SolarPVInvestor Forums

Pops,

ASPs in Europe will likely increase if you have tariffs, but don't you think outsourcing won't create extra costs as well? Tolling through Taiwan is becoming extremely expensive, since there is not enough cell capacity there, and also Jabil will certainly have higher production costs than Chi + they will probably want to make a profit on it.

I think it is definitely a plus to have outsourcing organized at this point, however profitability depends on the gap between ASPs and costs, and that is not clear yet imho.

Europe tariffs would probably benefit the non-Chi players more, but that is probably something that no one here wants to hear, right?

Quoted from "Klothilde"

ASPs in Europe will likely increase if you have tariffs, but don't you think outsourcing won't create extra costs as well? Tolling through Taiwan is becoming extremely expensive, since there is not enough cell capacity there

Yes, but the point with SOL is that they were out early to sign up the tariff free capacity on favorable terms before it got over-allocated and pricing skyrocket. Call it a tariff bet if you will. They are also using their position as wafer supplier and long-term tolling partner (not just get a quick tariff free service) to get favorable terms. Remember that SOL wafers are on the most wanted list of cell makers (running 140% utilization, while LDK at 25% and GCL at 65%).

Quoted from "explo"

Yes, but the point with SOL is that they were out early to sign up the tariff free capacity on favorable terms before it got over-allocated and pricing skyrocket.

Do you know this for a fact? Maybe their contract calls for regular price adjustments according to market rates?

I know that they have long-term relationships for cell tolling and that they said that their tolling costs are low. There no such thing as fixed pricing anymore, but long-term relationships with mutual dependence can still give much favorable terms to the guys knocking on the door after the fact saying: got some cell to help me circumvent EU tariffs?

Once a fact and with no prior commitment I don't see why tariff free lines will share the spoils of the war. SOL has pre-fact committed to its partners. I'm not saying others haven't done the same, but I think it is clear that this trade war may actually help speed up consolidation and raise ASP and make the strong tier 1 stronger.

Quoted from "Klothilde"

Europe tariffs would probably benefit the non-Chi players more, but that is probably something that no one here wants to hear, right?

That's of course true. REC should expand it's Solar division ASAP.

I see a lot of speculation and no facts. This is absolutely ok, however I personally and imvho would not state speculation as fact.

Tariffs are no solution, the South of Europe has no PV production base and no interest in much higher (40%+) module prices.

IMHO Europe will demand that some assembly is done in the EU, in most cases module production, so the South can hope for some work.

The South gets the hope but the work will end up in the East (Poland in the case of SOL) and even in Germany.

The big China-Solaris are going to be the winners anyway, they can bring in all the components from China, no Taiwan Cells needed, maybe some Wacker-Poly, smaller chinese Solaris will leave the market.

For SOL this is a very good development, you can bet that China will answer with moderate Poly-Tariffs

Explo

SOL is also outsourcing wafers. I got email from IR saying that they have only 2GW capacity but will sell min. 2.6GW in 2013.

Outsourcing is free money. They spend $0 on capex, and they use their name brand to get 10+% on extra capacity that they don't have, that then can use those profits to expand their home capacity for markets without tariffs. I see nothing wrong with that. In fact it is a smart idea and if they play it right and the demand continues they could easily do more than their high end of their 2013 guidance of 1.6GW, both by expanding their home capacity and their outsourcing.

Quoted from "Klothilde"

I see a lot of speculation and no facts. This is absolutely ok, however I personally and imvho would not state speculation as fact.

I'm not sure what your point is Klothilde. Are you saying that SOL does not have relatively lower risk exposure to EU panel tariffs and China poly tariffs compared to those with a lot of cell capacity and little poly capacity in China?

Here's the China cell risk scenario under certain circumstances of rest of value-chain routes: tariff on input and/or tariff on output

Prices and costs are speculations. Capacity structure & tolling volume arrangements vs shipment guidance structure are not. The game is about keeping the protectionstic (thus high margin) markets open at low cost. Not one or the other of keep open and low cost, you want both.

Quoted from "Boss"

Explo

SOL is also outsourcing wafers. I got email from IR saying that they have only 2GW capacity but will sell min. 2.6GW in 2013.

Yes, they said the same to me. If there is tariff on wafers that tolling cost will go up though, since I expect wafer tolling outside China to be more expensive. It is hard to imagine the EU market being decently supplied at all without allowing China wafers.

If Europe puts tariffs on cells and modules but not poly and wafers, which is the most likely scenario, which companies will be the winners and which ones the losers? Comments?

Quoted from "cfeng"

If Europe puts tariffs on cells and modules but not poly and wafers, which is the most likely scenario, which companies will be the winners and which ones the losers? Comments?

SOL will be the winner in that case.

Quoted from "explo"

Quoted from "Klothilde"

I see a lot of speculation and no facts. This is absolutely ok, however I personally and imvho would not state speculation as fact.

I'm not sure what your point is Klothilde. Are you saying that...

My point is that I would not state a speculation as fact as you did.

You stated: (SOL was) "out early to sign up the tariff free capacity on favorable terms before it got over-allocated and pricing skyrocket."

which proved to be your speculation and not a fact. I would have included a "probably" or "possibly" to make it clear that it is an opinion, a speculation, and not a fact.

Now, if you ask me whether rising tolling costs in Taiwan will affect SOL I would answer imo yes. SOL may not be affected as strongly as other players that are starting now to make those tolling arrangements but it is unlikely imo that they are off the hook completely. As you stated there is always a market price component to contracts, and also think of following: If the taiwan cell guys have to choose between tolling at cash cost (15 cts, accounting loss) for SOL or selling at a good profit in the spot market, which one will they choose? At all cost they will choose the latter option.

Quoted from "Klothilde"

Do you know this for a fact? Maybe their contract calls for regular price adjustments according to market rates?

SOL has never identified who exactly and where their tolling partners are. They have never identified the terms of their contracts. They have indicated what their costs were and they have indicated that the tolling is done by their customers. SOL had indicated far back around 2 years ago that they would not build out any more cell capacity due to overcapacity and what they deemed was technology that would be obsoleted. They indicated that there was far to many solar companies and they would partner with them to meet demands that they needed. This was not meant to be only cells. They have been working on these relationships for some time now and as such are more likely to be stable (speculations). If you want validations on this, you can listen to their old audio Qna's as SA was not transcripting back them.

Prices that high will crash demand and no one will benefit.

Plus, in one sentence this thread is saying outsourcing is king and in the next owning a poly train which is the highest investment is great. Make up your minds.

Quoted from "Boss"

Quoted from "cfeng"

If Europe puts tariffs on cells and modules but not poly and wafers, which is the most likely scenario, which companies will be the winners and which ones the losers? Comments?

SOL will be the winner in that case.

And the losers?

everybody who does not outsource or open manufacturing plant outside of China.