SolarPVInvestor Forums

This article written in the past showed how they have retracted

https://solarpvinvestor.com/spvi-news/140…is-solar-weekly

I believe that the new technology and conglomerat entry threats are sometimes overated. What these Chinese solar 11's are working on perfecting is to get a stable quality level output at low production cost, when run in mass production. Not reaching something in a lab. This difference is much bigger than many think. It's not just an IP portfolio that decides the winner, it's perfecting organization, manufacturing processes and technology and production platforms. It's all about the total net result of mass production.

Regarding the discussion topic I was mainly reponding to Klothilde's point about the c-Si cost. The general thread topic is like you say a broader topic, especially looking more long-term than next up cycle.

Quoted from "explo"

I believe that the new technology and conglomerat entry threats are sometimes overated. What these Chinese solar 11's are working on perfecting is to get a stable quality level output at low production cost, when run in mass production. Not reaching something in a lab. This difference is much bigger than many think. It's not just an IP portfolio that decides the winner, it's perfecting organization, manufacturing processes and technology and production platforms. It's all about the total net result of mass production.

I do agree. I see 9 to be part of the revolution. After all they should be the leaders, exception, Daqo and LDK as I do not know personally how to place them. That does not mean they won't it is just me. I do not see anyone going in soon again (big business), and I think what did not kill companies,will make them a lot stronger. Stronger to be beyond the reach. I do not think money is the object for Chinese, not for those.

Quoted from "explo"

I believe that the new technology and conglomerat entry threats are sometimes overated. What these Chinese solar 11's are working on perfecting is to get a stable quality level output at low production cost, when run in mass production. Not reaching something in a lab. This difference is much bigger than many think. It's not just an IP portfolio that decides the winner, it's perfecting organization, manufacturing processes and technology and production platforms. It's all about the total net result of mass production.

I don't think that mass production itself is something that distinguishes the solar 9 from companies like Samsung and Foxconn. If anything it is Foxconn who has perfected the art of mass production and the ability to operate under razor thin margins.

The solar 9 have two cost disadvantages relative to a conglomerate like the ones mentioned who decides to invest heavily in solar: 1) They can be leapfrogged technologically by the conglomerate's massive investment in state-of-the-art production lines (technology is readily accessible either in-house or through 3rd party suppliers like Centrotherm or Manz) 2) The solar 9 have accumulated a huge debt burden which leaves them with higher interest expense and higher refinancing cost relative to the conglomerates.

Who agrees?

Quoted from "Klothilde"

The solar 9 have two cost disadvantages relative to a conglomerate like the ones mentioned who decides to invest heavily in solar: 1) They can be leapfrogged technologically by the conglomerate's massive investment in state-of-the-art production lines (technology is readily accessible either in-house or through 3rd party suppliers like Centrotherm or Manz) 2) The solar 9 have accumulated a huge debt burden which leaves them with higher interest expense and higher refinancing cost relative to the conglomerates.

If this is the case where are they now?
When times were fine they were up there claiming big expansions. Nothing happened and they are sitting under the rock. I wrote an article about lower pricing being an instrument to eliminate competition. Many accused China of it. If this is the case clearly price has impact on those companies. The free cash flow, is an illusion for many highly divested companies, who need to worry about LED, washing machines and phone businesses they manage. Look at Sharp. On its knees, outsourcing to Taiwan, closing Japanese operations.
In my opinion they do not have technological advancement advantage. I am not sure how any of those companies would take years of operational savvy from Yingli or Trina and overnight got ahead. Last blooming cycle did not show it. I also think that mass solution in technological advancement is highly dependable on Chinese demand. Specific solutions will be build with leaders and in-house developed technologies for mass production based on operational savvy. Lab made success by Samsung could not be transplanted into mass produced modules. Samsung modules were the most expensive to make along SolarWorld's and commended even higher prices on the market. Foxconn does not have a capacity, experience and relies on Chinese for build out (GCL). Let's tie this to Chinese policies on solar and available money. Do you think that Foxconn can work with GCL the same as Trina and CSIQ can? Money is not an issue for those 9 companies. I just do not see how it would be.

Quoted from "odyd12"

Quoted

Good wafer is really a purity of the poly and perhaps chemistry of the junction. Good poly wafer is one sorted from the core of ingot, where mono seed was closest. Sorting is means to find it not a produced it. All the claims are still a lot of hogwash. The cell is the heart, where technological know how, can take the wafer of choice and improve it.

