Will LDK's New Company Create Competition for First Solar?

Intriguing news! Details still appear sketchy, but this young gun CEO seems like one of those guys you really want to hitch your wagon too based on where he has been, so early in life. I'd like to see details of the technology before commenting further.. and I'd like to note this news has nothing to do with LDK Solar itself... it's just the same founder. Just in case Best Solar IPOs in the US I better start watching it; it will be interesting to hear how far along they are and what First Solar (FSLR) management thinks of this (they do have a huge head start)...

That said, all these huge initiatives plays into my thesis that we are going to have a major industry shakeout and (shorter term) gluts somewhere in the 2010-2012 time frame. [Jan 3: The Long Term in Solar] Anytime Abu Dhabi jumps on the train with their unlimited pocketbook...

• The LDK Investor Group says Best Solar, a thin-film startup founded by LDK CEO Xiaofeng Peng, placed the $1.9 billion order that Applied Materials reported to the U.S. Securities and Exchange Commission in March.
• Rumors about Applied Materials’ (NSDQ: AMAT) mystery customer have been flying ever since the company reported a $1.9 billion sales agreement “with a privately held corporation based outside the United States” in March.
• Some industry insiders thought the purchaser was Masdar, Abu Dhabi’s alternative-energy company, which later that month announced it would build $1.2 billion worth of concentrating solar projects in the south of Spain. Others guessed it was Moser Baer, which in February had said it would pump $1.5 billion into thin-film solar, and still others thought it was Chinese solar-wafer manufacturer LDK Solar (NYSE: LDK).
• Best Solar is an independent company that is unrelated to LDK -- other than sharing a founder -- and that aims to become the world’s largest supplier of thin-film solar panels, according to the report. “I’m sure this is correct,” said Telenius, who wouldn’t disclose his source but said it was “a direct source” and that the information was confirmed by “lots” of other unnamed sources.
• Jesse Pichel, an analyst at Piper Jaffray, said he believes the report is correct, based on his own information. The theory also fits in with LDK’s annual report, which states that Peng and his family members “are considering and may invest or otherwise participate in his personal capacity in several alternative-energy projects, including projects involving thin-film solar technology, solar-thermal, wind energy and biofuels.”
• “If true, it means the CEO’s personal business is directly competing with LDK shareholders,” Pichel said. “It’s a competing technology – one’s thin-film and one’s polycrystalline. And given that Peng’s the driver of the company, his attention may be diluted now that he’s having to run a big private company. He’s ramping a 1.5-gigawatt poly plant, a 1.5-gigawatt wafer plant and a gigawatt of thin film all at the same time.” (very good points)
• In the report, Telenius wrote that distraction is a concern, but also found some silver lining: Peng “is reinforcing the impression we have of his ability to strike bold deals and launch large companies – a true entrepreneur – and that he is committed to building a strong solar industry in China.”
• Applied Materials’ technology is still a risky proposition, said Brian Yerger, a research analyst with Jesup & Lamont. “There’s a lot of promise and a lot of hype and market capacity built into their solar division, and they’re going to be spending a lot of money and [capital] to ramp it up, but in reality they don’t have any modules that generate power yet,” he said. “It’s unusual for someone so large with such a long history spending so much to take a large shot at solar. There’s always some risk that a startup could come up and find a game-changing technology that could make Applied Materials obsolete.”

Again, this is still too new to process without more detail but it is fascinating. We should also be hearing the drumbeat of how Applied Materials (AMAT) much like Energy Conversion Devices (ENER) is now a "solar company" - of course AMAT is much bigger than ENER...

Solar is going to be a very interesting space for many years to come - but the competition is going to be brutal.

Disclosure: Long LDK Solar in fund; no personal position

Comments

[oaksleeksbeans:]

I wonder a little why do an AMAT line in China? It is a very automated line that makes large more difficult to ship roughly 10% - 12% efficient module. The modules are the size of the garage door on a one car garage. So larbor is a small component of module cost and shipping prices to the EU or US are high.

