The solar market is going through some major growing pains right now. Markets like the U.S. and Japan are booming, while former powerhouses Germany and Italy are struggling. Meanwhile, manufacturers are struggling with oversupply, low prices, and a shakeout that will leave many competitors bankrupt.
In an effort to keep investors constantly informed I've provided the biggest news over the past week in solar.
More trouble for solar
Suntech Power (STP +0.00%) announced last week that it would shut down production at two of three production shifts in its Arizona facility. The full 45 MW annual capacity will be cut to 15 MW as a result.
This isn't the first rationalization of capacity we've seen in solar. SunPower (SPWR +0.00%) and First Solar (FSLR +1.24%) have both shut down some global capacity due to weak demand. I think we'll see more of this going forward, especially from underutilized Chinese suppliers who will begin seeing funding cut off.
Struggling solar manufacturer LDK Solar (NYSE: LDK) also announced this week that a customer will pay $37 million to get out of a 10-year wafer supply agreement. LDK has struggled with declining sales and deteriorating margins – this is just another sign that the company is on its deathbed.
Keep trading alive
Speaking of troubled solar firms, a number of Chinese solar manufacturers have now fallen below $1 per share, a level that will get you delisted from a stock exchange.
LDK Solar informed shareholders that it received notification from the New York Stock Exchange that it has to bring its share price above $1 within six months of Nov. 5, 2012, or it will be delisted.
JA Solar (NASDAQ: JASO) said it will change the ratio of American Depositary Shares to ordinary shares to 5:1 as of the close on Dec. 10, 2012. This is essentially the same as a 5:1 reverse split. Shareholders will have one-fifth as many shares and the price of the stock should go up about five times after the conversion.
Many others will need to make similar moves or they will be delisted in the U.S.
Acquisition news
GT Advanced Technology (NASDAQ: GTAT) announced that it would purchase the assets of Twin Creeks Technologies, a maker of silicon equipment, for $10 million plus potential royalties. The technology is supposed to be able to produce solar wafers that are 20-30 microns thick, far thinner than a typical 150 micron wafer. At 20 microns thick you could stack 1,270 wafers together to get a one-inch-thick stack.
GT will expand potential usage beyond solar to its sapphire technology as well. The company has its eyes on cover and touch screen devices as a big growth space in the future.
This is a cool technology for GT to acquire; at a cost of $10 million the risk is very low. For the time being, GT is waiting for equipment to enter a new phase of high efficiency, which is expected to bring its next bump in demand. If HiCz can be combined with thin-silicon technology we could see a huge drop in the price of solar because of GT's equipment.
Solar jobs for everyone
Solar manufacturing in the U.S. has declined as Chinese firms have expanded production, but that doesn't mean solar employment isn't exploding in the U.S. The Solar Foundation's annual census found that the number of solar jobs increased 13.2% in 2012 to 119,016. Installation jobs account for nearly half that number and rose 17.5% this year, compared to a 21.6% decline in manufacturing jobs.
Foolish bottom line
Solar is growing at a rapid pace in sustainable markets like the U.S. and Japan, and investors need to keep an eye on the winners in these markets. Two of the largest installers in the U.S. are SunPower and First Solar, also two of the strongest manufacturers from a financial perspective.
