Solar Manufacturing Capacity Analysis

by: Andy Zelenak

Several months ago, investors in the solar sector had it easy. Investors had to answer, "Which solar companies are in a strong enough financial position to survive this period of oversupply?" Those solar companies which survived are up by triple digits on the year. In November the playing field is a bit more difficult to evaluate. With such large run-ups we have to start looking at value rather than financial fitness. In other words, the solar industry has rounded the corner, moving from "Who will survive?" to "Who will thrive?"

For a few months I've been curious how PV module manufacturing capacities stack up. In 2012 there was an oversupply issue that brought down average selling prices across the industry, but now we see several manufacturers adding new capacity. First Solar (NASDAQ:FSLR) is starting a fab for silicon modules, and SunPower (NASDAQ:SPWR) is building a new plant in the Philippines that will expand their module capacity by 25%. SunPower's new fab is slated to begin production in the first half of 2015.

As we see with SunPower, building a new fab takes a significant amount of time. There is a lag of approximately 18 months before new silicon hits the market. My hypothesis was that companies with underutilization would have an advantage in this market; they will be able to meet rising demand more easily.

After taking time to dig through the most current earnings transcripts of the top eight PV manufacturers, I see that demand has almost caught up with supply. Not many module manufacturers have extra capacity. This is a very good indicator for the industry as a whole, as it should lead to higher average selling prices. One could argue that First Solar is in the best position for adding new capacity, according to the table. FSLR will be able to bump up supply rather easily.

Module Manufacturer

Factory Utilization


First Solar


Q3 2013 earnings transcript



Q3 2013 earnings transcript

Trina Solar (NYSE:TSL)


Q2 2013 transcript & Trefis report

Yingli Green Energy (NYSE:YGE)


Q3 2013 transcript & PV Tech report

Canadian Solar (NASDAQ:CSIQ)


Q3 2013 transcript & CSIQ website



Q2 2013 transcript & JASO website

ReneSola (NYSE:SOL)


Q2 2013 transcript

Hanwha Solar (HSOL)


Q3 2013 transcript

Click to enlarge

*TSL is running above the nameplate capacity of their plant due to efficiency improvements. They expect to achieve 120% utilization eventually. I suspect YGE's and JASO's >100% utilization is attributable to the same reason.

An interesting side note is that several Chinese companies outsource module production to Taiwan and/or South Africa (in the case of ReneSola). I don't believe the outsourced production is included in the factory utilization figures that get reported in the earnings transcripts, so outsourcing might give TSL, YGE, JASO, and SOL a more flexible "bandage" solution.

With my personal portfolio, I'm starting to turn away from individual stocks and I'm investing, instead, in the Guggenheim Solar ETF (NYSEARCA:TAN). This should be a safer approach if one competitor brings a disruptive technology to market. Overall, I'm still 100% bullish on the sector. The recent news of 18 coal power plants being shut down, falling PV prices, and continued policy support for rooftop solar reinforce my bullish stance.

Disclosure: I am long TAN, SOL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.