Watch stocks you care about
The single, easiest way to keep track of all the stocks that matter...
Your own personalized stock watchlist!
It's a 100% FREE Motley Fool service...
Last week I wrote an article looking at the ways the semiconductor industry and solar industry are similar and where they diverge.
At the heart of the issue is a debate over whether solar companies primarily compete by out-doing each other with distinctively designed products or whether success lay in developing a superior manufacturing process. In other words, do you win through product or process?
It's more than an academic debate. If solar truly becomes a "process" industry, then winners and losers will be determined by who has a better factory. Solar vendors would be required to continually place multibillion dollar bets in cyclical markets with fluctuating prices. Clash of the Titanic Fabricators: it could be a worse gambling habit than trying to produce computer memory.
If solar vendors specialize in "products," many would be able to free themselves of owning factories: They could spend their energy in design and enhancements. A company could live longer before being swallowed up in the race to the bottom.
Process is King
One of the main arguments for the process side is that a substantial portion of the intellectual property in solar revolves around the factory machinery and manufacturing processes. Good luck telling the difference between a BP module and one from Sharp. They perform the same task, often at the same efficiency, look somewhat the same, and will sit for 30 years out of site on a roof or in a rack on an empty lot near a landfill. The difference in price mostly reflects what the companies invisibly accomplished on the back end.
Miasole, Global Solar, Solopower and others will all make similar copper indium gallium selenide (CIGS) solar cells. The difference will lie in processing: Miasole employs sputtering, Global evaporates and Solopower employs electroplating.
Compare that to semiconductors. Intel (Nasdaq: INTC ) and AMD (NYSE: AMD ) processors run the same software and fit in the same PCs, but each excels on different benchmarks and tasks. Some are power-optimized while others do best in servers. At one point, AMD had the upper hand in the rivalry by integrating a memory controller (something Intel didn't want to do) and cutting back the clock speed to gain performance. One chip designer analogized it to aircraft: AMD had come up with a DC3, the classic plane from McDonnell Douglas. Intel had made a cargo plane.
"This is not the chip industry. The rate of change is completely different," said Miasole CEO Joseph Laia. "Between your design and the variety of equipment makers, Intel can differentiate its process from Samsung and TSMC. Their factories can sing and dance at different levels."
Product counters: Solar manufacturers do differentiate by design. Look at SunPower (Nasdaq: SPWRA ) . The company leads the efficiency pack with internal layers that better capture light. Suntech is boosting efficiency and lowering cost by substituting copper for silver in the internal wiring for its Pluto panels. Solaria has integrated a concentrator into a panel. In the future, companies like Alta Devices will drive the cost out of high-efficiency solar cells made from group IV elements like germanium.
And festooning factories with off-the-shelf machines are far less risky. AQT has built a 15MW CIGS facility for under $15 million in about two years, well below the drunken sailor standard of CIGS.
The process crowd responds: Other than SunPower, all of those efforts are in their infancy or in the lab. Solyndra tried to revolutionize solar cells with its tubular device: Although it has landed contracts with companies like Coke and Anheuser-Busch, the panels cost twice as much to make as ordinary solar panels.
Meanwhile, First Solar has continued to rack up utility contracts by being able to crank out modules for under $1 a watt, a result made possible through relentless execution and precision in manufacturing. At First Solar, prices drop quicker than efficiency improves.
Back to product: a module is more than cells and glass. Integrating electronics like microinverters and controllers can enhance a module's performance. Different size modules for utilities and homes will lead to a multifaceted ecosystem. On top of that there are the installation innovators with prefab, easy-to-install solar panels (Armageddon), modular racking (Zep Solar and Canadian Solar) and trackers. (SunPower's PowerLight.). Dow, Linde, Innovalight and DuPont have begun to promote integrated materials and coatings that can enhance performance characteristics.
BIPV, flexible CIGS and crystalline: differentiation will flower.
Process counter: Racking? Just a bunch of aluminum benders. How will that avoid commodity pricing?
Product: How does Apple get people to gush and camp overnight for the privilege of buying overpriced phones? Branding, features and channel can mean more than technology.
And on it goes. What do you think? Please respond. We will total up the results later.
More from GreenTechMedia: