrystalline wafer industry works similarly. As long as a wafer is pure enough to work effectively, customers will purchase based on price, making the industry subject to low profit margins. LDK remedies this by producing in China (taking advantage of low labor costs) and by using scrap and recycled polysilicon (taking advantage of low-priced inputs) to keep costs down and bring margins up.

Fixed price contracts are good for the company if silicon wafer prices fall in coming years, as they allow the company to make more money than it would without the contract. If price levels rise, however, the company could miss out on potential revenues.

Business & Financial Metrics[4]

In 2009, LDK incurred a net loss of $234.0 million on revenues of $1.10 billion. This represents a turnaround from 2008, when the company earned $66.4 million on $1.64 billion in revenue.

Trends and Forces

Demand for LDK's Wafers Follows Demand for Solar Power

Solar power is a rapidly emerging form of energy production that converts light (usually from the sun) into electricity through the use of photovoltaic (PV) cells. PV cells are typically made from multicrystalline wafers; in fact, they are the only major source of demand for multicrystalline wafers. Thus, demand changes in the solar industry are equivalent to demand changes for LDK's business.

LDK Hedges Against High Virgin Silicon Prices By Using Scrap Silicon

Silicon, a necessary input to most solar panels (and to the multicrystalline wafers that LDK produces), is one of the most abundant elements on Earth, but has nonetheless experienced rising prices over the last few years. As solar power started to popularize, silicon producers, who previously catered only to the semiconductor market, experienced a surge in demand - a surge they couldn't keep up with, given the limited amount of mining and processing capital on hand. This created a "shortage" of refined polysilicon, and caused prices to soar. For multicrystalline vendors like LDK, higher silicon prices mean higher costs and lower margins. Furthermore, a short-run spike in silicon prices would lead to a spike in solar panel prices, causing solar energy to be less competitive when price-compared to other sources of energy. LDK remedies the high-price problem by using recycled and scrap polysilicon as an input; with virgin silicon priced from $150-200 per kilogram and scrap priced from $50-$80 per kilogram[5], the savings from such a strategy are considerable. LDK believes that it can produce multicrystalline wafers of premium quality despite the use of non-virgin polysilicon; given the number of recent supply deals with major solar manufacturers, its quite possible the company can.

Prices will not rise forever, however, as high silicon prices create incentive for more companies to enter the silicon wafer market; eventually, demand will be met. Even better, there are delays in prices changes, which could cause companies to continue to enter the silicon wafer market, thereby creating an oversupply and causing prices to drop (hence, the cyclical nature of commodity prices). Once prices drop, demand for solar cells could increase, as would margins for multicrystalline wafer companies.

Government Support for Renewable Energy is Vital to the Growth of the Solar Industry

Governments worldwide have implemented legislation to encourage alternative energy production, due to political pressure from public concerns about climate change and energy independence. Examples include:

  • California's mandate that 25% of electricity come from clean sources by 2020 and 75% by 2050
  • California's One Million Solar Homes initiative that gives subsidies to developers to build fully solar powered homes
  • The European Union's stated desire to get 22% of its energy from clean sources by 2010
  • China's Renewable Energy Law aiming to raise the total percentage of renewable energy used in the country to 10% by 2020

Emissions caps and clean energy mandates that are supported by subsidies and tax cuts make solar energy relatively cheaper. This means that corporations and utilities companies may turn to clean energy sources to generate electricity for manufacturing facilities and power plants, directly benefiting solar power producers and input suppliers like LDK. Without government support, however, solar companies would have difficulty vending their products, as solar energy is currently much less cost effective than coal or natural gas.

Environmental Concerns Are Major Drivers in the Renewable Energy Movement

Oil and coal power are the two main energy sources for most of the world and release massive amounts of pollutants that contribute to adverse environmental effects such as acid raid. With a rising worldwide demand for energy, demand for clean forms of energy have risen. Solar energy is fairly clean, as photovoltaic panels release no pollutants or emissions (except in production). Clean energies like solar energy have experienced increasing demand , especially in politically progressive regions like Europe.

Competition and Market Share

The multicrystalline industry includes the following key players:

  • Kyocera - A diverse electronics and semiconductor company that manufactures solar panels, consumer electronics products, and telecommunications equipment.
  • Sumco Corporation - A Japanese silicon company that produces wafers for semiconductors and solar panels.
  • PV Crystalox - A British solar wafer company that is also involved in the Japanese silicon trading business.
  • SolarWorld AG - A vertically organized German solar company that operates in all levels of the solar industry, from raw materials to module sales.
  • Renewable Energy Corporation - The multicrystalline market leader and a vertically-organized solar company.


  1. CIBC Initiating Coverage on LDK, July 18th, 2007
  2. http://media.corporate-ir.net/media_files/irol/19/196973/new_Jan_2008_FINAL.pdf
  3. http://media.corporate-ir.net/media_files/irol/19/196973/new_Jan_2008_FINAL.pdf
  4. LDK 2009 20-F pg. 74  
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