JA Solar in ‘made to order’ mode: capacity constrained on SECIUM cells

Share on facebook
Share on twitter
Share on linkedin
Share on reddit
Share on email

Cost savings, technology focus and inventory control were key takeaways from JA Solar’s third quarter 2011 conference call, held this week. In line with piers, rapid price declines and weaker than expected demand impacting revenue and margins thus leading to inventory write downs of US$21.7 million. JA Solar reported shipments (cell and modules combined) of 445MW, which was at the low end of guidance of 450MW, and represented an increase of 11% over the prior quarter. Revenue was reported at US$388 million, a decrease of 7.3% compared to the second quarter of 2011. JA Solar reported an operating loss of US$43.3 million compared with operating loss of US$31.7 million in the second quarter. Gross margin was negative 4.3% in the third quarter compared with negative 2.7% in the second quarter.

Shifting business

Peng Fang, CEO of JA Solar, noted in the conference call to discuss third quarter results that the company had a clear shift from customers wanting higher efficiency modules due to the better return on investment, especially since feed-in tariffs are moving downwards in key markets such as Germany. Fang partly put the increased shipments in the quarter down to this technology shift.

However, Fang also noted the shift in customer selection requirements, highlighting that, “Customers want to work with suppliers who can offer bankability, demonstrated product quality, a strong cash position and the healthy balance sheet.”

Despite this, JA Solar guided lower shipments for the fourth quarter of between 310MW and 330MW and revised downwards, full-year shipments to approximately 1.6GW, compared to previous guidance of 1.8GW.

Geographic breakdown of third quarter revenue was approximately 57% China and 43% international, not surprisingly suggesting that lower utilization rates at PV module manufacturers based in China were falling, reducing demand as approximately 67% of product mix in the second quarter had been for solar cells and 6% solar cell tolling.

There is also a shift in product mix shipments taking place. JA Solar noted that module shipments made up 27% of shipments in the second quarter of 2011, yet module shipments would be slightly higher than 35% of product shipment mix in the fourth quarter. This would increase to more than 50% in 2012, noted Fang in the call.

Despite the looming trade issues in the US, the company noted significant volume demand for modules from the US. Although management were reluctant to guide shipment levels in the first quarter of 2012, they hinted that the seasonally weak first quarter, due to European winter weather may have less of an impact as the US market was strong and not seasonal.

Manufacturing shift

Much attention in the call was given over to manufacturing and technology issues. Understandably, cost reduction strategies were discussed in detail but a key point made by management was the decision to produce to order, given the focus on inventory reduction and manufacturing cost containment. This was reflected in the shipment figures for the fourth quarter being close to actual production levels.

JA Solar said that inventory levels at the end of Q3 were US$190.6 million, a fall of US$63.7 million compared to Q2 2011. Having reduced inventory levels by approximately 25% from the previous quarter, JA Solar management said that inventory levels would come down in terms of megawatts and also dollar level, but wouldn’t be that significant in Q4.

With inventory control and made to order approach capacity expansions like the majority of its rivals have been curbed, impacting capital spending plans for 2012.

Management noted that CapEx and capacity planning hadn’t been nailed-down yet for next year but guided that there would not be any additional cell or wafer capacity added. Spending would be on equipment maintenance and certain upgrades hinting towards some module capacity spend, due to customer demand for high-performance modules, though spending in this area is significantly less than in wafer or cell areas. Overall, management said CapEx would much less than this year.

JA Solar spent approximately US$91 million on CapEx in Q3, primarily to finish off capacity expansion undertaken since the beginning of the year for new higher efficiency products.

With the shift in demand towards higher performing products, JA Solar said it was capacity constrained in this area for its SECIUM and Maple products. Approximately 20% of shipments are expected to be SECIUM or Maple products in Q4. Limited quasi-mono wafer volumes and new cell lines ramping were said to be the key reasons behind the current capacity constraints.. 

“For the fourth quarter the high efficiency cells will continuously decrease in the price, in the cost. So, probably we will be like 5% decrease. However, the volume right now for the high efficiency is very small. So, the major part of next year where we are ramping up the high efficiency product. In the mean time, we will reduce the cost significantly. So, eventually, we're mostly high-efficiency product that has the similar cost,” commented Fang.

JA Solar expects total module production cost to decline between 25 to 30% versus its total module production cost in Q3. But cost reductions would seem to be slowing as management guided total module cost would decline a further 5 to 8% from Q4 levels, while cell processing costs would go down a further 10 to 20% versus current levels. Module costs were said to come down approximately 10 to 15% by mid next year. Standard module products costs would be down to US$0.80 to US$0.85 by mid-Q4.

With a focus on process optimization, yield and further cost reductions on its high-efficiency lines, JA Solar said it had already made significant progress on improving cell efficiencies. Management noted in the call that its multi-crystalline solar cell efficiency reached a record average of 17%, up from an average of 16.8% previously. In particular, through additional process improvements and breakthroughs, its high efficiency Maple solar cell technology average efficiency now stood at 17.9%, with a peak efficiency in the 18% range.

