China Sunergy shifting production priority to ‘Quasar’ cell technology

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In a move that could herald a wave of tier-1 China-based PV manufacturers switching priority away from capacity expansions to focus on the ramp of high-efficiency cells and modules, China Sunergy (CSUN) is shifting capital spending to its Quasar selective emitter monocrystalline-based cell technology. CSUN management gave clear plans during a conference call to discuss third-quarter results regarding the ramp of the Quasar technology which will replace a significant amount of existing but idled capacity by the end of 2012.

CSUN’s CEO Stephen Zhifang Cai highlighted in the call that not only did the overcapacity issue continue at the production level but it is prevalent throughout the supply chain. This has resulted in CSUN running cell production at only 60% utilization rates, while module production was down to 30% utilization, following actions that were taken to prevent inventory build in September, including US$26.8 million of inventory provision in the last quarter. A reorganization and reduction in head count was also being initiated, Cai noted.

However, Cai also explained that the company had instigated a significant increase in capital expenditures for the fourth quarter – to the tune of over US$50 million – that would primarily be used to ramp its Quasar cell technology to 140MW in the first quarter of 2012. The company is also planning to shift around 25% of its modules using the high-efficiency cells.

CSUN has spent US$13.8 million on CapEx in the third quarter, primarily for previously planned capacity expansions.

“In October [2011] we made our first commercial sale of Quasar modules to our customer in Switzerland and as first of many more to come,” commented Cai in the conference call. “Our new Quasar cell production line is consistently trending out cells with an average efficiency rate of 18.6%.

The Swiss customer mentioned by Cai was Sunergic S.A., to whom CSUN had delivered 0.30MW of the Quasar modules in mid-October, 2011.

CSUN had previously noted in the first quarter of 2011 that its Quasar cell pilot line had entered into production in May and had  demonstrated a highest efficiency rate of 18.58% and a batch average of 18.35%.

“Our capacity for Quasar cell production is expected to reach 140 megawatts in the first quarter of the next year. And that we hope that next year about a quarter of our production will be of this high-tech cell. Most of the capacity expansion in that near future will be for Quasar cells, but we are slowing down our capacity expansion outside of [moduling] for the time being,” added Cai.

Commenting to PV-Tech on CSUN’s technology shift, Finlay Colville, analyst at Solarbuzz said, “Sunergy’s announcement to expand Quasar cell production lines represents an early indicator of a technology-buy cycle, albeit very much customer and process-flow specific. Ramping Quasar capacity in excess of 100MW during first-half 2012 and targeting 25% of module production next year to come from Quasar cells does come however with high levels of risk.”

However, the risks are worth taking, according to CSUN’s CEO. High-performance modules are a known way to eke-out better margins, especially when margins on standard modules with average efficiencies are almost non-existent due to the overcapacity in the volume end of the market.

“Although, our short-term financial results continue to be poor, we believe we are doing all the right things to succeed in the long run,” noted Cai in his prepared remarks during the call. He added that, “minimizing cost and our expenses, cutting output, conserving cash and developing our Quasar technology, so that what we sell is clearly differentiated from the competition.”

“Gross profit on the Quasar modules could be above $0.04 higher per watt, compared to our current modules. This technological advantage is hugely important to improving our gross margin in the medium and the long-term,” Cai said.

Colville however, remained cautious, noting that, “The process flow for Quasar cells does involve several changes from the standard cell lines and while Sunergy may indeed be seen as the trend-setters in altering front-end cell equipment in years to come, they will have to fast-track mass production optimization in-house very quickly.”

The market analyst also highlighted that Cai’s comments on gaining back lost margin by shifting production to Quasar-based modules was all about generating a sufficient delta on ASPs using Quasar modules to absorb the higher CapEx (process tool throughput limited today) and manufacturing costs.

Such criteria would therefore ultimately determine whether Quasar is more successful than Sunergy’s previous efforts to roll out selective emitter technology to the market.

“The higher power panels may be essential simply to win business, rather than win at a price premium or Quasar modules may be used as a closing strategy to help shift lower power modules from inventory,” concluded Colville.

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