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Executives

Martin Reidy – Brunswick Group, IR

Dr. Peng Fang – Chief Executive Officer

Anthea Chung – Chief Financial Officer

Ming Yang – VP, Business Development and Corporate Communications

Analysts

Min Xu – Jefferies

Jay Green – Barclays Capital

Shawn Lockman – Piper Jaffray

Edwin Mok – Needham & Company

Colin Rusch – ThinkEquity

Mahip – Satya Kumar

Sanjay Shrestha – Lazard

Pavel Molchanov – Raymond James

Unidentified Analyst – Collins Stewart

Sam Dubinsky – Wells Fargo

Jeffrey Osborne – Stifel Nicolaus

Burt Chao – Simmons & Company

JA Solar Holdings Co., Ltd. (JASO) Q4 2010 Earnings Call February 22, 2011 8:00 AM ET

Operator

Hello. And thank you for standing by for JA Solar’s Fourth 2010 and Full Year 2010 Earnings Conference Call. At this time, all participants are in a listen-only mode. After managements prepared remarks there will be a question-and-answer session. Today’s conference is being recorded, if you have any objections you may disconnect at this time.

I would now like to turn the meeting over to your host for today’s conference, Martin Reidy of Brunswick Group.

Martin Reidy

Thank you. And welcome to JA Solar’s fourth quarter and full year 2010 earnings conference call. Joining us from the company are Dr. Peng Fang, CEO; Ms. Anthea Chung, CFO; and Mr. Ming Yang, VP of Business Development and Corporate Communications.

As stated in the press release, the oversimplified transition of CNY into U.S. dollars, which is set at CNY6.6000 to $1, is made solely for the convenience of the audience. References to dollars are the lawful currency of the U.S.A. The press release published today provides detailed financial tables under conversion from CNY to USD.

On this call, Dr. Fang will begin with an overview of our Q4 results covering business and operational developments. Following that, Anthea will provide details of the company’s financial performance and outlook. Following our prepared remarks, we will open it up for questions for the remainder of the call and we expect the entire call to last approximately one hour.

Before we begin the formal remarks, I would like to remind you that certain statements on today’s call, including statements regarding expected future financial and industry growth are forward-looking statements that involve a number of risks and uncertainties that could cause actual results to differ materially. These statements are made under the Safe Harbor provision of the U.S. Private Securities Litigation Reform Act of 1995.

Factors that could cause actual results to differ include general business and economic conditions in the solar industry, governmental support for the development of solar power, future shortage or availability of the supply of high purity silicon, demand for end-user products by customers and inventory levels of such products in the supply chain, changes in demand from significant customers, changes in demand for our major markets, changes in product mix, capacity utilization, level of competition, pricing pressures and declines in average selling prices, delays in the introduction of new product lines, continued success and technological innovations, shortage in supply of raw materials, availability of financing, exchange rate fluctuation, litigation and other risks as describe in the company’s SEC filings, including its annual report on Form 20-F filed with the SEC.

Although, the company believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results. You should not place undue reliance on these forward-looking statements. All information provided in today’s conference call speaks as of today’s date, unless otherwise stated and the company undertakes no duty to update such information, except as required under applicable law.

I will now turn the call over to Dr. Peng Fang, CEO of JA Solar.

Peng Fang

Hello, everyone and welcome to today’s call. We appreciated your interest in JA Solar. 2010 has been the most successful year in our company’s history. And I would like to thank all of the team members at JA Solar for their contribution to JA’s success. Over the past year, we achieved record results in the company’s history in both operational and the financial metrics and building strong long-term relationships with key global PV companies. We substantially diversified and improved our customer base and geographic distribution and established JA Solar as the world largest solar cell company, in terms of both shipments and the manufacturing scale.

As we are gained marketing share during the year, we increased the revenue 187% year-over-year and reached the profitability and audience to a record level, building a solid platform for sustainable future growth. Through our success in 2010 and our experience over the last five years, we have identified three primary competitive advantages for JA Solar.

First, our low cost largest player, manufacturing capability as the world’s largest solar cell producer, second, our emphasis on building global strategical partnerships, third, our industry leading manufacture technology.

Our success last year was supported by major scale up in capacity and the shipment. In 2010, we shifted 1.46-gigawatt of solar cells and the modules, which is almost 50% more than the entire our cumulative shipments in JA’s entire history from 2005 to 2009, and an increase of more than 200% from 2009 level.

We are now the clear industry leader in terms of solar cell production capacity, which currently stands just over 2.1 gigawatts, as we increased our capacity in response to the customer demand. We’ve increased the international sales from 29% of sales at the end of 2009 to more than 50% in Q4 2010, resulting in a more diversified global customer base closer to local and the -- local end market and driving a strong demand for our products.

As we grow and reach far faster than the industry average. We have done so strategically with the focus on building key long-term relationships with the major players in the key local market globally. In North America, we partner with leading project developers like Sun Edison, which has significant marketing presence.