So I pointed out to the limitation of the wafer processing. All those improvements are about yield, purity leading to efficiency. Sorting is a mechanical process of finding efficient material, by measuring tools in automation or by hand using tools to recognize characteristics required to process it further. The percentage of quality wafers is less than total production.

odyd, I'm still trying to get my head around this sorting method for wafers and what it means. I basically only have your article (https://solarpvinvestor.com/spvi-news/388…stalline-wafers) as reference. I need to understand this better for my analysis of Renesola's advantage.

First of all sorting is some that is done in PV quality assurance and classification processes already, but I assume this is a different kind of sorting that help increase product performance, not just sort it out?

From the sorting method descriptions, I've so far not seen that it does other things than sort wafers by their quality (typically the different bricks of a monocasted ingot will have different purity and consistency depending on how close to the core seed they are). The different wafer qualities give different cell conversion efficiencies when used in the same cell processing line. I can see how sorting cells by conversion efficiency allows you to broaden or narrow the power rating range of your modules, but that's a trivial fact. Maybe CTM loss is affected by cell power uniformity? What I'm wondering is if this wafer sorting technique increases the overall average power of the modules you make (e.g. moves your module power rating bell curve 5w to the right, by just sorting things better before module assembly)?

As you probably know my SOL's case is now based on that they no longer plan do quasi-mono. They do standard multi wafer, with a new propietary process that give wafers, that with standard cell screen printing, on average gives 255w modules, compared to their average 235w poly module a year ago. The process has same great cost and yield properties and easy cell-making properties as normal standard multi wafers, but gives much higher quality wafers on a very consistent basis (lowest power rating is 250w). I don't see how sorting is involved in this (not that you said it was ). If they would simply discard all wafers that won't enable 250w+ then that must already be included in their all-in cost of 52 cents to make modules averaging 255w.

So with HSOL, TSL and others that only get 240w average at an average cost of 58 cents, SOL would have a 12 cents gross margin advantage. First 6 cents because their cost is 6 cents lower (partially due to the higher conversion efficiency) and then another 6 cents because a 255w module is worth (at least) 6 cents more than a 240w module. Not to mention that the lower part of standard 225-250 ranges soon might have a hard time find any demand to talk about (amplifying discount needs). SOL or their customers can then add PERC and ESE or similar to make 275w modules instead.

My point I guess is, as new module brands coming from those with superior wafer technology, like SOL, REC, GCL and LDK, gained by experience in making polysilicon, diamond wires, other consumables, ingot growth and slicing techniques and all with a focus on making the best quality wafers at lowest cost, they will have an 15w head start compared to module brands just taking standard GTAT solution to integrate upstream. Applying ESE and other well known cell techniques can then be taken in-house or outsourced. The 12 cent gross profit difference should make a significant competitive difference. If on top of that market price for polysilicon rises, this difference widens.

I can probably see your hogwash point more with GCL, when they say "275w modules can be made with our wafers". It's likely that that applies only if you select the best pieces of wafers coming out of a monocasted ingot. SOL talks about having a narrow range (250-260w) with high average (255w) in mass production (1.8 GW) for the lowest cost process in the industry (continuous unseeded multi crystalline silicon ingot casting). What they've achieved is that despite the unseeded and continuous process to controll the growth in away that the grain sizes and orientations becomes optimal. With optimal grain structure you get basically the same efficiency effect as standard mono, where you have a single crystal (which is much much harder to grow). Standard multi, quasi-mono and standard (p-type) mono will all have a hard time competing with this next generation multi growth according to Renesola. That's why their whole casting capacity will focus on this, which is 90% of total ingot capacity, then they still have 10% for CZ.

Note that I'm not excluding the role of cell processing here, but when making a cell, regardless of cell technology, it should be benefical to base it on a higher quality wafer made at a lower cost. I'm looking at this from a "rational wafer capacity" perspective and that it, during this shift, should be a positive to be on the rational side and a negative to be on the irrational side (and neutral to just be a flexible buyer, or in case locked to a partner positive to have a wafer partner with rational capacity).

