Riding a 30-year Wave of Growth
Between 2003 and 2006 Motech Solar maintained annual growth of 70 to 80 percent. This year it is poised to join the ranks of the world's top five solar cell suppliers. How bright is solar's future?
Riding a 30-year Wave of GrowthBy Ching-Hsuan Huang
From CommonWealth Magazine (vol. 369 )
Compared to major semiconductor and display panel companies, recording turnover in the hundreds of billions of NT dollars, Motech Solar’s sales of NT$8.2 billion last year were insignificant. Yet the company already ranks seventh in the world among solar cell companies and is poised to break into the top five this year.
In late 2005 Business Week magazine named Motech one of Asia’s hottest growth companies, the only Taiwanese company to make the list.
Between 2003 and 2006 Motech recorded annual sales growth of 70 to 80 percent. Expected to continue that upward arc this year, Motech is the very definition of a hot growth company.
Over the recent Chinese New Year holiday, Motech Solar CEO Dr. Simon Tsuo and younger brother Dr. York Tsuo, founder of US-based upstream supplier AE Polysilicon, paid a visit to solar power industry heavyweight Dr. Alf Bjorseth, founder of REC, one of the world’s top six silicon suppliers. During their meeting, York Tsuo, a bit unsure, asked Bjorseth for his outlook on the future development of the solar industry, to which he replied, “Based on my experience, the solar industry has 30 good years ahead of it.” In Taiwan alone, in addition to the aggressive moves of Motech, E-Ton Solar Tech, and Delta, major semiconductor names like UMC, Mosul, and AUO have been investing and planning to set up their own solar cell divisions.
Everyone seems to be getting a foot in the door due to both the high demand and the low entry threshold. “Because of a dearth in upstream material supplies, anyone (meaning midstream and downstream) with a production line that can get their hands on materials can produce solar cells. And anyone can make money. It’s just a question of what kind of margins they make,” relates Simon Tsuo. Yet he cautions that it is not as simple as it looks. “A lot of investors look at it and say, ‘Whoa, they’re already turning a profit in just a year,’ thinking it’s some kind of magic and that solar is a money-making venture no matter what.”
Motech relies not on sorcery but cost and profit margins. From midstream and upstream silicon wafers to solar cells, at 30 percent margins Motech wields an advantage over other top global companies.
Weeding Out on the Horizon
Chung-Wen Lan, National Taiwan University professor of chemical engineering and director of the Photovoltaics Technology Center at the Industrial Technology Research Institute (ITRI), offers: “The main objective of technological development in the solar industry is reducing cost.” With 18 years of technical experience at the U.S. National Renewable Energy Laboratory in Colorado and in Taiwan’s manufacturing sector, Simon Tsuo is a pro at costing down, helping Motech economize faster than others in the industry.
However, with the market expected to return to normal in two to three years, upstream raw material supplies will no longer pose a problem, triggering a price drop of at least 50 percent in solar cells. This will in turn weed out a number of players, and not just anyone will be able to keep profiting from the movement to fight global warming.
The solar industry chain forms a pyramid, where the higher upstream a firm sits, the greater their dominion over the industry and the higher their margins. Consequently, vertical integration is the key to future success, “because it’s going to end up in a cost competition,” says Simon Tsuo.
Motech Solar has been quietly working on vertical integration for some time now.
Last year, Motech invested in AE Polysilicon at the top of the solar upstream supply chain, securing stable material supply with a 12 percent stake. In addition, the company announced in March the establishment of a new company in Suzhou to expand production capacity of its crystal growth and silicon wafer fabrication operations, both of which have been in development for two years.
If everything goes the way Motech Solar chairman Cheng Fu-tien expects it to, by the time vertical integration is completed around three years from now, Motech will be gunning for a position among the world’s top three solar companies.
Translated from the Chinese by David Toman
Chinese Version: 搭上三十年的太陽能熱潮