Trina Solar Ltd. (NYSE:TSL)
Yingli Green Energy Holding Co. Ltd. (NYSE:YGE)
LDK Solar Co. Inc. (NYSE:LDK)
What STP, TSL, YGE, and LDK have in common is the deep pockets of the Chinese government. Since the beginning of 2010, these four companies have received a total of nearly $26 billion in loans from their government. All four sport market caps lower than $2 billion, but all four are among the top five global manufacturers of solar cells.
The reason these companies ship more solar PV cells than any competitor except First Solar is their focus on low-cost – SunPower is not a low-cost provider. The top five low-cost providers are currently selling contracted cells for less than the spot price. This will hurt margins somewhat now. However, because they have already lowered their pricing, the impact on margins next year will not be as great. Competitors, especially from Europe, that are now seeing premium pricing are less well-prepared for the drop in shipments that is forecast for the first quarter of 2011.
The Chinese companies plan to use a substantial amount of their government loans to build more manufacturing capacity. Some of that new capacity will meet demand inside China, which is expected to double its new solar installations in 2011.
Of the four Chinese companies, it is impossible to pick a winner at this point. All four are well set-up to prosper and all four could be technology leaders as well as cost and shipment leaders in five years or less. National governments are almost certain to provide more policy support for solar power, consumer costs for rooftop systems will fall, and there is likely to be a trend toward consumer leasing as well. Now is a good time to be one of the leading solar companies in the world.
I have two positions with STP and YGE.
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