In India, we have developed the important long-term relationships with the top local manufacturers and in Europe, we partnered with major PV companies and the manufacturers. In China, we’ve developed a strong partnership with the leading domestic utility company, which has a large scale of project pipeline.

In 2010, more and more Tier I solar players worldwide have chosen us as their strategically supply partners and rely on JA Solar sales as the engine powered in their solar product. Our strategically -- our position in JA Solar as they were the largest producer of solar sales with high quality and a low cost to products enable us to supporting our customers to succeed in their end market and gain marketing share.

In terms of technology development, we have made significant progress in our R&D effort. As announced last week, we believe our Proprietary Maple Technology to be a major technology breakthrough in the mainstream high performance, low cost to multi-crystalline silicon solar cells field. Maple has enabled us to produce a high power multi-crystalline solar cell with the converting efficiency of 18.2%.

Maple sales have mono like efficiencies, utilizing lower cost to multi-crystalline wafers. As a result, Maple has -- Maple will enable us to achieve more advance range of high power solar margins at better cost performance ratio than conventional products and we expected to realize higher gross margin as we ramp-up production.

One of our strategy object -- strategic objectives this year is to further optimize and strengthening our supply chain. As the world largest solar cell manufacturer, JA Solar enjoys strong support from key suppliers globally. For example, one of our top suppliers is currently building a 2-gigawatt wafer facility in Yangzhou close to our cell manufacturer side to supply us with lower price, high quality wafers. Wafer delivery from this key suppliers is expected to be double from Q2 this year versus Q1, allowing us to become even more cost competitive.

As we move to 2011, JA Solar brand is increasingly recognized as the industry leader worldwide. A clear example of our growing reputation come in January, when JA Solar was the only [non-stake holder] Chinese company invited to participate in the Alternative Energy strategic dialogue during Chinese President, Hu Jintao shift to Washington, where we delivered a speech on the development of China PV industry.

During our success in 2010, we as anticipated another year of strong growth for JA Solar in 2011 with the robust momentum of 2010 carried in 2011. For full year 2011 based on current marketing conditions, estimated production capacity and the focus on the customer demand, we expected that our PV solar cell and the module shipments to exceed 2.2 gigawatts for full year 2011, which representative an increase of 50%, compared to 2010, and this comes on top of the 187% increase in 2010 over 2009 levels.

We entered at the year with substantial visibility to 2011 orders. The best visibility in JA’s history, illustrating our success in develop, strategic partnership with our diversified the global customer base. We currently have signed the customer contracts to deliver more than 2 gigawatts shares and the modules in 2011, representing approximately 90% of our expected total shipment of the year.

Driving by the robust customer demand and in-house utilization rate of our production line, we estimated our first quarter shipment to increase to a range of 465 to 475-megawatt, despite hundreds of the Chinese spring festival holiday in February. We had completely sold out everything we produced in January and so far in February. And we adjusted our solar cell pricing upward in end of January to reflect marketing dynamics. This was well-accepted by our customers and reflects healthy market competence.

With demand already outpacing our ability to supply this quarter, we plan to ramp-up solar cell capacity to 3-gigawatt by end of 2011 to meet our customer needs for additional volume and supporting one of our strategic goals of this year of gaining more market share in this high growth industry.

With that, I will turn the call over the Anthea for financial highlights. Thank you.

Anthea Chung

Thank you, Dr. Fang, and thank you, everybody for joining today’s call. In Q4, we achieved the highest shipments and revenue in the company’s history. Total shipments reached a record 463-megawatt in Q4, exceeding guidance of 450-megawatt. Total full year shipments exceeded 1.46-gigawatt, an increase of over 187%, compared to 2009.

In Q4, solar cells accounted for 54% of shipments and cell tolling and modules accounted for 23% each. Total revenue for Q4 was $584 million, $36 million higher than Q3 revenue of $548 million. 2010 revenue was $1.78 billion, compared with $573 million in 2009, representing year-over-year growth of over 200%.

In Q4 the geographic breakdown of shipments was approximately 47% China and 53% International, inline with our Q3 breakdown. To break this down further, our European sales were 35% and rest of world including the U.S. accounted for 18%. Over the past year the team has been working hard on achieving a more diversified customer portfolio and we are satisfied with the results of those efforts.

Q4 gross margin were $112 million or 19.2% of net revenue. Full year gross margin was $386 million or 21.7% of net revenue. By comparison, our 2009 gross margin was $73 million or 12.8%, from a dollar standpoint, our gross profit increased by over 400%.

Total operating expenses in the fourth quarter were $22.7 million, in line with our Q3 operating expense of $22.2 million. Total operating expenses represent 3.9% of total revenue, compared with 4.1% in the third quarter. For the full year, our total operating expenses were $86 million or 4.8% of net revenue and we continue to exercise tight control over operating expenses.

