Foxconn & GCL together in China
The world’s biggest solar wafer producer GCL has tied up with electronic OEM giant Foxconn to build the largest solar power plant in China. GCL is going to supply solar wafers which will be processed by Foxconn to solar cells and assembled into solar PV panels. Around 1 million panels will be used to build this project. Note there have been rumors for a number of years about Foxonn entering into the solar panel industry. This is the first formal step of Foxconn which employs hundreds of thousands of Chinese in giant factories in China entering the solar industry. Note the big Chinese solar panel producers are already neck deep in trouble due to the following problems:
a) USA duties on Chinese solar panel imports and possible European and Indian retaliation
b) Massive oversupply of solar panels in the global market
c) Higher costs than prices of solar modules implying continued losses
d) No end in sight for falling trend of solar panel prices
e) Local Chinese governments keep supporting bankrupt Chinese companies.
If Europe finds the Chinese solar module manufacturers guilty and imposes special duties to protect the European solar industry, then the struggling Chinese solar panel makers like Suntech, LDK which have huge debt burdens and losses might shut down completely. Already there are rumors that LDK has been taken over unofficially by 3 state owned corporations as it continues to bleed money with no hope for revival anytime soon.
Europe accounts for almost 75% of the world’s demand of solar panels and has been instrumental in the growth of the Chinese solar industry. Note China accounts for less than 10% of the demand, while it supplies almost 60-70% of the global supply of solar panels. While the US was a small market comparatively, Europe is a huge market and the loss of this market will sound the death knell of the biggest Chinese companies.
Already most of the Tier 2 Chinese solar panel makers have shut down along-with the biggest European/US companies like Q-Cells, Solyndra etc.
Foxconn to invest $2.5 billion to set up 5 GW Solar Panel Capacity
The last thing that these companies needed was the entry of giant Foxconn with its expertise in manufacturing high volume low cost electronics. Note Hon Hai which is Foxconn’s parent company was trying to enter solar by buying up E-Ton but the deal did not go through. Buying up a stake in Japan’s largest solar panel producer Sharp also got cancelled. Note Foxconn is very well connected with the Chinese government which is essential in getting cheap capital and land besides winning large solar farm projects from Chinese state owned Big 5 utilities. Counties across China are falling over each other trying to attract Foxconn to set up manufacturing facilities. The company has set up base in Funing in Jiangu province which is home to GCL’s chairman.
China Daily
It is rare for the world’s biggest contract manufacturer, Foxconn, to pick a county as its production base. But Funing, which is not considered a star county even within the rich Jiangsu province, succeeded in persuading Terry Gou, chairman of Foxconn’s owner Hong Hai Precision Industry Co Ltd, to set up the company’s solar cells production base in the county.
Foxconn aims to build its Funing plant into a world class photovoltaic (PV) base, hoping to claim one third of the global market in three years.
The project, with an expected total investment of $2.5 billion, sets the short term capacity goal for PV cell at 5GW and the long term goal at 10GW, according to Funing county. The construction of the plant began on Dec 15, 2011, only three months after the agreement was signed on Sept 17. The first phase of the project is expected operate July this year and construction of the second phase will begin in August.
The county has already sent more than 600 people to Kunshan, Foxconn’s production base near Shanghai, for training, and they will immediately begin work as soon as the plant opens.
The companies will share revenue from selling electricity to the government utility at the 310-megawatt plant which will use GCL’s solar cells to be assembled by Foxconn, Shu Hua, executive president of Hong Kong-listed GCL told Bloomberg News yesterday. He declined to give the investment amount or revenue split for the facility, which will be fully operational during the first half of next year.
Total budget for the plant, in Shanxi’s Datong region, was initially based on a cost of 10 yuan ($1.58) per watt, which has since dropped to about 9 yuan, Shu said. The venture helps Foxconn founder Terry Gou move toward his goal of boosting investment in alternative energy, and GCL-Poly secures a customer amid declining prices and its first loss since 2009.
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