It’s the rare industry these days that isn’t getting hit by the global financial storm. Chinese solar stocks, after years of rosy prospects and burgeoning growth, are facing a mountain of a challenge, in the form of wobbly share prices, exorbitant costs of silicon and increased caution from investors. The decline of the euro and the wane of the once-generous solar subsidies in Europe, the world’s largest market for photovoltaic solar modules, has not helped matters any.
From Reuters:
“Chinese solar cell and module makers are the most exposed to a downturn, analysts and investors said, since they sell much of their product to Europe, have some of the highest costs, and some of the least differentiated products.”
Because of the current financial climate, investors are more likely to invest in the companies that have more established names and higher quality—which applies to primarily American and European companies—according to the above article. Indeed, share prices for Chinese solar companies JA Solar, LDK Solar, Canadian Solar Inc, Trina Solar Ltd and Suntech Power Holdings Co, Ltd all currently stand at less than four times 2009 earnings estimates, compared to 9.5 and 17 times for U.S. firms SunPower and First Solar Inc. Furthermore, Chinese solar cell manufacturers entered the market later than their western counterparts, who secured long-term contracts ahead of time that allow them to purchase silicon for $70 to $80 a kilogram, rather than the $200 to $220 (down from $350 earlier this year) the Chinese pay. And while the Chinese solar manufacturers are not sitting idle—JA Solar’s Chief Executive Samuel Yang has said that the company would press its polysilicon suppliers to cut costs—lowered prices could take weeks or even months to take effect. There hasn’t been any news yet (that I’ve seen) of the effects on Chinese solar thermal, which is what the majority of Chinese people use, but the big bucks are in the solar cell industry.
In spite of the doom and gloom above, however, not all financiers have run scurrying from the Chinese solar sector. Just last week, 400 American and Chinese entrepreneurs, policymakers and business and technology professionals gathered in Shanghai for the U.S.-China Green Tech Summit, a two-day long conference sponsored by the Bay Area Council. Green tech presentations, panels and marketing abounded, although the optimism was tempered by some caution from the venture capitalists present. Still, Intel’s $20 million investment in Chinese solar cell manufacturer Trony Solar Holdings Co, Ltd three weeks ago had some seeing a silver lining.