Income from operations was $89.5 million or 15.3% of net revenue in Q4. This compared with $101.4 million of income from operations in Q3. The change was due to lower gross margins in Q4, compared with Q3. Our income from operations for the full year was $299.6 million or 16.8% of net revenue, a significant improvement, compared with $14.2 million or 2.5% in 2009.

Interest expense in Q4 totaled $9.8 million, slightly up from $8.5 million in Q3. Interest expense in Q4 and Q3 include a non-cash interest expense of $3.8 million and $3.5 million respectively, representing accretion of discount to convertible bonds.

GAAP earning per diluted ADS in Q4 were $0.59, compared with $0.48 in the third quarter. Our annual diluted EPS was $1.61 compared with a loss of $0.18 in 2009.

Including other income were significant transactions from activities other than normal business operations. Firstly, the quarter gained of 34.6 million of proceeds from sales of Lehman Notes. The $100 million face-value USD 3-Month LCMNER Index-Linked Note was issued by Lehman Brothers Treasury Company B.V. incorporated in the Netherlands and was previously written-off as a result of the bankruptcy of Lehman Brothers and its affiliates. The proceeds from Lehman Notes resulted in a $0.20 gain per diluted ADS.

Secondly, the non-cash gain on change in fair value of derivatives was mainly related to convertible bonds issued in May 2008. Embedded derivative were calculated using valuation model, this gain had a positive impact of $0.13 to basic earnings per ADS. However, due to dilutive nature, the gain of $21.9 million was excluded from the diluted earnings per share calculation and the share count was increased by 7.5 million shares to 172.3 million shares, assuming that the convertible bonds were converted at the beginning of the quarter. The calculation reduced the diluted earnings per ADS by $0.13.

Our Q4 2010 tax rate was 9%, which is lower than expected. The lower tax rate was due to the recording of a $21.9 million gain and change in fair value of derivatives and $34.6 million in sales of Lehman Notes. Excluding these items, our tax rate for Q4 was approximately 15%. The tax rate for the full year 2010 was 12%, excluding gains in change in fair value of derivative of $11.3 million and sales of Lehman Notes up $34.6 million. The annual tax rate for 2010 was 15%.

Regarding our tax rate, I am pleased to report that our Hebei subsidiary has just been granted high-tech enterprise status by Chinese government and recognized by the Ministry of Science and Technology of China, the Ministry of Finance and The State Administration of Taxation of Hebei Province.

The high-tech enterprise status will entitle our Hebei entity for enjoined preferential tax rate of 15% instead of statutory income tax rate of 25% for two years beginning 2011. The high-tech enterprise status and preferential tax treatment will be reviewed by the government every three years.

Net loss from discontinued operations of $3 million associated with the potential sale of the 3-megawatt solar power plant. This solar power plant was previously recorded in fixed assets. In conjunction with the potential sales, the operating results of this solar power plant have been reclassified out of continuing operations for all periods presented. The loss had impact of $0.02 per ADS in the fourth quarter.

On the balance sheet side, our total receivables at the end of Q4 were $143.3 million compared with $150.6 million at the end of Q3. Days of sales outstanding were 22 days.

Total inventories at the end of Q4 were $204.4 million in line with our balance at the end of Q3 of $204 million. Average inventory turns in Q4 were 39 days.

Total prepayments to suppliers were $342.2 million, slightly up from $336.4 million at the end of Q3. We expect to utilize $91.8 million of prepayments or 27% over the next 12 months.

In terms of liquidity, the company generated a positive operating cash flow of $25.6 million in Q4. For the entire year, the company generated $193.9 million of cash flow from operations.

Our total CapEx for 2010 was $250.2 million including $74.8 million incurred in Q4. Our annual 2010 CapEx was slightly below our revised guidance of between $280 million and $300 million.

Total working capital at December 31 was $662.8 million. Total long-term bank loan outstanding was $230.3 million and fair value of our convertible bond due 2013 was $228 million. We do not have any bank loans due over the next 12 months. We also had approximately $200 million of additional credit facilities available to us for immediate drawdown or use in trade financing.

Our Q1 and full year 2011 shipment guidance have been provided by Dr. Fang earlier. Regarding Q1 gross margin, we anticipate gross margin to be in the high-teens percentage range. ASP declined towards the end of Q4 last year but we have seen the ASP stabilized with an increase in February versus January.

This concludes our prepared remarks. I would now open the call to questions. Operator?

Question-and-Answer Session

Operator

(Operator Instructions) And your first question comes from the line of Jesse Pichel with Jefferies.

Min Xu – Jefferies

Hi. This is Min Xu for Jesse Pichel. Thanks for taking my question. Your gross margin is a little below your guidance of 20% and you mentioned the ASP is a little lower. Can you give us more color on that and you provide some guidance on how we should look at in Q1 and Q2?

Peng Fang

I think dip in the gross margin in Q4 mainly is due to the last month December. I think the -- with the module price is up hand is coming down relatively more and then the wafer price. So wafer price in Q4, the first two months is coming up but people are expected -- as the capacity increase were soften, but it’s not coming down as fast as expected. So that’s one of the major reasons.

