Given the current difficulties for solar energy PV businesses, waves and waves of letdowns from last year’s close called for the rescue of LDK Solar Co., Ltd (ADR)(NYSE: LDK) from the recently bankrupted Wuxi Suntech, a subsidiary of Suntech Power Holdings Co., Ltd. (ADR)(NYSE:STP). With suspensions of the production capacity of the solar energy PV-related supply chain reaching 90%, there’s no firm answer as to when we will see the light at the end of the tunnel. People in the industry can’t even catch their breath in the wake of increasing pressure by the EU as they build their anti-dumping and anti-subsidy blockade.
Despite all the facts that should deter most people from taking further risk, to our surprise we saw Hon Hai (TW:2317) / FIH Mobile Ltd. (HK:2038) CEO Terry Gou is gearing up to further expand his OEM empire and attempting to replicate Foxxcon’s business model to conquer the already bloody battlefield of the solar energy PV business.
A number of experts in the industry are puzzled by his moves, particularly the recently announced deal with Guangxi’s regional local government involving a plan to build 20 new solar energy power plants and five solar PV module production facilities. It has caught the attention of the solar energy PV industry, and many are seeking answers from the “Emperor of OEM” about his move into a business that seems to be sinking.
Looking back at 2011, FIH teamed up with GCL-Poly Energy Holdings Ltd (HK:3800) and signed a joint venture agreement with Datong City government in Shanxi province. From the production facility of polycrystalline silicon and solar cells to solar power stations, FIH is trying to vertically integrate their solar energy PV manufacturing processes and gain the upper hand from its benefits as the plan comes to life.
FIH has also invested greatly in Yancheng of Jiangsu province, having planned and built a solar energy PV manufacturing base with an estimated investment of RMB 10 billion already made. Adding the Shanxi province, the total of FIH’s investment in the solar energy PV venture has already exceeded RMB 100 billion. It’s a bold and daring move by Gou, especially when the market is cluttered with news of calamity and desolation.
Industry experts have pointed out that Gou and FIH’s recent move is a product of their long-term strategy to diversify FIH’s reach into different tech industry sectors; the renewable energy industry is a prime objective that they certainly won’t miss out on. Their ability to streamline the production process, the effectiveness of cost reduction and the success of global operations management has made this heavyweight manufacturer into the most influential OEM service provider in the world; their management know-how may provide them with an edge to compete in the global solar energy arena.
CEO Terry Gou has long been regarded as an aggressive leader with a strong will. He’s was never intimidated into making attempts that might lead to losses. But most of his investments have proven the cleverness behind his decisions, even though others may only have seen the risk and the downside. For Gou, it could be the best time to start a rewarding investment. Now that things are looking gloomy and desperate in the eyes of others, he just might find the upside while everyone else is still looking for it.