If cost is constant, efficiency reduces it per watt. What I am driving it is a raw material costing in each vertical. If you making boards you lose parts of tree, you make HP wafers, you do not get 100% yield. Yes, you may have a low cost; perhaps the lowest in the industry, but that processing does not include costs of handling those losses. More so, If you making cells you buy entire shipment of one range efficiency wafers. This naturally creates even more costs for wafer manufacturer, since demand is specific yet the process is not. The pressure on wafer margins is incredibly high because of subpar product existence. So SOL picks its HP wafer for its modules. 80% of all wafers made by SOL are HP or is it 70% or 60%. I am not talking all lines, I am talking HP line. However company like HSOL can buy narrow range of high efficiency wafers at the 0 margin price (today). Even by not disposing of waste, HSOL is ahead. The processing cost per watt they provide in PDF (SOL), is not the cost of goods sold they provide in the accounting for it, so costs are more than the process cost. When I started this discussion, my view was that wafer is not point of differentiation and evolution in next couple years is not attached to wafer but cell. Why so: SOL will sell its best wafer to public, the same one, which is in its best module. The customer needs to have better cell and module technology to beat SOL module, granted but I believe they do. Furthermore I also believe that cell makers, who make cell for SOL, will not be able to compete with leading cells created in-house projects, in my revolution scenario. Perhaps this why Li wants the specialization on wafer to go on, he seems putting a lot of money into this as he wants to be “the only” wafer in town. Yet, existence of fully integrated companies, makes no choice for them to improve their wafers, which also encroaches on SOL’s turf and that idea. So this is why SOL is not the company I picked in the top row. BTW how do you calculate averages of HSOL and TSL to be 240MW modules?

Exellent post explo. I especially found your statments about narrow production distribution for wafers and next generation of multi wafers interesting.

Quoted from "odyd12"

If this is the case where are they now?
When times were fine they were up there claiming big expansions. Nothing happened and they are sitting under the rock. I wrote an article about lower pricing being an instrument to eliminate competition. Many accused China of it. If this is the case clearly price has impact on those companies.

I think Samsung's decision not to go ahead with its investment in PV was the only logical step at that time (End 2011/Beginning 2012). It was already evident that the industry was heading towards a period of radical overcapacity which would naturally drive down prices to cash cost level. Postponing the investment for a time later on in the consolidation was tactical on two fronts: 1) they avoid the big losses of selling at cash cost for several years 2) once they go ahead they will strike much harder when their rivals are heavily wounded (Look already at LDK, Suntech).

PV has so much potential that the big infrastructure companies will simply not be able to afford to stay out of the game.

Quoted from "odyd12"

The free cash flow, is an illusion for many highly divested companies, who need to worry about LED, washing machines and phone businesses they manage. Look at Sharp. On its knees, outsourcing to Taiwan, closing Japanese operations.

Samsung is unique in that it has mastered completely different types of businesses ranging from consumer goods to industrial products to commodity goods. They have acquired and maintained market leadership in the toughest of commodity businesses like DRAM, which hinge on superior process efficiencies. I see no reason why they shouldn't be able to repeat this in the PV space, given the relatively young stage in automation that the industry is currently in.

Quoted from "odyd12"

In my opinion they do not have technological advancement advantage.

Imho having no noteworthy technological edge is more of a problem for the solar 9.

Quoted from "odyd12"

I am not sure how any of those companies would take years of operational savvy from Yingli or Trina and overnight got ahead. Last blooming cycle did not show it. I also think that mass solution in technological advancement is highly dependable on Chinese demand. Specific solutions will be build with leaders and in-house developed technologies for mass production based on operational savvy. Lab made success by Samsung could not be transplanted into mass produced modules. Samsung modules were the most expensive to make along SolarWorld's and commended even higher prices on the market.

I'm frankly a bit sceptical about the "operational savvy" of chinese companies, as the huge employee numbers paint a picture of banking on cheap laber and not being overly automated. I know that Suntech has a lot of manual work. Going forward there's still a lot of operational potential to reap through automation.

Quoted from "odyd12"

Money is not an issue for those 9 companies.

You may be right on this one. The commitment of the chinese government to the PV-sector is simply amazing, as is the willingness to subsidize these companies with endless credit. This is clearly a very strong advantage these companies have vs. an international conglomerate.

Klothilde I think there will be a korean wave. Korea has been big in solar before and you can see it in the support and joint ventures etc.

Quoted from "eysteinh"

Klothilde I think there will be a korean wave. Korea has been big in solar before and you can see it in the support and joint ventures etc.

There's one example of Korean conglomerate entry already. Hanwha SolarOne is doing upstream and downstream from the Korean parent and leaving the mid-stream to the Chinese subsidy.

If you want to be a solar giant, one approach seems to be to have a chemical division (to do poly) and a construction division with a strong financial support (to do projects). The midstream panel manufacturing still seems to get lowest cost in China (with 75% of world production in that segment, the best resource ecosystem have developed). This seems to be the Hanwha model.

Do anyone see Oci doing a similar thing (e.g. targeting non-GCL connected YGE or JKS)?