And as we’ve seen in the Q1, generally the price for solar cell is already changed as we see it. It’s moving up towards to the end of January and also for the wafer supply situation currently is not very clear. However, in the medium-term like we said in Q2, we have almost doubled our supply with one of our strategic suppliers with low-cost wafer. And Q3, that situation was even more improved.

So medium and longer-term, we think in the margin or the costs were getting better and for near-term like January and February, it’s very dynamic.

Min Xu – Jefferies

Great. Thanks for the color.

Peng Fang

Yeah.

Operator

And the next question comes from the line of Vishal Shah with Barclays Capital.

Jay Green – Barclays Capital

Hi. This is [Jay Green] for Vishal. Couple of quick questions for you guys. I want to go a little bit further into what you are talking about on the wafer side before. Could you tell us how many megawatts you guys produced internally of wafers this quarter? And for 2011, what percentage of your total shipments you expect to be -- are covered by internal wafers? And what percentage do you’ll be -- expect to be covered by the wafer production from your strategic supplier? Thanks.

Peng Fang

We have about -- through last year, we had about internally 300 megawatts -- 330 megawatts of the wafer capacity and going up to 600 megawatts this year. And for the long-term contract with our strategic customer and supplier as you know we are published. We are getting about 2 gigawatts per year of supply average. And right now from January, we’ve already starting to enjoy the low cost of wafer with certain volume and this volume were getting much larger in Q2 and Q3 timeframe.

Jay Green – Barclays Capital

Great. And can you help us little bit on pricing, where you expect that pricing to be and where it compares to the market overall?

Peng Fang

I think the pricing, we have to say that it will [commend] to our suppliers pricing, but in January -- the price from January we’re getting is significantly lower than some of the competitors -- were seen with the -- yeah, more than 20% to lower than some other marketing -- spot market.

Jay Green – Barclays Capital

Great. And then one quick question. You guys said that you a have 2 gigawatts supply contracts already in the contract. Can you talk how pricing we should expect throughout the year? Do you expect to see a dropdown over the summer or do you think it’s going to be a steady decline or how do you see pricing after 2011?

Peng Fang

Actually, the total contract is 10 gigawatts through five years with our supplier. Sales contract, sorry. Okay. For the sales contract, we signed through last year or early this year is more than 2-gigawatt and what question?

Okay. So what we’re seeing right now is there is a very -- pricing is very stable and actually it’s recovering throughout Q1. For example February pricing is higher than January and the March, we expect to be higher than February. So we believe pricing trend going to end of Q2 is very strong. And pricing for Q3 is yet to be determined but we don’t think there would a major decline from there. It still looks relatively stable for now.

Jay Green – Barclays Capital

Great. Thanks.

Peng Fang

Okay. Thank you.

Operator

And next question comes from the line of Ahmar Zaman with Piper Jaffray.

Shawn Lockman – Piper Jaffray

It’s, Shawn for Ahmar. I just wanted to talk a little bit about your margin trends, also I mean, we get some pricing information there. But can you tell us a little bit, I mean you talk about high-teens for this quarter, do you expect that to sort of improve as you ramp your wafer capacity or how should we look at that for 2011?

Peng Fang

You mean pricing or margin?

Shawn Lockman – Piper Jaffray

Margins.

Peng Fang

I think certainly margin will be very dynamic. So I think more long-term strategically price wafers ramp for us and also as we produce when we press internally our cost of wafer will come down dramatically. So with stable -- relatively stabilized we do think in that environment and growth margin should improve.

Now, if we say that the -- our suppliers currently building a large facility of wafer supplied in our Yangzhou facility. And first -- I’ll ask first -- total is 2-gigawatt and first 600-gigawatt of wafer capacity or putting two product in Q3 probably.

Shawn Lockman – Piper Jaffray

So you see gross margin then sort of running back of about the 20% level or how should we think about that just in terms of a benchmark or a number there we can look at?

Peng Fang

We didn’t give the guidance right now but we’re thinking basically we are surprising or much more improved in the second half of this year.

Ming Yang

So and if you look at near-term, Q1 wafer pricing, it is really for this year is the peak blended basis for JA and that will come down throughout the year.

Shawn Lockman – Piper Jaffray

Great. And could you also just kind of review for us real quick your outlook for CapEx for 2011 and maybe give us some information on your cash flow from operations again for 4Q?

Anthea Chung

To get to the 3-gigawatt solar cell, 600-megawatt wafers and 800-megawatt modules, the estimated CapEx is approximately $350 million. So, we anticipated to use the cash-on-hand, cash generated from operation as well as bank loan to support the growth.

Shawn Lockman – Piper Jaffray

Right. Thank you.

Operator

And your next question comes from the line of [Edwin Mok] with Needham & Company.

