Applied Materials v Oerlikon Solar - with a twist!

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Applied Materials’ entry to the solar equipment manufacturing market just over a year ago is starting to make that market very interesting to watch and also to write about! 

Sure, we have covered polysilicon supply constraints and moves by semiconductor equipment suppliers to enter the solar market. But these past ventures have been more reports from a sideshow point of view rather than being the main focus of our attention.

That may be changing.

No, we are not shifting our focus, but we have decided to take more notice of what is going on in the solar manufacturing world and how this relates to the companies we have covered for over 10 years.

Some readers have already noticed that we have been covering certain news elements within the solar manufacturing realm for the last 12 months. Many of these news stories have proved to be very popular with visitors to this website and that, more than anything, has prompted a little bit of additional burden on the team here.

That said, it is very interesting to observe how the major thin film equipment suppliers to the solar manufacturing industry are positioning themselves for the press and potential customers.

For those of you still getting to grips with solar technology terminology, company names and major players, please bear with me, but at the grass roots of this industry comes the equipment to make this all happen—so I will start there!

Nothing to do with wafers

The thin film side of solar is based on glass panels, with lower conversion capability than silicon-based wafers but with the lowest cost-per-watt advantage. This is the market that is growing at a GAGR of 50 percent and is expected to do so from 2006 through 2009 as long as the market research firms can be believed!

The major drive here is that thin film looks the most promising to reach grid parity with conventional fossil fuel energy generation.

Though current forecasts project that this will not happen before 2014, and with a $1.4/W price tag, the race is on to meet or beat this parity. When that happens all hell should break loose and thin film solar should be the hottest product on the planet!

Oh! I forgot, what I meant to say was the hottest product just behind the 15th generation iPhone of course!

Should ‘real’ parity be reached, then it looks highly likely that solar could seriously become the cheapest current known energy source, following some Moore’s Law direction that we all know of in the semiconductor industry.

However, before we get to that point, we have many roads to go down as far as technology innovations, manufacturing efficiencies and very importantly scale are concerned.

Is bigger actually better?

Before Applied Materials got into the act, the manufacturing standard for thin film solar panels was 1.4m2 units.

Oerlikon Solar, for instance, has been offering turnkey thin film production lines for a couple of years and when Applied muscled in, I for one expected them to take on the incumbents at the 1.4m2 size.

Instead, it would seem that Applied is moving in to significantly shift the $ cost per watt to another level by focusing on 5.7m2 glass panels. These ultra-large substrates, sized at 2.2m x 2.6m, are four times bigger than the current standard thin film size.

The 1.4m2 panels use more mature technology, are easier to handle in both production and installation and would seem to hold the sweet spot in ‘versatility.’

Oerlikon Solar has recently introduced its new micromorph tandem technology, which has the potential for efficiencies of over 10 percent above current processes, ensuring the pace of innovation continues.

This technology has already been sold to Inventux Technologies and others are planning to upgrade existing thin film plants to the new technology.

The turnkey manufacturing aspect has also recently been boosted with the introduction of
Oerlikon Solar’s TCO (transparent conductive oxide) 1200 coating step that fully integrates into the production line flow.

All of this has given Oerlikon the ability to position itself as the only ‘field proven’ and ‘end-to-end’ turnkey equipment and process solutions supplier in the thin film solar field.

Applied Materials has only recently put all the pieces of the puzzle together with regard to its larger panel size offering, which wasn’t as easy as it sounds.

It has been widely known that the larger panel size faces key technical as well as market logic obstacles to overcome before it could potentially replace the smaller size from a volume/market share perspective.

Some of the technical issues surround the deposition quality of thin films on the larger substrates, restricting efficiencies and raising costs. Another is in relation to the active area under laser processing, which induces larger line widths ending up with a smaller active region and poorer conversion efficiencies.

The easiest area to understand the problem is from an installation perspective of the finished module. Heavier lifting and handling equipment and stronger fixing systems are required, pushing up the final installation costs as well as restricting building location.

That said, it is impressive that Applied Materials has gained instant attraction with multiple contracts from brand new customers in Europe and Asia.

Applied is claiming that its ‘SunFab Thin Film Line’ can be configured with single or
tandem junction technology, resulting in one line able to generate 75 megawatts per annum. Of course, Applied is not going to be just an equipment supplier, rather they will support installation and ramp and everything that goes with service and support.

Applied is therefore positioning itself as the lowest cost-per-watt turnkey supplier via the larger substrates. That was what Oerlikon claimed and in many respects still can as Applied will not be supplying such systems until next year and only then will real world results show whether they have achieved these goals!

What is a little surprising in this newly created battle is that market researchers are still projecting the biggest growth to come from solar wafers rather than thin film. The larger substrate size was only muted and now we have serious market opportunities with dollars already laid down!

Two recent pieces of news may well indicate another twist to the leadership market positioning already at play between Applied and Oerlikon.

Firstly, we had the news that 20-year semiconductor veteran Jeannine Sargent has been appointment as CEO for Oerlikon Solar.  This is at a time when Oerlikon has decided to encompass all solar-related activities under the Oerlikon Solar title when previously it was a bit of a mixed bag!

Secondly, the Financial Times ran a story, saying that an Oerlikon executive would not object to the Solar group being acquired by someone, as the company wanted to concentrate on its ‘core activities.’

I have heard that so many times in this industry that now it’s like a record stuck in a groove!

So immediately I am suspicious of the fact that Oerlikon made the reorganization to better align the tools and technology under one easier-to-package and -sell entity, and I am also suspicious that with Sargent’s knowledge of semiconductor equipment companies and its executives that an exit strategy is in the making.

Don’t forget that this was leaked to the FT by ‘some’ exec or senior manager, and now it all starts to make sense!

Well maybe, maybe not.

I still get the feeling that Oerlikon Solar is a core activity and getting more so each year as it is profitable and sales are climbing very well this year. The potential in solar is so vast that it begs the question: why would it not be a core growth entity within the bigger group?

Reports project Oerlikon Solar sales could top 600 million SFR in 2008 and could support 1.0 billion with current capacity.  

A key doubt, though, is the might of Applied Materials.

The classic example was when Applied entered the metrology market after acquiring two Israeli companies. No sooner had the ink dried on the contracts than the two biggest companies in that field merged to form KLA-Tencor.

That strategy worked and Applied has not been able to dominate the core of the inspection and metrology markets.

Applied’s move into solar is following the same path after acquiring key equipment components to the tune of $1 billion, ‘give or take.’

Oerlikon could well be reading the writing on the wall correctly!

Should that happen, it would be a big disappointment, as I was looking forward to seeing how the two battle it out if solar energy parity with conventional energy sources becomes a reality sooner than projected. Do we all win then?

The Financial Times story can be viewed here:

http://www.ft.com/cms/

A Thomson Financial story can be viewed here:

http://www.abcmoney.co.uk/news/052007129215.htm

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