China’s US$20 billion solar industry is avoiding loan defaults and mergers by taking aid from local governments, preserving jobs at money-losing companies such as LDK Solar Co (江西賽維), the world’s second-biggest maker of solar cells.
LDK agreed last month to sell a 19.9 percent stake to a renewable-energy investor part-owned by the city of Xinyu, home to its headquarters. Suntech Power Holdings Co (尚德電力), the world’s largest solar-panel maker, got a US$32 million loan in September organized partly by Wuxi, the city where it is based. The aid helps as the companies prepare to report combined losses of US$987 million for this year, analyst forecasts compiled by Bloomberg show.
The moves counter efforts by the central government to engineer mergers that create a handful of larger solar companies, said Jeremy Haft, founder of BChinaB Inc, a New York-based consulting company that specializes in Chinese business practices. The country has previously pushed consolidation to strengthen industries such as steel and coal.
Provincial governments mostly want solar manufacturers “to keep the lights on and not lay people off,” Haft said.
“There are a lot of people unemployed” in China and local government officials do not want to see solar factories close, he said.
Local aid efforts have not sparked a rally in LDK and Suntech. They have lost 38 percent and 17 percent respectively in the last three months, outpacing the 9.6 percent loss for the 17-member Bloomberg Global Large Solar Energy index over the same period. LDK gained 1.1 percent to US$0.90 at the close in New York on Friday. Suntech closed at US$0.906.
At the same time, GCL-Poly Energy Holdings Ltd (保利協鑫能源), the world’s biggest solar wafer maker, has increased 15 percent in the last three months. The company has been mentioned in Chinese news reports as a possible merger partner.
The China Securities Journal said national government-run China Development Bank Corp (國家開發銀行) is encouraging consolidation between panel makers, pledging financial support for 12 companies. The move may lead other struggling solar manufacturers to close their doors or agree to be bought, the journal said in a Sept. 25 report.
China Development Bank is motivated to keep struggling solar firms afloat, especially those that have borrowed from it, Washington-based Center for American Progress policy analyst Melanie Hart said. The lender is putting pressure on local governments to support companies so they will repay loans, she said.
The bank is telling local officials “we won’t lend anymore to anyone in your region until they pay us back,” she said.
Those local efforts contrast with China’s national goals, which are commonly described as “grasping the big, letting go of the small,” Hart said.
Help from local governments may be the biggest obstacle to making China’s solar industry competitive, Boston-based GTM Research solar analyst Shyam Mehta said.
“Until they stop supporting the uncompetitive manufacturers, this won’t go away,” Mehta said. “If LDK was allowed to fail, the market reaction would actually be positive.”
Suntech is evaluating various financing options and cutting costs, and in September temporarily reduced production in Wuxi, Suntech spokesman Rory Macpherson said in e-mail. He did not say whether the company expects additional support from the community. Telephone calls to LDK spokesman Li Longji went unanswered.
The country’s state-owned electricity distributor, China State Grid Corp (國家電網), announced incentives on Oct. 26 to encourage smaller solar projects, with capacity of less than 6 megawatts, such as rooftop systems. It will buy the electricity and exempt owners from certain fees.
Other Chinese communities are supporting local solar manufacturers. A company controlled by Dongying, a city in Shandong Province, offered US$10 million for a 50.38 percent stake in CNPV Solar Power SA’s sole asset, CNPV Dongying, on Nov. 1.
RECORD BUDGET: TSMC does plan to raise its proposed capital expenditure a lot, and could benefit if Intel outsources more of its production to foundries, analysts said Intel Corp’s earnings conference call on Thursday is expected to clarify the US semiconductor giant’s outsourcing production plans, which would be crucial regarding Taiwan Semiconductor Manufacturing Co’s (TSMC, 台積電) performance, analysts said. “TSMC stands to benefit if Intel outsources more of its fabrication to foundries,” SinoPac Securities Investment Service Corp (永豐投顧) analysts said in a note on Friday. Yuanta Securities Investment Consulting Co (元大投顧) was more cautious, saying that Intel’s contribution initially would be limited, but its outsourcing plans would still highlight TSMC’s leadership in technology, it added. “Intel will continue to manufacture server or high-end central processing units [CPUs], which have higher
MOBILE SMART: The Dimensity 1200 is 22 percent better in terms of performance than its predecessor, and 25 percent more power-efficient, the handset chip designer said MediaTek Inc (聯發科) yesterday unveiled its premium 5G processors — the Dimensity 1200 and Dimensity 1100 — as it vies for a larger slice of the world’s rapidly growing 5G smartphone market. Manufactured using Taiwan Semiconductor Manufacturing Co’s (台積電) 6-nanometer process technology, the Dimensity 1200 processor performs 22 percent better than the previous generation Dimensity 1000+ processor, and is 25 percent more power-efficient, MediaTek said. Chinese smartphone brands Xiaomi Corp (小米) and Realme Mobile Telecommunications (Shenzhen) Co (銳爾覓移動通信) are to be the first adopters of the latest Dimensity chips, the companies said during a virtual media briefing. Xiaomi plans to equip its first
Norway’s oil and gas reserves have made it one of the world’s wealthiest countries, but its dreams for deep-sea discovery now center on something different. This time, Oslo is looking for a leading role in mining copper, zinc and other metals found on the seabed and in hot demand in green technologies. The country could license companies for deep-sea mining as early as 2023, the Norwegian Ministry of Petroleum and Energy said, potentially placing it among the first countries to harvest seabed metals for electric vehicle batteries, wind turbines and solar farms. However, that could also place it on the front line of
‘BROAD RANGE’: The US Department of Commerce intends to deny a significant number of license requests for exports to Huawei, an industry association said US President Donald Trump’s administration notified Huawei Technologies Co (華為) suppliers, including chipmaker Intel Corp, that it is revoking certain licenses to sell to the Chinese company and intends to reject dozens of other applications to supply the telecommunications firm, people familiar with the matter told reporters. The action — likely the last against Huawei under Trump — is the latest in a long-running effort to weaken the world’s largest telecommunications equipment maker, which Washington sees as a national security threat. The notices came amid a flurry of US efforts against China in the final days of Trump’s administration. US president-elect Joe