Taiwanese Solar Companies have been the biggest beneficiaries of the duties on Chinese solar panels imposed by USA and the uncertainty arising from possible sanctions by Europe and India. To hedge their risk, solar companies have been diversifying their orders to solar cell factories in Taiwan which does not suffer from any anti dumping or CVD duties. Even Chinese solar companies with massive unused solar cell capacities are procuring Taiwanese solar cells to assemble them into solar panels for sale in USA. This is being done to avoid the duties imposed by the US Government. Renesola and Trina Solar have come out publicly stating the use of this strategy while other companies (like Yingli) are also doing this without shouting out loud. Taiwanese solar wafer companies like Green Energy Technology, Danen, Gigastorage are also benefiting from the increasing orders of their domestic solar cell peers. They are running at full capacity after facing a very bad couple of years.
Even smaller solar companies like Solartech and Tainergy are running their operations at full tilt as Japanese solar panel makers have close ties with Taipei. Japan is currently seeing a massive solar boom, thanks to the generous Feed in Tariffs announced a year ago in the aftermath of the Fukushima accident. This has led to increased outsourcing opportunities for Taiwan's solar cell producers who have historically supplied components to companies like Sharp, Mitsubishi and others. With some of the top companies like Sharp and Panasonic sharply curtailing their inhouse operations, Taiwanese companies have benefited even more.
Taiwan's solar association even claimed that the opportunity in 2013 for Taiwan would be 12 GW compared to the current 8 GW capacity. This would occur when Europe imposed its own duties on more than $25 billion in Chinese solar panel imports. Taiwan's solar industry has not seen a big failure unlike Western solar companies because they are in general well capitalized and mostly OEM palyers. While none of Taiwan's solar companies has become a major solar panel brand, consolidation is staring to happen (Neo Solar and Delsolar) which could create world beating solar companies in the future. Till then Taiwan's solar companies are trying to survive the brutal downturn through the bad luck of others.
Consolidation is the new way for Solar Companies to Survive
Consolidation in the global solar industry continues at an accelerated pace with companies exiting the solar business (Sharp, Siemens), bankruptcies being announced (Q-Cells), takeovers by government (NYSE:LDK) and private companies (GTAT buys Twin Creek). Two of the largest Taiwanese solar companies have decided to merge. Neo Solar Power which is the fastest growing solar cell company had decided to merge with Del Solar which was a small solar cell maker owned by Taiwanese electronics giant Delta Electronics. Note while Taiwanese companies have benefited from duties imposed on Chinese solar panel makers by USA and now in the near future Europe, they have not been able to stave off the massive drop in solar cell prices. Solar Cell prices have dropped to as low as 35c/watt which is almost a 70% drop over the last one year. Despite the prices of solar wafers falling, the ASP of 35c/watt means that the gross margin is negative.How Taiwanese Solar Industry has evolved
Taiwan's Solar Energy Industry has shown the fastest growth after China in recent years. The country's leadership in the Solar Industry was led by Motech which was once a top 10 Solar Cell Producer. However the recent financial crisis had hit the island nation's solar industry very hard with Motech and E-Ton facing massive erosion in profits and revenues. With the recovery in the solar industry in 2010, Taiwan's Solar Cell Producers have come back with a vengeance. Gintech, NeoSolar, DelSolar are some of the newer entrants which have grown sharply in 2010. Taiwan's Solar Industry has broadened significantly in the past few years with presence in all parts of the Solar Supply Chain. A Polysilicon Plant was also recently opened in Taiwan which is totally dependent on raw material imports for solar crystalline cells. Note the Wafer and Poly Tightness has already started increasing putting pressure on the input cost of cell producers. However the country's solar industry remains largely dependent on the manufacture and exports of Solar Cells.
Taiwan-based solar firm Solartech received module OEM orders from Japan recently and is at full capacity, according to the company. The firm also plans to expand its module capacity. Solartech added solar module order visibility is clear to February 2013.Solar makers noted that Japan's solar subsidy is better compared to markets in Europe and the US. In addition, Japan has relatively stable demand which has been attracting China-based firms to enter. As more China-based firms set up subsidiaries and plants in Japan, due to low production costs, China-based peers have been threatening the existence of Japan-based solar firms. Hence, Japan-based peers have been outsourcing solar cells and modules to reduce the overall production costs.
Taiwan-based solar wafer maker Green Energy Technology (GET) saw capacity utilization rate increase in October and is likely to reach full capacity in November. GET has been increasing OEM orders (customers provide materials) to reduce pressure from materials contracts. This has helped the firm see rising capacity utilization rate. In addition, the global solar trade war has been pushing China-based firms to transfer orders to Taiwan-based solar cell makers, which indirectly benefits GET.According to Chen Chi-jen, general manager of Gigastorage, the global solar trade war will benefit the development of the solar wafer market. In fact, said Chen, Gigastorage is planning to expand solar wafer capacity in 2013. In addition, the firm may expand by forming strategic alliances or through acquisitions, added Chen.
Taiwan-based solar firm Tainergy has recently seen orders for solar modules increase from Japan and Indonesia. In particular, the modules have been supplied to the public sector in Indonesia, showing growth in the Southeast Asia market.According to Kevin Hsieh, president of Tainergy, the firm's capacity has been moving towards integration which has been beneficial for the firm's sales. Tainergy has 100MW of module capacity, and since the second quarter, the firm has been seeing increasing capacity utilization.Hsieh noted that due to high subsidies, module orders from Japan have been increasing and customers have been accepting reasonable quotes. However, Japan-based customers have relatively strict quality requirements.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.