by Michael Kanellos
Will SunPower (SPWRA) make it?
For the past six or seven months, that's been one of the primary questions in the solar market. Will the pioneering manufacturer of high-end, high-efficiency solar panels succumb to competitors, or somehow pull through.
First, the dismal take. SunPower appears stuck in an unenviable spot. It competes against First Solar (NASDAQ:FSLR), which can offer lower prices for utility-scale contracts. In the residential market, it must contend with Suntech Power Holdings (NYSE:STP) and a raft of other Chinese manufacturers that [a] can produce products for less and [b] are increasing the efficiency of their products.
To top it off, the distinguishing mark of SunPower's products -- high efficiency -- is butting up against the walls of physics. Crystalline silicon solar panels can, in theory, convert 29 percent of the light that strikes them into electricity, but the real number is closer to 25 percent, SunPower CEO Tom Werner told me last year.
By the end of 2010, SunPower will be at 23 percent efficiency. Further gains will be more difficult to achieve, and this situation is already forcing the company to examine things like concentrators and different materials for making solar cells, which to date have had virtually no success in the market.
Now, the optimistic argument. SunPower remains one of the most innovative companies in what can sometimes be a fatally conservative market. Two years ago, it launched a consumer branding campaign emphasizing the distinctive look of its panels. Now, branding and marketing are becoming bigger issues in solar; see Akeena's (AKNS) recent deal to license the Westinghouse name.
SunPower has also become one of the most successful panel makers to date to expand into developing utility-scale solar parks. Besides improving solar cell efficiency, the company has devised new racking and installation techniques. Last month, for instance, it unveiled Oasis, a modular power station in a box, adapting a concept in part pioneered by SunPods and going mainstream with it. To get to the low end, the company has launched a set of modules made from components from other suppliers.
Just a few days ago, SunPower unfurled a joint venture with AU Optoelectronics, the TV division of the Acer group andone of the select large Asian conglomerates horning into solar with manufacturing muscle and a large bank account. This makes SunPower one of the first to come to grips with an inexorable, far-reaching trend. It has also accomplished a string of seemingly sound acquisitions of companies like PowerLight and SunRay. Wall Street anxiety? Chalk up a good portion of it to herd mentality.
So for all those reasons, we also picked SunPower as a Top Ten Acquirer in 2010.
The company has its shares of missteps and challenges, but welcome to the world of solar. First Solar, which has experienced titanic growth in recent years, will likely soon face more direct competition against General Electric (NYSE:GE) and many CIGS vendors. Suntech wants to triple the amount of modules it ships in North America in 2010, but Gemini, its joint venture to develop solar parks, has barely budged. SunTech bought a controlling interest in CSG Solar to expand into thin film, but now must retool the product line.
So where will destiny take SunPower?
An apt analogy seems to be Sun Microsystems (JAVA). Like SunPower, Sun prided itself on technical acumen. Its scientists and execs -- Vinod Khosla, Andy Bechtolsheim, Bill Joy, Greg Papadopoulos -- became industry figures, much in the same way that SunPower's Dick Swanson remains a well-known solar guru.
But even more importantly, Sun instinctively knew how to shift with the winds. Back in the mid-90s it competed, and often lost, to Silicon Graphics over workstations. (Remember that company? They did the graphics for the movies Jurassic Park and South Park.)
Then the battle shifted to servers. Silicon Graphics bought Cray, but then sold one of the server groups to Sun. Sun converted it into the Enterprise 1000 line and exploded during the go-go internet days. Silicon Graphics headed to the tar pits.
And along the way, it commercialized things like Java and marketed the hell out of itself.
In the end, of course, Sun found its territory increasingly eroded by cheaper Intel-based servers, and last year it finally succumbed to an acquisition. But the company had a long run, and navigated the last 15 years -- essentially from the beginning of the internet era until now -- better than Digital Equipment, Compaq, Tandem, Intergraph, and a whole bunch of other big iron companies.
Solar has just begun. If SunPower continues on its path, it could have a long runway ahead of it.