Edwin Mok – Needham & Company

Hi, thanks for taking my questions. So first question on capacity, what was your cell capacity end of 2010 and in terms of ramp-up, how do each -- can’t think about that, how much do you expect that to be present in year 2011 or is it more fundamental, what’s to that?

Peng Fang

Through 2010, our -- by December, our capacities are around 2-gigawatt. In January, we say that right now is 2.1-gigawatt and we actually currently under constructing our Hebei site, adding additional 29 of solar cells and those due capacity will come in line in the Q2, end of -- later of Q2. And our strategy is always continuously build capacity after customer demand required. We are in the cost effective fashion. So we will build a facility and the factory first and ramp-up the equipment accordingly.

Edwin Mok – Needham & Company

Okay. That’s helpful. And then on the wafer capacity, how do we can’t think about then -- that it has a gross margin. I mean, it was absolute maybe some cost, positive cost that you guys are having and the conversion costs that you guys have for, for those wafers?

Peng Fang

Our wafer facility through last years operating, I think in the cost wise that we reached the industry, the Tier 1 level of our performance and as net cents -- $0.20 per watt processing fee and also the party, you can model right now, this -- I mean the purchasing on the open market is about $60 per kilo gram for JA, yeah. So the -- with that internally wafer capacity basically have a very healthy gross margin.

Ming Yang

So Edwin -- just to clarify so we’ve tend to procure polysilicon. We have strategic contract or long-term contract. So we try not to tap the spot market as often has much higher price than what we can procure.

Edwin Mok – Needham & Company

Okay. That’s helpful. And one last question on the Maple cell that you guys announced last week. How do -- I can’t think about the volume for this year and I think you guys have announced that multi sorry -- a mono wafer base product before and you mentioned in your prepared remark that it should have a better cost structure. What is the cost structure between mono and wafer right now anyway?

Ming Yang

For the Maple, work into the ramp-up for the second half of this year, for couple of hundred megawatts. The efficiency of this wafer and also the marketing demand for this wafer is much higher because it is a multi-type of process and also can transfer to the higher efficiency of modules. And we’re currently have our own facility with the wafer casting build up and right now, we have -- how many megawatts? Yeah, we have about 30-megawatt capacity already in second half or gradually at more and over the year, we plan is more than 200-megawatt.

Edwin Mok – Needham & Company

Great. That’s all I have. Thank you.

Anthea Chung

Great. Thank you.

Operator

And the next question comes from the line of Colin Rusch with ThinkEquity.

Colin Rusch – ThinkEquity

Thank you so much. Can you talk about the degradation characteristics of the maple cells? Did they experience the typical 100 basis point decline kind of out to get the typical B-type cells usually see?

Peng Fang

Actually in this -- you can see is whilst the topline of multi-technology that degradation is no more than conventional multi-cell you see.

Colin Rusch – ThinkEquity

Great. And could you give us the sense on whether you could potentially achieve cash flow breakeven or positive on all-in basis for 2011?

Anthea Chung

Okay. So, Colin, it’s me. So, we definitely expect to generate positive operating cash flow for the year. But if you look at our CapEx requirement in a world very strong support from financial situation here in China. We announced, I guess, multiple billion dollars of China development bank, strategic lending agreement. So, I mean looking at all of our future CapEx, it would be majority funded by Chinese bank loans where ingredient launch facility that -- that will allow us to access.

Colin Rusch – ThinkEquity

And could you walk us through the decision to exit the product business at the structure were you running into competition with folks that you wanted to do business with or was that division does not operate in up to -- to the centers that you guys difficult in keep?

Peng Fang

Okay. So relate to that particular project, it was actually by the pilot program we work together with more of our strategic partners who has positive development arm. And we tested it and we realized that actually in our core business, JA Solar was very strong at in low cost, high quality manufacturing of high efficiency solar product but we’re not very good at earning development.

So we stop after that particular project. And the return profile for that particular project seems in line with most solar projects, but we’ve decided that we’re not in the business of operating a solar comp plan. So we had an opportunity to sell that to one of the independent -- renewable energy power producers in the regions, so that’s what we did.

Colin Rusch – ThinkEquity

Perfect and just one final question. If you look at your contracts in the interest level from new customers, are you seeing new, large Korean or Japanese international (inaudible) coming in and increasing orders and looking to user balance sheet to get into the downstream business in Solar at all?

Anthea Chung

I mean with only meaning-wise specific, I think we’ve just a lot of interest from Asian, and whether Korean or Japanese companies to enter but to actually work with us in the growth of -- it within their entry of their solar business or to grow their solar business. So we are seeing that.

Colin Rusch – ThinkEquity

Great. Thanks so much.

Peng Fang

Thanks.

Operator

And your next question comes from the line of Satya Kumar with Credit Suisse.

Mahip – Satya Kumar

Hi. This is [Mahip] on behalf of Satya Kumar. Just wanted to get some color on the 2-gigawatt of contracts you have, what geographies would those be from?