The company said it would now be able to provide a module product in the 245W to 250W range. With additional optimization, it expects to produce modules in the 260W and 255W power range in volume by Q2 2012. 

In R&D, the company noted it was developing new technologies that included a roadmap to reach 30% cell efficiency, utilizing a p-type wafer. 

19 July 2022
As New South Wales is gearing up to become a renewable energy superpower, an exciting clean energy event is coming to Sydney. Energy Next is a free-to-attend industry event focusing on the latest renewable energy and energy management technologies, which will be held from 19-20 July 2022 at the ICC Sydney in Darling Harbour. Organised by the same people behind the country’s largest clean energy event, All-Energy Australia, Energy Next will bring a quality exhibition and technical session series to NSW. Energy Next will also host the Clean Energy Council’s Solar Masterclass with a program developed for solar designers and installers. Across two days, Energy Next will provide an extensive exhibition, workshops and networking opportunities for those working in the renewable energy industry to meet with leading suppliers, discover the latest technologies and gain an understanding of how to successfully launch new clean energy projects.
21 July 2022
The rooftop solar PV market is set for significant growth, but installers are being held back by complicated design software that is slow, cumbersome and fails to take into account rooftop shading, module compatibility and energy storage. Huawei’s SmartDesign 2.0 is a web-based PV and energy storage system tool that promises to solve all of those issues, and much more. This webinar will provide a live demonstration of the SmartDeisgn 2.0 tool, showing how installers can quickly complete Huawei PV & ESS system designs and assemble a professional report with 3D site view for potential customers, streamlining the design and sales service.
23 August 2022
Intersolar South America, South America’s largest exhibition and conference for the solar industry, takes place at the Expo Center Norte in São Paulo, Brazil, on August 23–25, 2022, and has a focus on the areas of photovoltaics, PV production and solar thermal technologies. At the accompanying Intersolar South America Conference, renowned experts shed light on hot topics in the solar industry. In 2021 – despite the Covid-19 pandemic – Intersolar South America welcomed more than 28,000 visitors and over 1,000 conference attendees over 3 days. 200+ providers showcased their products. Combining local and international expertise, Intersolar South America brings together the PV and solar thermal sector to discuss the current status and strategic trends for Latin American PV markets, as well as technology innovations and new business opportunities. Overall, distributed generation is still driving momentum in the Brazilian market.
6 September 2022
Intersolar Mexico sits at the cross-section of photovoltaics, solar heating & cooling technologies, and energy storage. The event serves as the industry’s go-to source for invaluable technology trends and premier B2B contacts in the promising Mexican solar market. From September 6–8, 2022 Intersolar Mexico together with the co-located The GREEN Expo® and Aquatech Mexico will take place in Centro Citibanamex, Mexico City.
19 September 2022
RE+ 2022 is the umbrella event that includes SPI, ESI, RE+ Power, and RE+ Infrastructure. As North America's largest renewable energy event, it's a catalyst for industry innovation that's supercharging business growth in the clean energy economy.
20 September 2022
From source to generation, from grid to consumer, the boundaries of the sector are blurring and this evolution is being shaped by established players, external disruptors, innovative start-ups and the increasingly engaged end-user. Enlit Asia is the unifying brand for POWERGEN Asia and Asian Utility Week, showcases expert knowledge, innovative solutions and foresight from industry leaders, coherent with Asian strategy to achieve a smooth transition towards a low carbon energy supply. This year, Enlit Asia will be co-located with Sustainable Energy Technology Asia (SETA) & Solar & Storage Asia (SSA).

Read Next

July 4, 2022
Tongwei has become the latest upstream solar manufacturer to increase prices as the cost of raw materials continues to spiral.
July 4, 2022
Shell Overseas Investments and renewable energy company Emerging Power Inc. (EPI) have agreed to jointly develop, own, operate and maintain 1GW of utility-scale solar PV in the Philippines by 2028.
July 4, 2022
Thin-film technologies such as cadmium telluride and perovskites can markedly reduce the carbon intensity of PV compared with silicon alternatives, according to researchers at the US National Renewable Energy Laboratory (NREL).
July 4, 2022
S&P Global Commodity Insights has partnered with renewables advisory firm Pexapark to create a new power purchase agreement (PPA) benchmark.
July 4, 2022
Norwegian energy data and intelligence company TGS has acquired renewable energy asset and real-time data manager Prediktor.
July 1, 2022
Hanwha Qcells’ power plant division Q ENERGY Europe has teamed up with newly rebranded Q ENERGY France to establish umbrella company Q ENERGY Solutions SE as it seeks to deepen its ties to the European market where it has a 12GW development portfolio.

Subscribe to Newsletter

Upcoming Events

Solar Media Events
October 4, 2022
New York, USA
Solar Media Events
October 11, 2022
Virtual event