PV module encapsulant material supplier, STR Holdings warned that its business would be significantly impacted by an expected and imminent transition by First Solar to using an unidentified alternative supplier.
The leading thin film module manufacturer has had a long-standing material supply agreement with STR, including being recognised by First Solar in previous supplier awards. First Solar is also acknowledged by STR as being its largest customer.
STR noted that sales to First Solar in 2012 were approximately US$39 million. STR had reported Q3 2012 sales of US$23.1 million.
Robert S. Yorgensen, President & Chief Executive Officer said, “We have enjoyed a very long and prosperous relationship with First Solar. Their loyalty over the years is a testament to our value as a reliable supplier of excellent quality products and service, for which First Solar honored us with their Top Supplier Award just over a year ago We have had no claim for defective product from First Solar, nor have we had any returns, and the product we have been supplying for years has been according to specification. Unfortunately, I cannot elaborate on their decision to work with another supplier at this time, added Yorgensen.”
STR said that the transition to using a different supplier’s encapsulant material was expected to start in the first quarter of 2013.
First Solar is well known to employ a “copy smart” manufacturing methodology, enabling line by line uniformity in quality and performance and has been aggressively upgrading lines to boost module conversion efficiencies as well as lower production costs over the last 12-months.
Joseph C. Radziewicz, Vice President & Chief Financial Officer, said, “While the loss of First Solar as a customer is certainly an unfortunate development for STR, we have already taken swift action to reduce our costs, which will help to preserve our strong balance sheet as well as our options going forward.”
STR said that aside from a comprehensive cost structuring review and its appointment of UBS Investment Bank as its financial advisor in December 2012 to look at strategic business alternatives for the company after PV related sales plummeted, material production in the US would be stopped and supplies to US customers supported from plants in Spain and Malaysia.
However, full restructuring plans would be detailed at a later, unspecified date.
“On a more positive note, we have recently added three new customers in China, two of which have qualified and ordered our next-generation encapsulants,” added Yorgensen. “While this new work won’t make up for the loss of First Solar’s business in the short-term, we believe it represents very important progress toward increasing our share of the burgeoning Chinese market.”
Management had said in its Q3 2012 conference call, held last November that the company was close to securing the first supply contracts for its new EVA encapsulants, with volume ramps expected in early 2013. According to Yorgensen at the time, over 20 module manufacturers were evaluating the product.
Module manufacturers around the world have been pushing material suppliers to lower costs on the back of massive overcapacity and plummeting module ASPs.