Sharp to Bail out of Solar as it gets Bailed out by Japanese Banks

Greenworldinestor has been pointing out the rapidly deteriorating competitive position of Sharp in the solar panel market for the last couple of years. We have even pointed out that it was not worth buying a Sharp solar panel given the alternative. Now as predicted Sharp has bailed out of the solar market almost completely selling 3 of its 4 factories in Japan and closing its marketing operations in USA and Europe which account for nearly 80% of the global solar PV market. Sharp will concentrate its efforts on the domestic market and Asia while ceding the developed markets of the West to stronger players from China and Korea.

Biggest Solar Failure nobody is talking about

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.

Why Sharp is being forced to abandon domestic 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 Philippines, 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 led 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. 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.

DigiTimes

Japan-based Sharp plans to cut solar panel production in Europe and the US. The firm plans to gather resources and focus on Japan and other Asia markets. Sharp hopes to increase its domestic solar market share from 30% in 2012 to 40% in 2013 and has been focusing on highly profitable rooftop solar PV system projects. Sharp plans to sell three of its four solar cell plants in Japan. Also, the firm plans to sell solar equipment before end of its 2012 fiscal year. Solar cell production will be integrated into Sharp’s plant in Sakai city in Osaka and the extra workforce will be shifted to other departments to avoid lay-offs.

WSJ

Sharp Corp. said Friday it has reached a deal to receive a ¥360 billion yen ($4.64 billion) syndicated loan, helping keep the struggling electronics maker’s operations afloat amid an apparent standstill in talks with Taiwan’s Hon Hai Precision Industry Co. over a previously agreed capital injection.