Schott Solar Withdraws from C-Si Production, Q-Cells’ Assets Are Considered By Hanwha Group

On Friday, June 28^th, Schott Solar issued a release about withdrawing from module c-Si production, following a similar move in January, when the company had stopped wafer and cell production activities. 

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On Friday, June 28^th, Schott Solar issued a release about withdrawing from module c-Si production, following a similar move in January, when the company had stopped wafer and cell production activities.   The company still has product in the pipeline for developers and will continue to sell inventory to niche markets.  The thin-film production and CSP unit will remain intact.  Schott cited deteriorating prices and steep competition from Asia, in addition to pressures created by lack of stability in Europe as reasons for the decision.  Despite a 50% cost reduction over the course of two years, after careful consideration, Schott found itself not economically viable to continue in this segment.

Legacy

Schott has been on the edge of the development of new solutions for the industry and had produced some of the highest conversion module prototypes, which could be adopted into mass production. Mass-produced modules also reached high conversion and were sold to Japan, Germany, Israel and the US. In December 2011, PERFORM MONO was announced to reach 289MW output, with cells being over the 20% conversion. This would translate to 17.7% module conversion, in comparison to top mass-produced mono modules, which achieve 16.4%. The Chinese company Canadian Solar (NASDAQ:  CSIQ), in June had announced 21.1% mono cell conversion, considered the highest performance in the p-type category; however, module performance was not disclosed. Schott also worked on IBC cell structure technology achieving 23% conversion, with quasi-mono wafers reaching ratings of 19.9%, almost 3% more than other manufacturers of quasi-mono wafers.  Schott replaced silver with copper and delivered 18% conversion multicrystalline cell, reducing the cost of front contacts by 50%.

Recently, Schott licensed its technique to produce cells using PERC (Passivated Emitter and Rear Contact) structure to Schmid Group. Schmid will be offering production equipment that allows a mono wafer to achieve over 20% conversion using this technique.  Equipment is easy to integrate in the current production lines and can work on multi- and quasi-mono wafers in addition to mono wafers. It appears that the above action was a preliminary step toward the withdrawal announced on Friday.

Capacity

Schott had 830MW of module production capacity in 2011, and produced around 500MW. The company also has a joint venture with Chinese company Hareon Solar, which was recently listed on the Shanghai stock exchange. When originally announced in January 2011, the Hareon’s holding subsidiary, Schott Solar Hareon Co., Ltd., was going to reach 850MW of production capacity, but the venture reached 300MW in September 2011.  On its own, Hareon Solar is a large producer of cells, with its own capacity worth 1.7GW. The company also has a module assembly capacity of 900MW. It is unclear whether Schott’s 830MW included joint venture; it is safe to assume Hareon’s number does have joint venture figures. Hareon Solar appears to be one of the Chinese companies which were not listed on the preliminary anti-dumping judgement issued by the US Department of Commerce, leaving its cells to draw as much as 250% in levies.  It is unclear whether Schott modules used Hareon cells, but Schott was actively selling into the American market. In April, Hareon announced 1GW of EPC projects with Wuwei Municipal Government for completion during the 2012 to 2015 period, allowing this company to ride a wave of increased demand in China.

Acquisition

Another Germany company, Q-Cells, which had produced some of the most impressive R&D results in recent history, may come to its end in its current form. The company filed for insolvency proceedings in April this year under a heavy burden of debt and limited liquidity, and faced with high costs. The company had remained operational, and even restarted some of the production recently.  Early in June the Chinese thin-film company, Hanergy, agreed to purchase Q-Cells’ thin-film division of Solibro, worth 135MW in capacity.

On Friday unconfirmed reports appeared about Hanwha Group looking into Q-Cells’ assets in pursuit of potential acquisition. Q-Cells has 950MW of cell and 130MW of module capacity. 700MW of cell capacity is located in Malaysia. Hanwha group is a majority owner of Hanwha SolarOne (NASDAQ: HSOL), a Chinese company, which belongs in the top ten c-Si companies in the world.

Potential

This relationship could hold very interesting results for Hanwha SolarOne as a manufacturer. There is a manufacturing gap between 1.3GW of cell and 1.7GW of module capacity.  Hanwha SolarOne already outsources part of its module production to Q-Cells.  In its first quarter report Hanwha SolarOne had almost completely withdrawn from the US market, and planned to return with modules built on Taiwanese cells. Instead, Hanwha SolarOne could use Q-Cells’ Malaysian factory. There is also another German-based 250MW, which can be also easily incorporated into the scope. The combined capacity for the Hanwha Group investments would be 2.2GW in cells and 1.9GW in modules, elevating it to the top of the ranks in capacity.  In addition, to achieve complete independence, Hanwha Group is also building an $869M polysilicon facility in Yeosu, South Korea, with a production capacity of 10,000MT. Hanwha‘s experience as South Korea’s biggest maker of chlorine-alkali chemicals, along with the benefit of utility costs reduction of $2-3 per kg through resource-sharing with its petrochemical plant, are advantages over other, high-cost operations.

Beyond the instant manufacturing boost Q-Cells could offer a lot to Hanwha in R&D and branding. Hanwha SolarOne has not attracted much attention on the high conversion front and it is currently perceived as a second-tier module manufacturer. This can change fairly quickly if the company can produce high conversion modules using Q-Cells’ R&D achievements, combined with Chinese cost efficiencies. In January Q-Cells’ multicrystalline modules were rated at 18.1% efficiency in the aperture area with a 60-cell structure, which is an output of 291W, and quasi-mono module reached 283W, or 17.3% efficiency.  Both companies, Hanwha SolarOne and Q-Cells, are very active in pursuit of EPC projects in Europe. Q-Cells remains as one of most recognizable solar brands and the company is still one of the largest solar developers on the European continent.   While the acquisition remains a highly charged rumor, Hanwha Group may reach its objectives to become one of the leading solar companies around eight years ahead of its own deadline and for a lot less than initially thought. In announcement made in September 2010, Hanwha had estimated a $6B investment in the solar industry with 4GW capacity by 2020.