On a more general note I think it depends on what type of conglomerate you are, if PV is interesting or not. These products are harder to brand and thus harder for someone like Samsung or LG to leverage their brand for. What's important when we consume electricity? Price. It's the ultimate commodity. And in the end that falls back to the module. As long as it produces its kWh and has good warranty conditions and warranty insurance or other solutions the industry come up with to make the consumer feel they buy a guaranteed kWh production of electricity (under given irradiation conditions), the label shouldn't matter much. Previously to become bankable (on the green light list of major banks in major market) it helped to have a big PV market-share, track record of multiple years of successful installs, solid balance sheet and stable profitability, but with past year's industry development with third party independent insurers, this has become less of a play. What now makes a PV brand bankable is if they have a warranty insurance deal with a bankable insurer. So the PV companies now only have to convince one reputable insurance company of their bankability (or rather insurance risk premium) rather than a lot of banks. For the consumer the choice then becomes quite simple. What IRR does this panel give me? Is this IRR covered by an industry top rated insurance?

The insurance cost is less than 1 cent per watt for the module maker, but the old bankability criterias can be assumed to play a role in this cost.

The actual kWh producing quality is highly measurable and these types of independent quality tests made by Photon and others are a way to build brand. There's still a role for brand to play as there are for utilities and banks, but in the end the decision is more about economic outcome (how much does my electricity and credit cost?) than life-style choice or other things that make us choose an Apple brand over an Asus brand or similar. It's rather positioning of products, like rooftop segment from high conversion efficiency. Desert segment from good temperature coefficient and sand storm tolerance, etc. It's more hard specs (kWh produced per geographic conditions and insurance terms) of economic outcomes than brand trust that's the deciding factor when specs and price differ.

So I guess my conclusion is that, since some of the conglomerates, going into PV, would not be able to leverage some of the strenghts they normally leverage, they would have to be sure they can enter and ramp production to a more efficient level than established players. The risk here is that they go up against PV focused quite big players (because PV is big) that have learned and tuned PV manufacturing processes for years and there might be significant challenge differences to electronics manufacturing. As odyd mentioned awhile back, quite a few of them once thought they could, then realized they couldn't and forgot about PV. If someone will make a new try, I think it will be the Hanwha model. The risk of adding huge new capacity instead of consolidate and acquire a well tuned mid-stream production machine in China seems not worth taking, especially since some of those well-tuned Chinese production machines now can be purchased for a dime on the dollar (Hanwha paid around $10 per HSOL share back in 2010).

Quoted from "odyd12"

If cost is constant, efficiency reduces it per watt. What I am driving it is a raw material costing in each vertical. If you making boards you lose parts of tree, you make HP wafers, you do not get 100% yield. Yes, you may have a low cost; perhaps the lowest in the industry, but that processing does not include costs of handling those losses. More so, If you making cells you buy entire shipment of one range efficiency wafers. This naturally creates even more costs for wafer manufacturer, since demand is specific yet the process is not.

I think you're oversimplifying the discussion, by saying that it's in the cell processing where things happen. Look at YGE. Both for mono and multi they are differentiating in the ingot step, with growing n-type mono ingots and the recently announced "develop high-efficiency multicrystalline ingot casting technology based on gas refrigeration". This is where YGE adds conversion efficiency. Same with SOL and of the China 11 YGE and SOL have reached high average conversion efficiency in mass production at low cost. Others are doing things in the cell step, but so far from what I've seen from CSIQ MWT and SPWR's high efficiency solutions they have way way higher costs. I think kWh produced can be gained through the whole value-chain from poly purity to tilting mounting axes for optimal inclination.

I do see what your trying to examplify with the wood analogy, but I'm not sure if it proves your point. So for wood you have seed and soil quality (poly, other raw material and equipment), then you can grow different quality wood, like fast growing low density pine or slow growing high density oak (ingot growth step), then you have to saw this into boards of shape usable for application and lose some of the wood (cropping, squaring ingots and slicing wafers with resulting kerf loss). Sure you end up with a pile of oak boards vs a pile of pine bords or if you will a pile of high purity n-wafers vs a pile of low quaility multi wafers. This does not mean that the guys doing this step and having come up with some solution to produce the goods of higher value at lower cost can not make more money than the guys buying this type of goods. What matters is how competitive you are in the step(s) of the value-chain that you operate.

If hypothetically there truly is only one part of the value-chain where sudden huge differentiation is possible, then there's higher potential for that successful name operating with the great advantage there, but the flipside is that it is a big risk to operate in that vertical if you don't become that player with the superior technology. Then it's safer to be a consistent top quality material supplier.

