Why Sharp is being forced to abandon its Japanese Solar Factories

Sharp which was the biggest solar company in 2010 in terms of revenues is being finally forced to move its production away from Japan to low cost countries in Asia.Note the relentless cut in prices of solar panels by Chinese solar panel companies has made life impossible for high cost panel companies in Europe and Japan.While US Companies like Sunpower and First Solar always had the majority of their production in low cost locales like Malaysia and Philipines,European solar firms had also started shifting their production overseas with Q-Cells moving to Malaysia and REC  to Singapore.The current glut in solar panels has let to massive bloodletting in the solar industry with some established companies like Evergreen,ENER on the verge of bankruptcy.The sharp cost improvements and increased supply of crystalline silicon solar panels is set about to bring radical changes in the solar industry after a massive boom in 2010.The Second Wave of Thin Film Technology Bankruptcies has already started and we can expect more of that soon.Most of the production bases in Europe should be shuttered as well as costs have become higher than the selling prices.PV Crystalox and REC are already in a lot of trouble,cutting production and forecasting losses in the second half of 2011.

Sharp which has managed till now to survive with its high costs in Japan factories too is now facing the pressure.Japanese market is highly protectionist with majority of the demand going to  Japanese zaibatsus.The Japanese government is helping Solar Companies with subsidies/diplomacy to sell Japanese solar panels in Asia and Africa.Sharp now is being forced to move off the islands of  Japan as the high cost of labor and currency makes it uncompetitive in the fiercely cutthroat solar panel global market.Sharp has a giant thin film silicon factory in Sakai and cell/module operations spread out in Japan.It will now manufacture more of its cells/modules overseas to cut down on the cost which are much higher than the Chinese.Note while Sharp is still a long way in suffering the fate of the likes of Evergreen Solar,there is no doubt that it is under huge pressure.Read my earlier post on Sharp’s position in the solar industry

Will Sharp be Decimated like the Europeans by Chinese Solar Panel Companies

Sharp,the Japanese Electronics Giant was the largest solar company in the world by revenues in 2009,however it risks losing its top 5 place in 2011 as Chinese companies ramp up capacity at a much higher rate.Sharp has been shielded from the fierce competition in the solar panel market as the domestic Japanese market has also grown sharply.Japan is a tough market for foreign companies to crack like other sectors and that has allowed Sharp to prosper despite much higher costs and lower margins.However,Sharp has not been able to grow fast enough in 2010 with major Chinese companies seeing upwards of 100% growth.2011 promises to be even harder as European countries tighten their subsidy mechanisms.Newer competition in the form of conglomerates like Hanwha,Samsung,Hydundai and CIGs Technology Companies likeSolar Frontier,Miasole,TSMC is expected to make the market even tougher.Sharp has been building a huge amorphous Silicon capacity at its facility in Sakai and has gotten traction as well selling modules to Thailand and Canada.It has also setup a JV with Enel in Italy as it turns into a IPP something similar to US companies First Solar and Suntech.It recently bought a downstream solar system developer Recurrent Energy to bolster its position.However Sharp faces a tough challenge in remaining a Top 10 Company with a 10% global marketshare.

Sharp’s Thin Film Strategy and Expansion

Sharp alongwith STM and Enel is building a 160 MW factory in Italy in an unused STM fab to manufacture a-Si modules using Sharp technology.This plant which is getting a Euro 49 million grant from the Italian government will ultimately manufacture 480 MW modules per year.Alongwith this JV between these 3 companies named 3Sun,Sharp is also entering the Independent Power Producer (IPP) business.It has formed a 50:50 JV with  Enel Green Power’s to build power plants using these a-Si modules in the EMEA region.This JV has set a target of 500 MW of solar installations in the next 5 years.Note amorphous Silicon technology has received a major setback with Applied Materials exiting its SunFab  a-Si equipment manufacturing.Sanyo which had ambitious plans to ramp up a 1 GW capacity using a-Si technology in a JV with Nippon Oil has also shut shop.It remains to be seen whether Sharp can make a success of a-Si technology.a-Si technology has much lower efficiency in the range of 7-9% compared to the mainstream crystalline solar technology.a-Si cost advantages over the c-Si technology has also disappeared with falling polysilicon costs.This makes a-Si only feasible for utility sized plants as a-Si’s larger area requirements makes unsuitable for residential and commercial segments.The IPP JV is a good move as it will provide captive demand for Sharp’s a-Si modules.