Canadian Solar cites defective production tools as reason for lowered margin guidance

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Despite an expected higher level of solar module shipments, Canadian Solar has been forced to reduce its previously issued gross margin guidance for the fourth quarter because of what the company describes as “higher processing costs and lower yields caused by certain defective production equipment” at its new ingot and wafer production facilities in Luoyang, China.  The vertically integrated solar manufacturer says that it “is in the process of correcting these issues with the equipment vendor.”

Canadian Solar also blames the lower gross margins, now expected to be in the mid-teens, on “the clearing and revaluing of certain aged solar cell inventory, partly caused by the reduction of module ASP in December 2009.”

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Quarterly shipments will be in the 128-138MW range, according to the company, slightly better than previous guidance.

The unnamed tool vendor in question is evidently a locally based concern, not GT Solar or any of Canadian Solar’s other international equipment suppliers.

“The defective heating design of a domestic multifurnace supplier caused high processing cost and low yield in Q4,” according to a Feb. 19 note issued by Jesse Pichel of PiperJaffray. “[Canadian Solar] has since shut down the defective furnaces. A solution has been found and the vendor is working to fix all the furnaces.”

Jeff Nestel-Patt, spokesman for GT Solar, told PV Tech that “Canadian Solar runs a mixed equipment environment in their ingot and wafer operations. We have determined that the problem does not come from the GT Solar DSS furnaces, but rather a local supplier.

“Canadian Solar is happy with the performance and quality of our furnaces,” he added. “In fact, we have received a new order for our DSS 450 furnaces that will be delivered in the April timeframe.”

Canadian Solar will hold its quarterly conference call March 3 to discuss its financial results for the fourth quarter and business outlook for the coming year.

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