Quoted from "odyd12"

The pressure on wafer margins is incredibly high because of subpar product existence. So SOL picks its HP wafer for its modules. 80% of all wafers made by SOL are HP or is it 70% or 60%. I am not talking all lines, I am talking HP line.

I'm not sure what you mean. All SOL's 1.8GW non-mono "lines" are the same now. They can be set to make either quasi-mono or HP multi. My point is that a year ago their quasi-mono averaged 245W and their multi 230W, but now they both average 255W. Since their HP multi process is as low cost as standard multi, the HP multi has many advantages over quasi-mono:

• Lower cost in ingot growth and cell processing step (same as standard multi per piece, thus lower than standard multi per watt).
• Consistent ingot quality (no sweet core and bitter outer layer difference to sort out)
  
• No reconfiguration of cell lines. Standard multi process.
  
• More aestetically appealing.
  

So we can forget about quasi-mono and its uneven ingot quality.

Quoted from "odyd12"

However company like HSOL can buy narrow range of high efficiency wafers at the 0 margin price (today). Even by not disposing of waste, HSOL is ahead.

That's an obvious, but for me quite irrelevant observation. If I looked only at today's pricing along the value-chain it, from a gross margin perspective, only makes sense to buy cells and sell modules. Gross margin is more than 30% in module tolling and negative in poly and wafers. It used to be the opposite. These things cycle and rarely the gross margins are made in the module vertical instead of the poly, wafer and cell verticals.

Quoted from "odyd12"

The processing cost per watt they provide in PDF (SOL), is not the cost of goods sold they provide in the accounting for it, so costs are more than the process cost.

I'm not sure what you mean here. The processing cost is the total cost of goods manufactured. This should include kerf loss, discarded out of spec pieces etc., just as wafer breakage loss in cell processing is included in cell processing cost (cell processing is not lossless either). The actual GAAP costs reported includes inventory carrying effect in cost of goods sold (COGS) and used to include freight (now moved to opex selling expenses in industry praxis). If SOL (or anyone else) says it cost 52 cents to make a module a certain quarter, then the quarter that inventory is sold will have that COGS level.

Quoted from "odyd12"

When I started this discussion, my view was that wafer is not point of differentiation and evolution in next couple years is not attached to wafer but cell. Why so: SOL will sell its best wafer to public, the same one, which is in its best module.

Again I'm not fully on board on this. First, differentiation makes me think of consumer product features. Like touch instead of keyboard user interface for mobile devices. And those who came up with the capacitive screen technology instead of the pressure requiring resistive screen technology probably made some bucks, not just those first to apply it (Apple). A good module, needs a good cell, needs a good wafer, needs good poly. Who's to say where it's easiest to avoid competition of the title good? Even if that was possible to conclude, we don't know who it will be in the future. It's easier to bet on someone who is good somewhere today.

Quoted from "odyd12"

The customer needs to have better cell and module technology to beat SOL module, granted but I believe they do.

But the key metrics, conversion efficiency and production cost, says differently now. 1 year ago SOL was inferior with 230W average, now they are superior with 255W average in the super low cost segment.

Quoted from "odyd12"

Furthermore I also believe that cell makers, who make cell for SOL, will not be able to compete with leading cells created in-house projects, in my revolution scenario. Perhaps this why Li wants the specialization on wafer to go on, he seems putting a lot of money into this as he wants to be “the only” wafer in town.

Yes, I believe that SOL's value is primarily as a wafer maker (having in-house super low cost poly). They are basically a GCL competitor. It just happens that their wafers now have become so outstanding that any standard cell and module process applied to it will make a cheap and superior module, that will sell-out (80% QoQ growth in Q4). So why not exploit this to capture that extra margin market without any effort. I'm sure that, as the market looks now, GCL want to do the same things. It's said that GCL thoughT about it and that Trina called them and tought them business manners. If someone takes a giant leap on pure cell technology SOL can just go back to supply the best and cheapest wafers available.

Quoted from "odyd12"

BTW how do you calculate averages of HSOL and TSL to be 240MW modules?

I look at the product specs of their volume products. For most of these Chinese companies these are the standard 60 and 72 multi cell products. Assuming normal shaped distributions the average should be close to the mid-point.