Peng Fang

The contract is they are coming from a very diversified base. Basically from the Europe and also as we announced before we have 40 some percent of customers from China they shift to global market as well. And also we see the increased trend as our U.S. customers has actually increased the volume. We actually go into U.S. market through our large partnership, and were -- they’ll be different than their module companies, we sell through solar cells.

And basically it’s a B2B type of business, and basically it’s the power based modules in the market of our solar cells. So actually to say, relatively large volumes in those regions are ready. And also in India, for example, is a new emerging market. We’ve already worked with the top local manufacturer as far as the major suppliers in solar cell. So we’re actually pretty much diversified in the whole global market.

Mahip – Satya Kumar

And on the module business for the 500 to 600-megawatt are they from -- how much of that would be from Europe, with specifically Italy and Germany if you have any color on that?

Peng Fang

You mean of that 600-megawatt capacity that we have, is that what you are referring to?

Mahip – Satya Kumar

For the module shipments in 2011?

Peng Fang

Our module shipments – you see most of the module shipment is to international customers. We had for -- a customer from, most of the customers from Europe, different regions German, and non-German, Italy and also the Belgium and also some of the East European countries. And also, we have module and a project in the North America and Canada and also the India.

Ming Yang

This trade is diversified the customer base, but most of the module is directed through sales to international customer.

Mahip – Satya Kumar

Okay. And finally could you give some color on OpEx going forward in 2011?

Anthea Chung

The operating expense is going to be -- we anticipate it to be in the range of 4% to 5% of net revenue.

Mahip – Satya Kumar

Great. Thanks a lot.

Peng Fang

Okay. Thank you.

Operator

And the next question comes from the line of Sanjay Shrestha with Lazard.

Sanjay Shrestha – Lazard

Thanks. Could you give us some more color as to what was some of the main decisions driving your capacity increase of 3 gigawatts. I mean, were you targeting a percentage market share, and what kind of overall market demand were you expecting as you decide to grow to 3 gigawatts?

Peng Fang

See, as you know we are grow marketing very, very fast in the last three years, and actually sold out everything, and so we are -- this model is to produce a sort of sales. And this is a model, you know -- required us to working with all the leading Tier I customers. I think and due to this model, success of last year and this year we see a lot of Tier I customers come back to us for much larger volume order, and so that’s why we always sort-out for the capacity.

So basically, for example, for module -- even for integrated module manufactures in China some of the customers also outsourcing their solar cells to us because we are a high-quality, low-cost manufacturer. Also, those companies like to -- like they normally have 300 and even more megawatt outsourcing, then they only like to deal with one or two customers.

So those type of customers we have quite a few and they ask us the capacity and we’re thinking their order is pretty solid and also it’s a stable long-term customer. We certainly are increasing our capacity to supporting them. And, also for the -- some of the OEM customers they also ask us for large volumes from us.

Sanjay Shrestha – Lazard

Got it. So it’s based on the bottoms-ups demand from your key customers? One...

Peng Fang

Yeah.

Sanjay Shrestha – Lazard

One follow-up question, if I may, quickly here? The 800 megawatts of module supply contracts, how is -- how is pricing set on these contracts and what visibility do you have on pricing for these contracts?

Peng Fang

For most of the contracts our format is as we setup a frame contract, and also we actually have a down payment calculated based on the reference price. However, we agree to adjust price every two or three months sitting down together. So, basically we go with the marketing price.

Sanjay Shrestha – Lazard

Okay. Great. Thank you.

Operator

And the next question comes from line of Pavel Molchanov with Raymond James.

Pavel Molchanov – Raymond James

Thanks very much. Let me ask you back your geographic mix, now that you are approximately 50:50 China International, are you still looking to increase your international exposure or are you satisfied with the current mix?

Peng Fang

We’re thinking current mix is pretty healthy, and also we see in future, the Chinese marketing also grow locally, and we think we are stable in this type of mix so far.

Pavel Molchanov – Raymond James

Okay. Let me ask as well, in Q4 or your outlook perhaps for 2011, what percentage of your wafers came from in-house production. I think you mentioned this before, but I just wanted to clarify the number?

Ming Yang

Over 20%.

Pavel Molchanov – Raymond James

Over 20%?

Ming Yang

No -- end of 2011 or end of 2010?

Pavel Molchanov – Raymond James

Well, I’m sorry for end of 2010 and your average for 2011?

Ming Yang

I think about 70 -- I’m sorry, approximately close to 20% -- of our shipment we produced wafers -- in terms of produced wafers.

Peng Fang

Yeah. So this year, if you calculated that we have about 400, 500-megawatt, right 300-megawatt ramp-up to 600. So internally -- if 400, 500-megawatt internal wafer out of 2.2-gigawatt type of shipment are very low.

Pavel Molchanov – Raymond James

Okay. Thanks very much.

Peng Fang

Thank you.

