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Suntech America’s Roger Efird talks about manufacturing in the U.S., solar supply chain, and more

19 November 2008 | By Tom Cheyney | Chip Shots

efird_suntech Suntech releases its third-quarter financial results before Wall Street opens Wednesday, yet another benchmark solar company announcement during what has been a very active and tumultuous earnings season. Three months ago, when the company's founder/chairman/CEO Zhengrong Shi looked ahead, he could not foresee the increasing turmoil in and pressure on the global financial markets and the cumulative effect on the solar sector nor the firm's plumetting share price. Market watchers will find out whether Suntech still believes it can achieve its year-end goals of reaching 1 GW in solar cell capacity, shipping 550 MW of product, and breaking the $2 billion revenue mark.

When I interviewed Roger Efird, the president of Suntech America, at Solar Power International in San Diego last month, fresh back from lunch and a "love affair with a meatloaf sandwich," his crystal ball was not functioning. But he still had some interesting comments to make about Suntech, the possibility of manufacturing in the U.S., the supply chain, and thin-film PV. As the major solar-cell and module company's announcement looms, here are some excerpts from my conversation with Roger.

On the possibility of Suntech manufacturing solar modules in the U.S. and the squeeze on smaller solar manufacturers:

Our founder and CEO said over a year ago in a speech he made in California to the IBEW (International Brotherhood of Electrical Workers union) the first public statement about manufacturing in the U.S. Basically what he said, we will do it, it's just a matter of timing, when the regulations get in place, when the market gets to be the right size, etc.

We're having thoughts now about how that might happen. We've already had discussions with about three different states. The kind of incentives that states are willing to give to attract us are more than enough to offset the costs of low cost labor in China, so those issues don't exist truly.

But I suspect there's another way that we'll end up doing it. All the analysts are saying we're going to go through consolidation over the next couple of years, due to the silicon shortage that's been in place for about three years. The larger companies that were financially strong could afford to put down $100 million and spread it around with alot of these silicon startups and get favorable contract terms. All the new silicon that is now coming online 2-½ years later, it's already purchased, every ounce of it has been bought at good prices.

The smaller guys in this industry who didn't have the money to put up front, they didn't get any of those contracts. These guys are generally the smaller companies of 100 MW or less in capacity, so the theory is that they will not survive, because as the supplies come up and pricing starts moving toward grid parity, as we start moving toward grid parity, there are some companies that aren't going to be able to do that. So I suspect that our U.S. factory could be one that closes down one day, and opens up as Suntech the next.

The idea that China would export jobs to the U.S. on the surface seems kind of silly, but think about this: the only thing about a solar module that is lightweight is the solar cell. Everything else is the glass, the aluminum, etc. The cost of a 40-foot container of goods, shipping from China to Long Beach, CA, has gone up 50% in the last 5 or 6 months. Shipping costs are skyrocketing.

So it makes sense to air-freight pallet loads of solar cells to a regional factory to assemble modules locally than it is to make 'em all in a central location. It's not just us looking at that, every manufacturer is looking at that. It's the norm when you look at the future of manufacturing....

On the solar manufacturing supply chain:

There's always the possibility of additional shortages. It might not be silicon. The industry is experiencing right now somewhat of a shortage of backsheet material. There can be constraints that don't have anything to do with silicon. But those are constraints that can be fixed in six months, not four years, like silicon.

And what's the future for the silicon guys? Historically, it's been feast or famine with them. We chose not to vertically integrate and get into the silicon business. We did choose to make some investments and take some minority interests and make some advance payments on some investments. I think looking out in the long run it's not something that we're interested in....

On Suntech's thin-film PV and the prospects for thin film in general:

We have a 50-MW factory, for tandem-junction amorphous silicon, that's just been completed in Shanghai. Our founder is a research scientist with 16 years experience in thin film. He wasn't a crystalline guy. So we have interest in thin film and we are proceeding. In early 2009, we should be able to start shipping sample quantities to some customers.

The next couple of years for thin film are going to be extremely interesting. Thin film has been around a long time. Almost every technology that's there today was there 25 years ago when I got into the business. The only thing I hear now that I never heard 25 years ago was the word "nano." I don't even know what nano is, and how it applies, I don't know that either.

With the silicon shortage over the past few years, thin film has had an opportunity to plant a lot of seeds, in alot of places, in alot of markets around the world. The thing that I will be watching is, as the silicon supply gets better and traditional modules get better, will thin film hold its market share, lose market share, or increase market share? That's the real question.

I've always had a back-of-the-envelope thing that I use when when I compare crystalline to thin film for, let's say, a solar farm. If we're looking at a selling price of $1.50 a watt of the thin film and let's say $3.20 for crystalline, that's about where they're even.

With thin film, it's not as efficient, so because it's pretty inefficient, you really can't use a tracker, since trackers cost too much money to use with thin films, because the economics of the project just don't work if you put 'em on a tracker, so they're gonna be fixed on the ground. With crystalline product that is close to twice as efficient, or at least 70% more efficient, using a tracker to track the sun, the extra cost of that tracker is worth it.

So when you're finished installing the systems, if your net price on the crystalline module is $3.20 and the thin film module is $1.50, you're about even. Your return on investment for that solar farm is going to be about the same. Assuming that everything is going to last the same length of time, and you're going to get through the 20-year program, theoretically you should be about the same. Three years from now we will have some thin-film solar farms that have been out in the sun for seven, eight years, and the data from those farms are either going to give us more confidence about performance over long periods of time or not going to give us confidence.