This from SOL's Q2 CC might underline my point about the enormous progress from inferior to superior SOL's modules have undergone in only one year:



"First and
foremost I think it is worth pointing out that our modules are clearly among
the highest in terms of power output out there in the market out of China. This
is why we are operating at 100% capacity utilization, this is why we had record
module shipments, this is why we had record shipments again for the second
straight quarter. There is a lot of demand for our products because of the high
power outage reduction that comes from our products."

Quoted from "explo"

I think you're oversimplifying the discussion, by saying that it's in the cell processing is where things happen. Look at YGE. Both for mono and multi they are differentiating in the ingot step, with growing n-type mono ingots and the recently announced "develop high-efficiency multicrystalline ingot casting technology based on gas refrigeration".

I am only stating there is wasted material in production wafers, to largest degree that any other vertical. No need to describe processes I am familiar with them. You and I agree on this. Mono has less waste as the purity of poly allows to be reused.

Quoted from "explo"

I'm not sure what you mean. All SOL's 1.8GW non-mono "lines" are the same now. They can be set to make either quasi-mono or HP multi. My point is that a year ago their quasi-mono averaged 245W and their multi 230W, but now they both average 255W.

The production line (ingot) will have only a % of HP wafer and produce 1.8GW , what is the percentage of HP?

Quoted from "explo"

That's an obvious, but for me quite irrelevant observation.

It is important as the cost factor and overhang. It falls in to other point.

Quoted from "explo"

I'm not sure what you mean here.

Again, I am explaining this. Processing costs are in COGS, but COGS is not the processing cost you see in supplemental info in PDF. I believe that obsolete material gets written off, quarterly and this is cost you do not see in the deck. Yes cell processing has losses and the same happens. However cell loss due to damage is a lot more controlled these days.

Quoted from "explo"

Again I'm not fully on board on this. First differentiation makes me think of consumer product features.

So check the interview with had with SOL. Right there most of the HP wafer will be going to their modules. But that is not the case for wafer seller. If they will compete with other wafer sellers, they will put the same wafer in own module as the next guy who bought their wafer. You do see that the only case of differentiation is the "cell" here, right?

Quoted from "explo"

Yes, I believe that SOL's value is primarily as a wafer maker (having in-house super low cost poly).

To points above this is what they are. So as a module seller they equipped with their common HP wafer ,build on vanilla cells, will not be part imho of the revolution, which I expect to see in few years. Not on the dynamic of today.

Quoted from "explo"

I look at the product specs of their volume products. For most of these Chinese companies these are the standard 60 and 72 multi cell products.

I am not sure how you do it. The only way I could think of calculating this would be to know total shipment and measure amount of physical modules shipped. This could be possible, but it is certainly not disclosed. If you looking at the datasheets, I am skeptical this has value. I could assume that Panda shipments are 270s based on recent specs and Honey ships in 260s. To conclude, high efficiency modules cost more per watt, agreed? Therefore why sum of watts sold by Renesola commands such a low ASP? They export all of it, so overseas ASP would be beneficial. Is the brand, sale channels etc? Perhaps but those are the factors I described. Hanwha has a good brand name. Certainly a lot more after Q.Cells buy. They sell at the same price. Interesting why this is . Certainly feeling on their modules is they are low efficiency, for now.

Odyd, i wrote my message in a rush on the way out. I edited it a bit to be easier to undestand.

On ASP, this is SOL's comment:In the fourth quarter, we believe that overall in most of the markets that everyone participates in and where we are as well, we should be more or less equal or perhaps even higher priced than many of our peers and competitors. Now a lot of the differences, unfortunately, are actually due to geographies or where people have established channels. So, for example, as we make more U.S. sales, which historically we haven't done much of, and in the future perhaps as we make Japanese sales as well, our overall blended ASPs will appear higher as well, just like many of our peers

Explo. certainly this is the case of brand building and has a promotional aspect attached to it. Accepting explanation, I am not convinced with the perception that particular module rating is responsible or present in ones modules sales. We do not have this visibility. I think however that it is possible to extract it from module shipment data. The only needed ingredient is the physical account of the shipment, like containers, pallets. I contacted Jason for some info on this. By understanding this average for various destinations, you can average company's efficiency for overall shipment number and build a better understanding of efficiency in its capacities. View we do not have today. Yet I am getting ahead of myself, may not be possible or have too many variables to compile. I will have to wait for his response.

ody12 this would be very good information to know and something I think people would pay for if you are planning something like this in partnership with solarzoom. Even if it is delayed 2 months it is very important information for making a picture of future gross margins.

Quoted from "odyd12"

I am only stating there is wasted material in production wafers, to largest degree that any other vertical.

