Suntech Power Boasts 1GW Capacity Amid Tough Times for Solar Market

By Ucilia Wang

Suntech Power Holdings (STP) has crossed the all-important milestone of being able to produce 1 gigawatt of solar panels a year.

The Chinese company celebrated the accomplishment Thursday along with the opening of a new headquarters in the city of Wuxi that comes with 1-megawatt solar panels built into building facade in addition to a host of energy-efficiency features (on right). Suntech makes the solar cells and assembles them into panels.

Reaching 1 gigawatt is certainly worth boasting, although investors will care more about what the company does now that it has that capacity – and how it weathers the economic downturn.

Last month, Suntech's CEO Zhengrong Shi said an oversupply of panels in the world market would likely lead to a 25 percent to 30 percent drop in Suntech panel prices in 2009. A growing supply of polysilicon, the key ingredient for making solar panels, along with the battered global economy will take the blame, analysts said.

Last November, the company cut its 2008 sales and shipment forecast after its customers had deferred orders. Suntech expected to ship 490 megawatts instead of 550 megawatts worth of panels by the end of 2008. For 2009, it anticipated shipping more than 800 megawatts worth of panels (see Weak Euro Prompts Suntech to Slash Sales Forecast).

Still, building a manufacturing powerhouse is crucial for companies to price their solar goods competitively and sell lots of them to meet sales goals.

"Economy of scale matters," said Jenny Chase, a senior solar analyst at New Energy Finance. "It's going to be a difficult year for solar manufacturers. There are going to be a lot of companies trying to undercut each other."

Competing solar companies that are close on reaching the 1-gigawatt capacity include Q-Cells (QCLSF.PK) in Germany and First Solar (FSLR) in the United States. Q-Cells recently lowered its 2009 production and sales forecast after its customers wanted to postpone deliveries, leaving Q-Cells with solar cells that it couldn't resell quickly (see Q-Cells Cuts Sales Forecast After Customers Delay Deliveries).

First Solar, which claims to be able to make solar panels cheaper than anyone else, hasn't announced cutbacks. But some analysts have questioned whether First Solar's customers, most of them located in Europe, are building up a larger inventory than usual. Because of the credit crunch, project developers are finding it more difficult to get loans from banks to build solar power plants (see First Solar Panels Piling Up?).

"We have heard about a build up of panels in general, and would be surprised if First Solar's panels aren't among them," Chase said. "Some companies just couldn't get financing. As far as I can tell, First Solar modules are still nicely priced."

Suntech's shares climbed more than 6 percent to reach $12.77 per share in recent trading.

Comments

[gebby:]

global warming is real and governments around the world including the united states are aggressively addressing this reality. any build up in inventory of panels is short term . great investment.

Jan 09 09:44 AM

[petyaczar:]

IMO

"A growing supply of poysilicon" = cost of materials and production DOWN
Increasing production capacity = Cost of production DOWN

Reduction in selling price, while maintaining gross margin = SALES UP and PROFITS UP

the Bronze Bama;s Govt alternative energy plan = demand for Solar UP
SOLAR CREDITS reinstated = demand for solar UP

IMO. looking good for solar and especially ESLR and STP.

Jan 09 10:47 AM

[petyaczar:]

IMO STP will hit $20 before it gets back to $10 and it will do so within 2-6 mos.

IMO

Jan 09 10:51 AM

[RRPUTT:]

As I read comments or observations by so called "experts" or those supposedly informed...it continues to amaze me how people are NEVER satisfied or better yet find it much easier to look for the negative verses finding the positives... Example, isn't it amazing how not that long ago vertualy every artical made comments that were are looking at this unbelievable "shortage" of polysilicon and a primary reason why solar stocks are in trouble...now everything you read its all about the "glut" or over supply we have in poly... Amazing how people just prefer to look for the negative!

Jan 09 01:11 PM