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China Sunergy, one of a growing number of solar cell manufacturers, may have seen sales and shipments increase over 100 percent year-on-year but was unable to a make a profit in its most recent quarter having been hit by a series of factors that could easily affect others in the market in the coming months.

China Sunergy has seen selling prices fall due to increased competition, especially in its main market in China while being hit by higher wafer prices due to the continued tight supply of polysilicon.

The company noted that in Q2, wafer costs reached $2.35 per watt compared to $2.23 per watt in the first quarter. Wafer costs per watt as a percentage of total production costs per watt increased from 87.8 percent to 88.4 percent.

Polysilicon shortages could also be causing a quality issue or off-spec occurrence, China Sunergy noted, as it failed to meet wafer specification targets for customers, forcing a reduction in selling prices.

The company has also entered into three recent supply contracts with LDK Solar, Konca Solar Cell and Changzhou Xiandai Communications Optic Fiber for a net supply of a total of approximately 11.9 million monocrystalline 125mm and 4.4 million multicrystalline 156mm wafers, respectively, for the second half of 2007 and 2008.

Production expansion has been curtailed for the time being putting further pressure on achieving profitability.

The company has also been hit by increased R&D expenditures as it attempts to move improved P-type and N-type cell technology into production.

Recent changes in management may well have been disruptive, and the announcement of the departure of its CFO at the same time as its quarterly financial reporting took place highlights the difficulties solar manufacturers face regardless of the overall boom in the business.