I don't disagree with this (without knowing the exact waste details), but since waste is already include in the stated processing costs I don't see your point. A high gross margin is a high gross margin and a low gross margin is a low gross margin, regardless of how much waste was involved. The only thing a high degree of waste means is that there are further cost reduction potential from waste reduction.

Quoted from "odyd12"

The production line (ingot) will have only a % of HP wafer and produce 1.8GW , what is the percentage of HP?

As I've said, my understanding from the information the company has provided is that it is 100%. This is the whole point with SOL, compared to JASO, CSIQ, TSL. Every single wafer SOL makes is high quality (standard multi cells based on it will have 4.35W+ power) and low cost. They have an ingot growth process that yield wafers in the narrow range of 4.35W to 4.50W for every ingot, with the average at the mid-point. Others get wafers in the 4.0W to 4.35W range.

Quoted from "odyd12"

It is important as the cost factor and overhang.

It has to be considered as a short-term impact, but has little impact on my view of long-term strength.

Quoted from "odyd12"

Again, I am explaining this. Processing costs are in COGS, but COGS is not the processing cost you see in supplemental info in PDF. I believe that obsolete material gets written off, quarterly and this is cost you do not see in the deck. Yes cell processing has losses and the same happens. However cell loss due to damage is a lot more controlled these days.

You've referred to PDF two times. Do you mean the conference call slides supplementing the earnings release? I know that cost of goods sold (also known as cost of revenues) can include more than what is stated as manufacturing cost. I think warranty cost can be one such thing that is part of cost of goods sold, but omitted in cost of goods manufactured. As I said freight used to be it too, but it is often put in selling expenses instead of cost of goods sold these days. What I don't see is that there should be unstated manufacturing costs going into cost of goods sold and that that should only apply for the wafer vertical. Non-standard items in cost of goods sold, like inventory write downs has nothing to do with wafers in particular either.

Quoted from "odyd12"

So check the interview with had with SOL. Right there most of the HP wafer will be going to their modules. But that is not the case for wafer seller. If they will compete with other wafer sellers, they will put the same wafer in own module as the next guy who bought their wafer. You do see that the only case of differentiation is the "cell" here, right?

For me SOL is selling their high efficiency Virtus A++ wafer and their low cost poly when they sell a module, that's where they collect the incremental 12 cents gross profits per watt over industry standard products. In isolation their cell and module step is not much of an advantage. The primary advantage of Virtus II modules is the Virtus A++ wafer powering it to allow very high conversion efficiency at very low cost. Having the Virtus A++ wafers makes it easy to sell the module, so I see why SOL wants to exploit this by selling some modules themselves (and thus doubled module capacity in 2012 from a small boom opportunistic level built in 2009-2010).

You know there are quality grades of multi wafers from low E to high A. SOL only gets A++ wafers now from the ingots grown with its propietary process that combines this quality with lowest cost.

In reality they are not competing much with their customers if there's only 2GW supply of Virtus A++ wafers and 30GW demand looking for best value offer, but in theory you are right. Since SOL is low on cell capacity, they can make good offers to customers to do their cell tolling, thus balancing the situation to a win-win.

I'm not sure if you missed some of the things that happened in 2012 regarding SOL. I can say that comparatively in 2011 they were nobody and suddenly R&D dividends just exploded and for every quarterly conference call there's been huge progress announced. I'm talking leaps that competition does in maybe two years. It's in this detailed study of SOL's recent development I see the case. Otherwise I would agree with you more that SOL is just a standard component player doing opportunistic mid-stream OEM work at boom times. That was the old SOL. The major changes is that poly cost is down from $35 to $18 and cover full sourcing need and that their wafers have gone from mediocre to best there is at industry leading cost.

Here's more from Q2 CC to clarify product mix impacts of this progress (goodbye quasi and standard multi and mono):
"there is actually likely to be substantial changes coming through the product mix now that we have the Virtus II modules which is actually based on the Virtus A++ wafers using the Virtus A++ manufacturing method and essentially at the rate that things are going and given all the advantages of these wafers, we believe that sooner rather than later, not only will we be replacing all the normal multi, but also in fact most of the normal multi in the market will start to really fade way or fall away.
And in fact it is also possible that people will start to move away quickly from mono as well"

Quoted from "odyd12"

Quoted from "explo" Yes, I believe that SOL's value is primarily as a wafer maker (having in-house super low cost poly).

To points above this is what they are. So as a module seller they equipped with their common HP wafer ,build on vanilla cells, will not be part imho of the revolution, which I expect to see in few years. Not on the dynamic of today.

