Amid all the turmoil solar manufacturers are going through, there are some positive things happening in the solar industry. SunPower (Nasdaq: SPWR) leveraged leading efficiency and a strong project pipeline to a decent quarter, and now Suntech Power (NYSE: STP) reported earnings that showed some improvement.

Suntech's shipments grew 16%, 1% higher than guidance, and gross margins were 13.3%, also slightly above guidance. But that didn't keep the company from reporting a $116.4 million loss, or $0.64 per share, driven by interest costs and a foreign exchange loss. Still, the company's gross margins were some of the highest we've seen in the industry for the third quarter.

Suntech is executing on its strategy to vertically integrate operations, and it has taken this manufacturer from the bottom of the pack to competing with Trina Solar (NYSE: TSL) and Yingli Green Energy (NYSE: YGE) for top of the Chinese manufacturer list.

Over at Canadian Solar (Nasdaq: CSIQ), the news wasn't quite as good, with gross margins falling to 2.4% and a loss per share of $1.02. In the fourth quarter, Canadian Solar expects margins to recover to between 5% and 8% and reiterated full-year shipment guidance of 1.2 GW to 1.3 GW.

Both companies took an inventory writedown and reduced capital spending plans because of a glut of supply in the market.

FIT reduction accelerating German demand
Suntech pointed out that Germany was its strongest market in the third quarter, driven by a coming feed-in tariff reduction in 2012. Installers are pushing to get solar modules installed quickly before the FIT reduction hits, and that should drive demand in the fourth quarter.

Both SunPower and Canadian Solar rely on Europe for a vast majority of demand, so any dropoff that happens because of Europe's debt crisis or FIT reductions will hit these companies hard.

Signs that demand may pick up
Suntech said it saw improving conditions in three emerging solar markets: the United States, China, and India. China instituted a feed-in tariff earlier this year, and lower costs for installations should drive demand in the United States and India.

Foolish bottom line
As I said earlier this week, you can see good and bad signs in the solar industry depending on your perspective. Not all manufacturers will survive, considering that many are reporting massive losses, but that will be good for the stronger companies that survive.

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