Suntech Power Holdings (STP)– Part 1 – A Solar Cell Industry Behemoth In The Making

Suntech Power (STP) is in the business of manufacturing and distributing solar modules. It is the largest provider of such modules globally. As illustrated below, the operating niche for STP is in the middle of the Photo-Voltaic (PV) supply chain. STP is dependent on suppliers to provide Ingots and Wafers, which are essential components in building its modules. The Ingot suppliers in turn depend on solar grade silicon suppliers. The modules produced at STP are then distributed to a variety of business partners including electric utilities, system integrators, installers, and distributors. These modules are used in the On-grid and Off-grid applications of PV systems.

STP is headquartered in Jiangsu Province in China with production sites in Wuxi, Luoyang, Qinghai and Shanghai (under construction). They manufacture both monocrystalline and polycrystalline cells. Monocrystalline cells are more expensive but the additional cost is offset by 4% better conversion efficiency. STP also produces building-integrated photovoltaic (BIPV) cells, which can replace existing roofing materials with solar panel roofs, enabling an integrated look with savings on building materials and installation.

In January 2007, the company announced commercial adoption of the ‘Semiconductor Finger’ technology that has a conversion efficiency of 18%. The major benefits of this technology include
  • Use of lower grade silicon wafers
  • Use of a smaller number of metal contact strips on the surface of the PV cells, which reduces shading from the sun leading to, increased conversion efficiency.

The 2nd quarter 2007 financial transcript at SeekingAlpha indicates an upcoming advancement in the same area nicknamed Pluto replacing the ‘Semiconductor Finger’ technology as quickly as possible.

In May 2007, the company announced the construction of a solar cell plant that will use microcrystalline silicon thin film on a glass substrate. The major advantage of this technology is that it is expected to use only about 2% of the solar grade silicon used by existing mono and polycrystalline cell manufacturing technologies. The compromise is on the conversion ratio of the end product. It is expected to be in the 6-9% range, which is significantly below the 14-18% conversion ratios of the existing mono and polycrystalline cells. This product will then be used in the BIPV cells manufacturing process essentially increasing its stake in the BIPV value chain. BIPV currently holds only a negligible percentage of SunTech’s sales. Its growth is expected to accelerate as adoption in the residential market picks up in inverse relation to the Average Selling Price (ASP) coming down.

On the wafer supply side, the company entered into a pivotal $6 billion contract over 10 years with MEMC in July 2006. In its wake, the company has been actively signing smaller contracts with other suppliers including the one with Hoku Scientific in June 2007.

With the supply contracts in place, STP is in command to meet its supply needs. The new technologies being introduced should enable it to remain price competitive. Further, from STP’s press releases, it is obvious that there is high-demand for its products. Suntech should continue growing at a reasonable pace for the foreseeable future.

Suntech Power Holdings Analysis:
  1. Part 1 - A Solar Industry Behemoth In The Making.
  2. Part 2 - Business Issues.
  3. Part 3 - Preferring Manufacturing Expertise Over R&D.

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2. LDK Solar (LDK) - Stock Analysis - 03/08.
3. Solar Manufacturer Comparison (STP, TSL, YGE, CSIQ) - 11/07.
4. Suntech Power Holdings (STP) - Stock Analysis - 09/07.

1 comment:

shari74 said...

I just sold off all my solar stock at a massive loss before it goes down even more. $10 a share for what is essentially $80 stock, means fraud is going on.

I just got off the phone with the attorney handling the JA Solar class action lawsuit. I can just smell a Suntech Class Action on the way. JA Solar did not disclose information to its investors. I have a feeling none of them are disclosing information. Everybody who holds Suntech has lost money, so I imagine that there will be a huge lawsuit.

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