Today modules with low cost HP wafers and vanilla cells seems to sell really well. I'm not saying this is the future, but HP cells don't reduce the value of low cost HP wafers, especially if they combine well.

Quoted from "odyd12"

Quoted from "explo" I look at the product specs of their volume products. For most of these Chinese companies these are the standard 60 and 72 multi cell products.


I am not sure how you do it. The only way I could think of calculating this would be to know total shipment and measure amount of physical modules shipped. This could be possible, but it is certainly not disclosed. If you looking at the datasheets, I am skeptical this has value. I could assume that Panda shipments are 270s based on recent specs and Honey ships in 260s. To conclude, high efficiency modules cost more per watt, agreed? Therefore why sum of watts sold by Renesola commands such a low ASP? They export all of it, so overseas ASP would be beneficial. Is the brand, sale channels etc? Perhaps but those are the factors I described. Hanwha has a good brand name. Certainly a lot more after Q.Cells buy. They sell at the same price. Interesting why this is . Certainly feeling on their modules is they are low efficiency, for now.

My assumption (confirmed by examples I've seen) is that the distribution curve for power yield in module production is bell shaped. So when product sheets show a range of powers available I assume that the average is the mid-point (as it is for normal distributions).

Quoted from "explo"

My assumption (confirmed by examples I've seen) is that the distribution curve for power yield in module production is bell shaped. So when product sheets show a range of powers available I assume that the average is the mid-point (as it is for normal distributions).

This is my suspicion also.

Quoted from "odyd12"

Explo. certainly this is the case of brand building and has a promotional aspect attached to it.
Accepting explanation, I am not convinced with the perception that particular module rating is responsible or present in ones modules sales. We do not have this visibility. I think however that it is possible to extract it from module shipment data. The only needed ingredient is the physical account of the shipment, like containers, pallets. I contacted Jason for some info on this. By understanding this average for various destinations, you can average company's efficiency for overall shipment number and build a better understanding of efficiency in its capacities. View we do not have today. Yet I am getting ahead of myself, may not be possible or have too many variables to compile. I will have to wait for his response.

I agree with eystein, that's would be very valuable data. Once you've identified type of module (e.g. 6x60 or 6x72) and number of modules and the total watts for a container the actual average conversion efficiency of exported modules would be visible. Right now I'm just basing numbers on plausibility using normal distribution assumptions. I think the current simple and assumed model still has decent enough confidence to place the weight I do on it in stock pick evaluations.

I am referring to Q3 or Q2 processing costs written in Supplemental PDF.. There is clear difference between cost of 0.67 (as per Q3) and in all processing from the COGS. When you analyze the inventory, you will see three very distinct concepts. Obsolete inventory, inventory effect due to market adjustment and the cost of carrying it (storing it, cleaning it etc). The first one is written off, others are adjustments. This is the part which should grab your attention as write off is basically stuff declared as not usable. Sole fact off various ranges and names for virtus is fancy recognition of randomness of the process, and HP % required to produce 255 to 260W virtus modules is low, and it is not 100%. Nothing has changed here. The overall bar went up, but this is the section of the production only. If it was 100%,why would you have anything else sold, it costs the same if not less? Freight has been out for 3 years, i am not sure what this is coming back. The processing of .11 or whatever does not have disposal of obsolete inventory. When demand is driving efficiency requirement, and you sell wafers, you sell portion what you produce, since the "process" does not produce 100% efficient line. You cannot sell the rest, it is obsolete. How is the company which produces poly can write off basic material to zero, it can be simply reprocessed, yes? Because it is wafers which are sub rated. Why cannot they call it for what it is, it would be so simple this way. Your assumption about module penetration of certain range is unfounded and cannot be supported by any of the data I seen. I rather not discuss this as it is not a fact. I just want to add. This is a great discussion but i do not want to carry on with this as we are discussing elements which are very hard to identify with precision or fully understood by application of data. I have written an article about Trina for PVM. There reason I bring this up, it was the most difficult piece of writing as I happened to consult the company. From that point on it was edited number of times that it almost lost its key points. Companies, all of them not just Chinese, will be very secretive on aspect of their business. I would not write SPVI article in the same fashion as I write here as there is a lot which is just a statement on my part based on my experience to date with thus far dealings with solar businesses. I am making points not expectations that you Explo or anyone else will stop liking SOL. I am hinting why I do not put as much into SOL today. I put things into TSL and as you may note I also not put this firm into a first row. My opinion. Good discussion, and you are very knowledgeable on the subject.