#gintech

Greetings,

The three leading publicly listed Taiwanese solar cell manufacturers reported surprisingly good sales numbers, taking into account that the US market is basically blocked for their products. In September, Motech Industries Inc. increased sales by 30% month-on-month, Gintech Energy Corp. improved its numbers by 21% and Neo Solar Power Corp. (NSP) improved turnover by 5% (see chart 1). This is a very good development as Taiwanese companies were hit very hard when the US Department of Commerce (DOC) expanded its anti-subsidy/anti-dumping tariffs against Chinese modules to Taiwanese cells in June and July. In consequence Taiwanese solar companies' sales tanked in the summer months.

Good news for Taiwanese and beyond

The strong uptick in sales not only is good news for the Taiwanese companies, which urgently needed this boost for their under-utilized factories, but also a very good sign for the overall solar market. After hardly any solar power systems were installed in China in the first half of the year, the recent publication of the guidelines for the distributed generation solar segment has kick-started the long-awaited huge pull that is assumed to facilitate the country remains the world’s largest PV market this year. Together with the strong pull from Japan, US, UK and many other small emerging markets, there is so much demand the first analysts have even started talking about a product shortage.

“Positive revenue trend for Taiwanese cell makers may well extend into late 2014”

So why have the Taiwanese cell capacities not been used to satisfy demand in other countries? Simply because their prices were so high, some low-margin markets, like China, would not be attractive and in others it would have strongly shrunk margins of module suppliers. But now, apparently time has come again both needs are matched - the Taiwanese were so desperate that they have decreased prices and the  Chinese are willing to pay a little more also for usage of Taiwanese cells in their modules outside the US. “Cell and module prices have bottomed up since early September on stronger demand, especially from China domestically,” Herbert Lu, NSP’s head of Corporate Marketing, told sunnybloke. “As you can see many Taiwanese cells see positive revenue growth in September and I believe the trend may well extend into late 2014,” he said. Adding, “Considering the UK and Japan incentives review and adjustment due in Q2/2015, I think there will be a rush for installation, at least until end of 2014.”

Bonus for higher quality?

Lu believes that there’s another reason for Chinese companies to use Taiwanese cells. “Since the distributed generation incentivizes power output instead of installed capacity, there is a need for high quality and high efficiency cells - and that is where Taiwanese firms are good at and thus benefit.” However, while Taiwanese cells indeed are considered top quality, the top tier Chinese companies can do that as well - so new demand is much more triggered by the lower product price.

NSP produces at full capacity

“Our factories are currently at full capacity and many Taiwanese tier one also see 85% or higher utilization,” said Lu. If correct, that means that soon there will be little leeway for Taiwanese to supply more cells. After the DOC announcements Taiwanese companies put all domestic expansion plans on hold, but were even more thoroughly looking into expanding abroad. Gintech and NSP execs mentioned such plans to sunnybloke in interviews earlier this year, and in the meantime two smaller Taiwanese companies have announced exactly such ventures. In mid-September, Taiwanese news provider Digitimes published that Solartech and Tainergy intend to set up cell production in Malaysia and Vietnam.  

New cell price increase on the horizon?

However, if you look at the year-to-date sales number of the three largest Taiwanese cell makers they do not look so bad when compared with last year (see chart 3). In fact, they are at similar levels in 2013 and 2014 for both Gintech and Motech; the strong 2014 sales increase of NSP can be explained in the merger with DelSolar in late May 2013; for the first 5 months of 2013 DelSolar’s sales were not included in NSP’s sales statistics.

And if the year-run will come as anticipated than we might see cell prices to go up again in the coming months - there’s big markets with high margin-potential, like Japan and the UK, where it makes a lot of sense to get a system in place with somewhat more expensive Taiwan cells than not being able to finish the project in time at all. 

More soon.