Funny how quickly trends can flip-flop. Last year, solar power was all the rage and solar wafers were worth their weight in bottom-line profits. SunPower
Fast-forward to the Great Panic of 2008, in which worldwide infrastructure investments crashed and burned on a lack of investment capital, leading to an oversupply and resulting price reduction. That event seemed to hit solar investors much harder than traditional chip chasers: Intel and TI have both rebounded to where they were late last September, while the solar stocks are still licking their wounds.
And then there's MEMC Electronic Materials
Sales jumped 32% from the first quarter, landing at $283 million. Still, that's only about half of the year-ago revenue stream. The good news here is the company’s report of "significantly higher wafer volumes for semiconductor applications," while prices dropped across the board.
Last year, the raucous solar industry supported a 53% gross margin; now, that metric has recovered from a heart-stopping 9.2% last quarter to a slightly healthier 12.3%. To put that depressing trend into perspective, the notoriously low-margin grocery store industry has averaged gross margins in the low 20s over the last five years. Single-digit gross takes are no way to make a healthy living.
MEMC's saving grace is its rock-solid balance sheet. Its $1.3 billion of cash equivalents and investments generated enough interest to push a red-ink operating margin back into the black on the bottom line. The company held on to a big chunk of change during the fat years rather than sinking it all into more manufacturing capacity. That strategy is paying dividends today, while MEMC waits for the solar power trend to reignite.
And of course, the semiconductor segment is doing its part again. MEMC's chip-wafer factories ran at a measly 30% of full capacity in the first quarter, but are now up to over 60% utilization again. Two of MEMC's biggest wafer customers -- Taiwanese chip foundries Taiwan Semiconductor Manufacturing
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Fool contributor Anders Bylund owns shares in Taiwan Semi, but he holds no other position in any of the companies discussed here. You can check out Anders' holdings or a concise bio if you like, and The Motley Fool is investors writing for investors.
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