Top 7 Solar PV Module Cost, Profit, and Forward PE Report Q4 2010

by: Iam Phree
When you buy a product, what motivates your choice? For most it is price and quality. For some it may be color, like my wife's laptop computer. My guess is that for solar PV, it is price and quality which translates to return on equity (ROI) and other tangibles. The same reasoning applies to stock, but with stock, there is a lot more than margin, outlook, shares, and dividends to think about.
This article is about the top seven solar manufacturers based on module costs in the world. While some may argue about which solars belong in the top seven, the selection is based firmly on an independent third party (Greentech Media) identifying the cost structures. Profit structures imply resilience, survivability, profit, and margin and when evaluating profit outlook, costs are important. It has to do with a simple equation: Profit = Sales x (Price – Cost). Assuming price is dictated by market conditions, then if you have the lowest cost, you can have the best profit margin. If you have the largest capacity, you can have the most sales, capitalizing on this relationship.
In general, there are basically 3 types of solar PV, expensive, moderate, and cheap. They roughly breakdown into cutting edge multi-spectrum, exotics that are hard to manufacture. These are the kind rich or poor governments (they never spend their money, instead spending taxpayer money) put on satellites. Mono or multi-crystalline with efficiencies typically in the 14-19% range, and thin film, the kind that First Solar (NASDAQ:FSLR) and others make with much lower efficiency. The old adage “you get what you pay for” rings true. This is why First Solar (FSLR) must sell at a lower price than Mono and Multi-crystalline manufacturers. It is not a choice, rather it is determined by the market because of these efficiencies. Think of it this way-- if a utility wants a 500 MW PV Farm, the lower efficiency means it will need to pay more for property, putting up more panels, consuming more labor and maintenance costs.
First Solar has been the leader for a long time, returning healthy margins. A big part of its success is due to the high cost of polysilicon (the primary product in c-Si type solar, or competitors) in its early years. Polysilicon manufacturing is a technology requiring a lot of capital and years to build the manufacturing plants. Solar PV (c-Si) entered the market and created a lot of polysilicon demand. Prices soared to $400.00 / kg which basically made c-Si solar cost prohibitive. As a consequence to the nose-bleed margins for silicon, everyone wanted a polysilicon plant. Now, prices for polysilicon are around $70/kg after touching $40/kg during the market collapse. Although c-Si has been around for a while, it is only in the last couple of years that c-Si has had the opportunity to become very competitive to thin-film technology. Solar efficiency has thus been branded as low efficiency, primarily due to solar being associated with thin film. This is not necessarily the case. Not all solar is created equal. Investors have been slow to recognize this.
My research shows incredible bargains among Chinese solars. LDK Solar (NYSE:LDK) in particular has incredible capacity. Earning more per module/watt than First Solar, LDK is priced at less than 1/10th of its peers. Its product is non-toxic and its warranty is better and transferable too.
Let's take a look at current module cost to determine a baseline of what the market currently is willing to pay for thin film, mono, and multi-crystalline in the USA. For that information, let's take a look at, a great site to derive this information. I've aggregated their data in the following table.
Module Type
Current Module Price
Thin Film (Amorphous)
$1.37 / watt
$1.84 / watt
$1.89 / watt
Click to enlarge

To be clear, this price does not include subsidies or grants. I've heard the argument that without subsidies, solar is not competitive. Anyone who wants to make this argument can feel free to contact their congressman and ask congress to re-balance the subsidies that fossil fuels get, to that of renewable energy. Be very careful not to be caught in the propaganda machine of big oil, lobbyists, and the greedy campaign contribution engine that influences congressman. I'm all for it! This is another growing sore spot with consumers as prices break $4.00 per gallon, head to $5.00 with 20% of the price of gas taxed at the pump after the Government granted big oil billions in subsidies out of your income tax (and growing).
Next I want to examine costs for several low cost module manufacturers. Unfortunately, I don't want to spend the next decade doing so, nor do I want the skeptics to assert that I purposely left some out. So let's trim the list down to the top seven by using greentech media's cost chart for several companies. This chart should be pretty close to current costs. For the others, I don't expect they should be the focus anytime soon with regards to module cost, unless they have cornered the market on some radical new technology and ramped it up in just months. I find this prospect unlikely.
Click to enlarge

2010 Module Cost Per Watt (Greentech Media)Click to enlarge

With the top seven identified, let's provide module price, costs, and the difference identified as profit per watt. The costs will be from each respective transcript on or each company's website Q4 presentations or an estimated guess from the chart above.
Company (Product)
Current USA Module Price (
10Q4 Cost / Watt Avg of mono and multi-crystalline or thin film
Profit / Watt
First Solar (Thin Film)
Yingli (c-Si)
Trina (c-Si)
Suntech (c-Si)
Sharp (c-Si)
Hanwha SolarOne (c-Si)
LDK Solar (c-Si)
Click to enlarge
The data clearly shows LDK Solar in terms of cost per watt catapulting from number seven on's chart based on all of 2010, to number four in 2010Q4. It is a significant move as others are struggling to reduce and control silicon costs. Let's take a look at this graphically in terms of profit (because that is what it is all about) and ordered current FPE numbers superimposed. I would expect the more profit per module should have the highest FPE as investors attempt to capitalize on the difference, but that is not the case. Call it dysfunctional investors or opportunity. Only time will tell if Chinese companies will survive making more money per watt than FSLR.

profit-fpe comparison top 7Click to enlarge
I can understand Sharp (OTCPK:SHCAY) having different FPE rankings as it is diversified. But the others all produce solar products. If we ignore Sharp and discuss the others, the striking difference is that FSLR is in the USA while the others are Asian. The top 3 in terms of profit / watt are literally within 3 cents. LDK Solar has the largest potential based on FPE. LDK is a huge value based on sales capacity, ramping, and the facts presented.
Let's take a closer look at what LDK Solar is projecting for costs in 2011Q1 to see if the cost reduction has momentum by examining its latest presentation. After all, no point buying a stock when investors are spooked on virtually no cost reductions?
LDK Solar 2011Q1(e) Module Cost (Est) Guided by LDK Solar
Wafer Processing
Cell Costs
Module Costs
Total Module Cost
Click to enlarge
Source pg 28, 67, 75
Final module cost is continually being improved. The company also reported that on December 10 (pg 15) it achieved < $1.00 per watt In-House. The reason for the difference in cost is that the Module Cost in the above table includes outsourced cell and module production. Added ramping in the Hefei manufacturing plant will continue to drive module production costs lower for LDK as production shifts to internal production and a more balanced vertical integration model. Expansion and optimization of its polysilicon facilities also make considerable future cost reduction contributions.
LDK solar appears to have dropped near 30 percent from its peak PPS. It will be the second lowest cost per watt by the end of 2011Q1. Most importantly, it is the highest profitability per watt solar manufacturer in the world today with FPE numbers screaming BARGAIN!

Disclaimer: Forward-looking statements made herein involve known and unknown risks and uncertainties and are based on information found primarily in the links provided and other historical data found in public domain. At times, mathematical relationships are used for comparisons which may be in error or incomplete. As such, no guarantee of accuracy or investment gain or loss can be made. The reader or investor bare sole responsibility for their actions. As of the date of this article, the author has less than 5,000 shares of LDK Solar.

Disclosure: I am long LDK.