Chinese manufacturers see profits dip
Updated: 2012-09-14 11:05
By Ariel Tung in New York (China Daily)
Already reeling from weak sales and declining prices for their gear, Chinese solar-equipment makers could be driven to close, consolidate or declare bankruptcy because of tariffs imposed by the United States and possibly the European Union, industry analysts say.
Oversupply of solar modules used in electricity generation for construction projects has sparked price wars that drive down manufacturers' profit margins. The Chinese companies have also been hurt by weak sales in Europe, the biggest importer of modules, partly due to reduced energy subsidies from governments on the continent.
The European Commission, the EU's executive body, said Thursday it was opening an anti-dumping investigation on whether solar panels imported from China were produced at artificially low prices.
China's Ministry of Commerce expressed "deep regrets" over the EU decision.
"Restricting China's solar-panel products will not only hurt the interests of both the Chinese and European solar industries, it will also undermine healthy development of the global solar and clean energy sector," ministry spokesman Shen Danyang said.
Major Chinese manufacturers such as Suntech Power Holdings Co, Trina Solar Energy Co and Yingli Green Energy Holding Co have posted losses in recent quarters. Module shipments of Suntech, the world's biggest solar-panel maker by output, fell 22 percent from a year ago.
Terry Wang, chief financial officer at Changzhou-based Trina Solar, said the next few quarters will be critical.
"The prices of modules fell and that led to shrinking margins for Chinese solar-cell makers," he said. "Most Chinese companies have been losing money for at least three quarters. We don't see much improvement in demand in the near future."
Robert Petrina, managing director of Yingli's US subsidiary, said the tariffs are more of a distraction to the market than anything else.
"What we are concerned about is that the tariffs increase prices. We compete with other sources of energy, not just within the solar industry," he said.
Suntech spokesman Walker Frost said the company was able to adjust its sourcing in a way that keeps all of the products it sells in the US exempt from tariffs.
Another module maker, JinkoSolar Holding Co, plans to switch to Taiwanese-made solar panels. Sebastian Liu, the Shanghai company's head of investor relations, said it's possible Jinko will build a plant in in Malaysia, Thailand, India or the Philippines.
The anti-dumping allegations initiated by some European companies are both unfair and unfounded, and do not reflect the reality of the highly-competitive global solar industry, he said. The company believes that trade protectionism will only harm fair competition in the market, hinder the development of the entire PV industry, and hurt PV consumers.
"JinkoSolar, as one of the leading photovoltaic manufacturers in the industry, will actively cooperate with the European Commission's investigation. The company will continue expanding into emerging markets, including China, South Africa, India and Australia to alleviate possible impacts that could result from the potential trade friction," said Xiande Li, JinkoSolar's Chairman.
"JinkoSolar will keep committed to delivering the demand requested of our high -quality solar modules to the European customers in main PV markets with the good service of our local teams from our different offices in Europe and the local logistics services," added Arturo Herrero, Chief Marketing Officer.
Aaron Chew, a solar-energy industry analyst in New York, doesn't think many of today's industry leaders will exist as independent companies in five to 10 years.
"You need a company the size of [technology manufacturer] Foxconn to handle huge volume but at a minimum margin. I think the only way for them to survive is to be taken over by a manufacturing conglomerate," he said.
"If you look at the companies that are failing in China, the business model is damaged. The question is, how many of these top-tier companies are going to survive? There's no profit in Chinese solar," said Mark Bachman, an analyst with Boston-based Avian Securities LLC.
But Trina Solar's Wang remains optimistic.
"I don't think the tariffs will wipe out the entire Chinese sector," he said. "It will help some to get stronger. We can either make a direct investment or forge partnership with a local player. We are open to all options."