Operator

Your next question comes from line of Dan Ries with Collins Stewart.

Unidentified Analyst – Collins Stewart

Hi. This is (inaudible) for Dani Ries. Just a couple of question on your Maple cells. I was wondering, the processing cost for your new Maple cell comparing to the current technology is that -- how much higher like, maybe $0.03 or $0.04 higher or can you give us a number?

Ming Yang

Actually, this is through some type of raw material research and combined with our -- this multi cell processing. So in the processing side the cost price is similar to our conventional -- I mean to our traditional technology.

Unidentified Analyst – Collins Stewart

That’s great. Another question is can you retrofit the new Maple technology to your existing production line?

Ming Yang

Yeah.

Unidentified Analyst – Collins Stewart

That’s great. Do you have any plan to retrofitting in 2011?

Peng Fang

Yeah. We were – we’ll say that we will build at least a 200-megawatt or more capacity, and also this will come to some material increment. We are adding some material equipment to produce more special types of wafers.

Unidentified Analyst – Collins Stewart

All right. Thank you very much.

Operator

And the next question comes from the line of Sam Dubinsky with Wells Fargo.

Sam Dubinsky – Wells Fargo

Hi, thanks for taking my question. Couple of quick ones. Perhaps you can give me more color on the exact percentage magnitude of cell pricing changes over recent months? What percent was pricing down December and January, and what percentage do you expect to recover in February and March, not in the fall?

Anthea Chung

We don’t provide this type of detail, but for -- from Q4 we provided information on the brand average for the quarter ASP for Q4 was in the low single-digit increase compared to Q3.

Sam Dubinsky – Wells Fargo

Okay. And what about for Q1 -- or perhaps you can talk about spot market pricing. Like always spot market pricing for cells down in December and January, what is spot market price expect to increase in February and March?

Ming Yang

Single-digit, correct?

Anthea Chung

Yeah. So we basically under the long-term contract. So our brand average may not necessarily -- will pretend that at the swap price. For the brand average for Q1 that’s on January, February, March and then compared to brand average of Q4, we do anticipate a slight decrease in the -- probably mid single-digit level. But as we mentioned previously we saw a drop in December, but we’ve seen the pricing stabilized in January, actually trend upwards right now.

Sam Dubinsky – Wells Fargo

Okay. I know you guys gave geographic breakdown or where you guys sell your products, but do you have an estimate where your actual panel customers are deploying these products? Obviously, pricing is going up, some of these products are being sold in Germany. Do you know what their exposure to OE is? Or you ask -- assuming I give what the actual end market exposure of the product is? And then I have one last follow-up question?

Ming Fang

Yeah. For our volume, we have to sell probably every market, every major market in company. We do not have exact a breakdown of where have been solar cell or the module end up to, but we think in all the major markets of our product and Germany, Italy, Belgium and France and also in the India, in the Canada, in North America most of these regions specifically are major sales regions.

Sam Dubinsky – Wells Fargo

Okay. My last one, what’s your panel conversion cost and what’s your -- what percentage of totaling do you expect for 2011 in terms of shipment? Then I am done.

Ming Fang

The total increase in Q1 is about 25%, and we do see – we were stabilizing against this ratio, maybe slightly higher.

Anthea Chung

That’s 23% in Q4. So it’s in roughly -- that’s our range going into Q1 as well.

Sam Dubinsky – Wells Fargo

Well, then the conversion costs, how much of the costs to make a panel for you guys?

Ming Fang

For the module side?

Sam Dubinsky – Wells Fargo

Yeah. On the module side?

Ming Fang

Yeah. Module side we basically have a comparative cost to their peers.

Sam Dubinsky – Wells Fargo

Like $0.40 or $0.35 to $0.40, is it higher or lower?

Ming Fang

We don’t give any thoughts on these, it’s roughly in our range.

Sam Dubinsky – Wells Fargo

Okay. Great. Thank you very much. Appreciate it.

Peng Fang

Okay. Thanks.

Operator

And the next question comes from the line of Jeff Osborne with Stifel Nicolaus.

Jeffrey Osborne – Stifel Nicolaus

Great. Good morning. I might have missed it, but could you give what the processing cost was for your classic cell business. I think in the past you’ve talked about under $0.20, so I was just curious if you were able to maintain that as Maple ramps up, if you would expect a step-up in that?

Anthea Chung

We do not disclose the detailed cost information. We have – as Ming mentioned, I think, in previous quarters are below $0.20. But we have seen that the improvement as to the every quarter on the non-silicon processing cost has actually trended downwards.

Ming Fang

Also with the Maple, is not going to increase for this processing cost.

Jeffrey Osborne – Stifel Nicolaus

Okay. I wasn’t sure if depreciation going up or any kind of new steps would lead to some lower utilization in the near-terms. And then just as a follow-up, could you maybe discuss what your outlook is for margins and pricing for your [towing] and module business in 2011. And particularly the towing business you commented to Sam’s question about 25% for Q1, but any kind of outlook in terms of the demand there for the second half of the year as many of your Chinese peers and customers and competitors are adding around capacity, maybe there is less of an interest in that?

