Last week, we saw U.S. solar players Energy Conversion Devices (Nasdaq: ENER ) and GT Solar (Nasdaq: SOLR ) come up short. Meanwhile, China's JA Solar (Nasdaq: JASO ) said that business is sizzling, now that solar pricing has hit the sweet spot. Yingli Green Energy (NYSE: YGE ) echoed its fellow Chinese company on Friday with another very sunny report.
For the third quarter, Yingli shipped a record number of photovoltaic modules, with volume up more than 80% over the previous period. Lower average sales prices constrained sequential revenue growth to 49%, but gross margins fattened to 20%, thanks to lower silicon and non-silicon costs. SunPower (Nasdaq: SPWRA ) sported similar margins in its surprising quarterly report. You can expect Yingli's gross margins to expand further as it works off high-cost inventory.
As hinted at in our look at First Solar's (Nasdaq: FSLR ) fumbled quarter, the prospect of a slimmer 2010 German subsidy has definitely pulled demand into 2009. Yingli's management said the looming cutback has "galvanized the PV industry into action." Witness the 300 megawatts installed in Germany from July through September. There were just 500 megawatts installed in the prior six months.
As we saw with JA Solar, Yingli sees demand far outstripping its productive capacity at present. Developers racing to get ahead of next year's lower feed-in tariff (we still don't know how deep the cut will be) are definitely in the driver's seat here. Roughly 60% of shipments are headed to German customers in the fourth quarter.
As Yingli said on its call, this clamor for modules in excess of the firm's capacity is a "nice problem" to have, but the race against the clock in Germany also distorts the picture of normal demand -- not that such a thing exists in this heavily subsidized industry. For what it's worth, though, Yingli foresees a "very strong 2010" in Europe.
As for the U.S. market, Yingli has taken steps to grab market share here, and saw its panels present in 11% of California Solar Initiative applications in September. On the utility side, Yingli has had its wares bid into more than a gigawatt's worth of potential projects. The company aims to set up manufacturing operations somewhere in the country before the end of 2010. These operations will be modest, but valuable as a means of sidestepping any protectionist measures the company might otherwise face here.