It only really makes sense if China itself and its neighbors are going to start doing utility scale open field arrays.

2008 May 12 06:22 PM

[tessant:]

hopefully LDK will get some street cred with this....time will tell. they have sure taken a big PR beating in the last year.

scott
solarfeeds

2008 May 12 06:30 PM

[GH:]

Mark,

Why do you think "competition is going to be brutal" ? In "commodity" industries, tiny advantages are the only differences and competition is fierce. However, in the solar power business, technological differences create major differences in product characteristics, and will allow many different players to prosper for the forseeable future.

OatLeaksBeans, I think your guess is correct. China is a sufficient customer to keep *any* business busy, never mind a clean energy business! And China has huge expanses of undeveloped high-insolation land: perfect for giant solar photovoltaic arrays.

2008 May 12 06:35 PM

[stockbull:]

mark!! why are you posting old news with no new info?? this article is same as one which has already been here for couple of weeks!! are you sleeping?

2008 May 12 09:16 PM

[George Jurg...:]

With respect to solar, AMAT is in the PV manufacturing equipment business (capital equipment), making machines used by PV manufacturers. Brian Yerger's comments appear out of context. Beyond that, AMAT sells manufacturing equipment to plants in China and worldwide for IC wafer production. Selling equipment for pv manufacturing is a related business. The capability of the manufacturing equipment, delivery schedule, and quality are the key factors in its procurement.

LDK's current CEO building a business to compete with LDK's products rather than building another division for thin film within LDK? I don't think any paper arrangement could hold up in court to allow that breach of fiduciary duty to shareholders of LDK.

JMHO

2008 May 13 09:50 AM

[EnergyFinan...:]

If you're interested in LDK Solar and First Solar, you should attend the Renewable Energy Finance Forum-Wall Street (), held June 18-19 in New York City. LDK Solar's CEO, Xiaofeng Peng, will join First Solar's CEO, Mike Ahearn, as well as representatives from SunPower and Applied Materials, in a discussion about the future of the photovoltaics industry.

2008 May 13 11:10 AM

[EnergyFinan...:]

Wow! Did you know that LDK, First Solar and Applied Materials CEOs will all be presenting at the Renewable Energy Finance Forum-Wall Street (www.reffwallstreet.com), June 18-19 in NYC? They'll be joined by other Solar executives from companies like SunPower, Acciona and Abengoa Solar.

2008 May 13 11:11 AM

[VSD:]

Thin film cannot be used to make solar farms like silicon based cells can. Think of thin films as shingles on the house while silicon as concrete on the terrace of a building.

2008 May 13 02:27 PM

[TEM:]

I am new to stock market and all the white noise that one can blog useless info. I hope I am not one...My problem is that research does not answer questions why the U.S. feeds China old 70's technology and gambles on it in the open market while our DOE goes all-in on new nano-tech that would leap-frog %eff. offered. Brutal competition could be like Microsoft against Xerox; not much. The U.S. appears to have the most to learn, and gain in the long-run about the infra-structure costs of mass distribution.

I hope the best for LDK, Best Solar and the next Peng adventure required to compete against future U.S. technology.

I do know a little about large construction projects and Flour is top notch. But if I was LDK, I would be careful posting photos of a lagging construction project about to embark on precise technology and all the controls and commissioning it will take to produce high-quality products mentioned in their public announcements (CC's). I see great success for LDK, but 2-to-3 quarters from the projected metrics based on their own website construction photos.

2008 May 13 11:06 PM

[Aman YUEN:]

Do you consider the fact that the "yield" of Thin-Film is much higher than C-Si before your comment?

On May 13 02:27 PM VSD wrote:

> Thin film cannot be used to make solar farms like silicon based cells
> can. Think of thin films as shingles on the house while silicon as
> concrete on the terrace of a building.

Mar 15 04:18 AM