Peng Fang

Actually, we still see the order for our segment is -- as the largest solar producers, right now our customer -- some of the customers in leading solar cells module manufacturers, they have a very good product line and very good module line, but they still are outsourcing a significant volume of solar cells module to us. I think our business motto is fitting to supporting those customers in their growth strategy, and we do not expect that second half the demand that were too off, and in opposite, we see this kind of demand is very, very strong. That’s why we build more capacity and also we probably review the more partnership later on with long-term significant volume. We will announce the (inaudible).

Jeffrey Osborne – Stifel Nicolaus

Very good. Thanks for the detail.

Operator

And the next question comes from the line of Burt Chao with Simmons & Company.

Burt Chao – Simmons & Company

Yeah. Good afternoon. Thank you for taking my question. Very quick question. You mentioned India and the New York obviously have talked about China in the past, when you look at those two end markets despite all the work you do now, what’s your near-term and mid-term expectation for when those markets start growing and I guess maybe a clear megawatt sense and then also as a percentage of your total sales? For...

Ming Yang

For...

Burt Chao – Simmons & Company

I’m sorry. Go ahead.

Ming Yang

Yeah. For India markets as we -- are starting ship to some leading suppliers over there with tons of megawatts and may not be significant, but we are the -- more of the major marketing share in India market. So if they grow we were taking more growth opportunity over there. For China, we think in the China market, they improve very, very fast. In last year this year and the coming to next couple of years and we position very well in China, but Chinese market and people are – they are waiting for universal FIT system from government, and this year probably it’s – we don’t have the exact number.

We think it should be in the gigawatt range, and once the FIT systems started, this Chinese marketing could shoot up a very, very quickly. We are thinking we are positioned there very well to address this market. And we are already working with some other leaders and largest of the utility companies. We currently already manufacture some solar cells or some panels for them.

Burt Chao – Simmons & Company

Okay. And maybe a little too early to speculate, but when the Chinese market does gain kind of a faster acceleration of demand, what do you anticipate margins to look like? Is it similar to the wind industry where the margins for producers and developers were somewhat tighter then they were abroad, or do you think it will be somewhat different in that you will be able to extract margins similar to global level of margins in China?

Peng Fang

I think it’s -- the China market right now is diversified. They are good in some program, they are utility program. So different program have different margins, right now you can see. But a couple of years ago people were thinking 10.5 (inaudible) is very low price, but where is the appreciation right now is very reasonable priced now.

Burt Chao – Simmons & Company

All right.

Peng Fang

So we think – when the market starting to large deployment, maybe in this year or next year and we already enjoy a healthy margin.

Burt Chao – Simmons & Company

Okay. Great. And then one last quick question, when given looking at your Q1 guidance and also, your full year guidance, when you look over the full year do you anticipate any variance in seasonality and what kind of the pace or the cadence at which you’ll recognize revenue and earnings and all that over the course of the year? Will it be spread out evenly or will there will be quarters that you anticipate currently that will be better than other quarters?

Peng Fang

So, if I understand your question is that you are thinking of the European demand over the year, right?

Burt Chao – Simmons & Company

Right. Demand and how that translates into, compared against, maybe even ASP decline over the year, where do you see your revenue trending kind of over the course of the year?

Peng Fang

We originally are thinking the second half of the demand will be stronger, but most likely a couple of weeks. So we see the demand already very strong and we sold out all of the capacity and that people are starting under our location basis again. So, we’re thinking the end market is starting to move and Germany is coming to the -- winter has come and if shipment has 30 days to 40 days and people are starting to buy a lot of modules themselves now, and that’s why we are -- we saw a very strong demand and we can increase price a little bit.

And through the year we see the -- for our customer base, we do see a significant volume come in, because a lot of large customers they are doing better and better and they come back for more orders from us and this volume is significant. So we expect that second half were at higher volume.

In first half we are little bit limited by the, how many wafers and polysilicon we can have, and also we have full capacity. But in second half we can have more capacity and more wafer supply come in line.

Burt Chao – Simmons & Company

Wonderful. Thanks so much for taking the questions.

Peng Fang

Thank you.

Ming Yang

Thank you.

Operator

And we are now approaching the end of the conference call. I will now turn the call over to Ming Yang, Vice President of JA Solar for closing remarks.

Ming Yang

Thank you everyone for joining us today. We appreciate your support of JA Solar. We’ll be meeting with investors in the coming month. So we’d like to arrange a meeting or if there are any questions, please contact or e-mail of our IR firm, Brunswick Group, and we’ll be more than happy to help you. Their contact information is on today’s press release. Thank you for your continued support and we look forward to talking with you in the future.

Operator

And thank you for participation in today’s conference. This concludes the presentation. You may now disconnect. Good day.

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