Sharp Solar Panels

There have been hundreds of solar bankruptcies in the last couple of years as solar panel prices have gone down by almost 65% and ASPs have approached the COGs of the lowest cost solar panel manufacturers. However the big Japanese solar panel manufacturers have remained insulated from this wave of failures as they are in general big conglomerates with diversified business lines. While some of the South Korean conglomerates like Samsung, Hyundai have curtailed their solar panel expansion plans, there is no fear of bankruptcy.

However Sharp which is Japan’s largest solar panel manufacturer is facing a real fear of failure as its stock price has crashed to a 37 year low as its cash flow position become precarious. Japanese electronic conglomerates like Sony, Sharp, Panasonic have continuously lost marketshare to South Korean and American companies like Samsung and Apple. They have been plodding along with wafer thin margins for a long time however the last couple of years have been brutal. A strong Yen and competition have forced them into huge losses. In fact Sharp is facing a major equity draw-down because of the huge loss it is making. Sharp has been losing money in its major bread and butter business lines like flat panel displays and solar panels. The company which invested a massive amount of money into building a state of art technology plant in Sakai is having difficulty in funding itself. The company is looking at Foxconn (an OEM supplier) for funds as it continues to lose money. While the other major business groups like Sony too are losing money, Sharp has reached pretty much the end of the tether.

Sharp Solar Panels

 Sharp solar panel manufacturing costs were always quite high compared to the Chinese. The company tried to shift to thin film amorphous solar panels with plans to produce 1 GW of thin film panels but that shift has not worked out apparently, as there are rumors that Sharp has shut down its thin film lines at Sakai. Given that First Solar which is the lowest cost thin film panel producer has stopped 3^rd party sales that would not be a surprise either. Note Sharp is no longer competitive in the solar panel market, Panasonic has already decided to shift lock stock and barrel to Malaysia. Sharp does not have the money to do a big move now and its high cost Japanese factories can’t compete economically. Sharp which was the largest solar panel maker by revenues may be the biggest failure of the current solar consolidation wave.

At GWI we had speculated that Sharp might be decimated by Chinese solar panel producers, that seems to be turning into reality.

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 was even harder, as European countries tightened their subsidy mechanisms. Newer competition in the form of conglomerates like Hanwha, Samsung, Hydundai and CIGs Technology Companies like Solar 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 moves into amorphous silicon panels

 Japanese Solar Companies Losing Marketshare to Cheaper Asian Rivals

Sharp’s c-Si division is not cost competitive with the Chinese and Taiwanese companies as its cost structure is almost 30-40% higher than the cheapest Chinese producers. Though the quality of Sharp’s crystalline silicon modules is considered much better, the cost difference has become too big in a rapidly commoditizing industry. Sharp has managed to retain its No.1 position mainly due to its large captive home market of Japan.  In other places like US and Europe it has rapidly lost marketshare to aggressive Chinese companies like Trina Solar, Yingli and Suntech. Other Japanese Solar Heavyweights like Kyocera, Panasonic-Sanyo and Mitsubishi have suffered even worse marketshare losses. Lack of focus and high costs have combined to move most of the Japanese to lose out in world solar rankings to the Chinese. These companies have tried to improve their cost competitiveness through outsourcing of cell production to Taiwanese cell companies like Motech, DelSolar and others. However the sharp decline in module prices have made even this strategy unsuccessful.

Thin Film Technology sees Massive Attrition

Thin Film Technology has faced a difficult recent 2-3 years as sharp decline in Poly Silicon prices have led to more than 50% decline in the competing c-Si module prices. Amorphous Silicon Technology has seen many casualties as a-Si equipment leader Applied Materials much heralded SunFab turnkey a-Si faces a life and death situation. Other players like Oerlikon have also not fared well. While companies like Masdar are abandoning their Thin Film plans, Sharp has started shipping a-Si modules from its 1 GW capacity plant in Sakai.  With its established distribution strengths and technological abilities in LCD Technology, Sharp is one company that can survive the c-Si onslaught. With most of the a-Si thin film competitors bankrupt or in a moribund state, Sharp can capitalize to completely capture this space. However the cost structure of Sharp is not clearly known right now to make a clear call on how this will turn out. Also a 10% efficiency while decent for a-Si technology fall far short of the 13% claims by CIGS startups like Miasole.

Sharp shares at historic low

Shares in Sharp Corp (6753.T) tumbled as much as 15 percent on Wednesday to their lowest in almost 37 years, with investors spooked by predictions that the ailing Japanese TV maker’s losses this year will be bigger than the company estimated this month.

Since releasing weaker-than-expected quarterly results on August 2 along with a bigger operating loss forecast of 100 billion yen ($1.3 billion), Sharp has seen close to $1.5 billion wiped off its market value.

The company, which makes screens for Apple Inc’s (AAPL.O) iPad and iPhone, needs to refinance 360 billion yen ($4.57 billion) of short-term commercial paper and will need a further 200 billion yen in September next year to cover a maturing convertible bond

 The company’s 5-year credit default swaps, insurance-like contracts against debt default or restructuring, were quoted at 1,181/1,413 basis points. Sharp has a 1-year default probability of 28.8 percent according to Kamakura Corp, up more than 4 percent on Wednesday.

 Hon Hai may take control of Sharp

The Nikkei, Japan’s economic journal, reported Friday (Aug. 17) that Foxconn owner Hon Hai Precision Industry Co. is now asking to double its planned stake in Sharp Corp. to about 20 percent from the originally agreed 9.9 percent. Neither Hon Hai nor Sharp is commenting at this point.Announced this past March, the deal between the world’s largest contract manufacturer and Japan’s leading LCD manufacturer has turned out badly for Sharp.
If Hon Hai has its way to increase its stake in Sharp over 10 percent, the Taiwan giant will get the right to ask a court to dissolve Sharp, thus allowing Hon Hai to increase its voice in controlling the ultimate destiny of one of the oldest Japanese companies. Hon Hai’s new proposal, if true, is the worst case scenario for Sharp, who has been resisting at all cost to changing the terms of the original agreement.

Financially stricken Sharp may be left with little choice at this point as Japanese banks are breathing down their neck to close the capital infusion deal with Hon Hai.