Storm Clouds

Jonathan Fahey, 02.26.09, 05:00 PM EST
Forbes Magazine dated March 16, 2009

First Solar, the darling of the photovoltaic industry, confronts new competition and a bum economy.
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In warehouses around the world there is a gigawatt of solar panels just sitting in the dark. That represents 20% of all the solar panels produced worldwide in 2008. Prices, predictably, are falling fast. The solar industry is in a period of upheaval, battered by the credit crunch, slowing government subsidies and falling natural gas prices. The company with the most to lose is the industry’s darling–First Solar (FSLR) of Phoenix.

“From a technology perspective, solar is not hard to do,” says Gordon Johnson, an analyst at Hapoalim Securities. “Longer term, this is a commodity business.” Adds a hedge fund investor who speaks anonymously, for fear of offending First Solar: “In the end it will be like selling a toaster–superlow margins and no brand loyalty.”

In an industry marked by broken promises, First Solar has been a success story. It delivered growth and big, uninterrupted profits. Over the past four quarters the company earned $277 million on $1 billion in sales. That’s nearly triple the $103 million profit and $356 million in sales recorded in the year before. Though the company’s stock, at a recent $130, is far from its $300 high of last May, it is comfortably above where it went public in late 2006, $24.50.

First Solar’s success is attributed to Michael Ahearn, the company’s reticent chief executive. (The company declined interview requests.) Ahearn was an adviser to the late John T. Walton, helping the Wal-Mart (WMT) scion find and fund the next great company, when he came across an Ohio outfit called Solar Cells. Ahearn reportedly convinced Walton to invest $45 million in 1999. Ahearn got involved in the business and eventually installed himself as chief executive. By 2002 the company was out of money, but Ahearn convinced Walton to invest another $100 million in what would become First Solar.

Ahearn’s Waltonesque strategy was to drive down cost. There are two basic types of solar cells–traditional crystalline silicon cells made out of the same stuff that powers computers, and thin films made from any of a number of chemical formulations. Thin-film cells are much less efficient at turning sunlight into electricity, but they are cheaper to make. For the buyer, there’s a clear tradeoff. The objective is to get the lowest cost per kilowatt-hour generated. Depending on where it’s installed, a panel will produce something like 1.6 kwh of electricity annually for every watt of peak power.

Can high-tech giants revolutionize solar market?

Commentary: Intel, H-P and IBM are making bets, but payoff likely years away

By Therese Poletti, MarketWatch
Last update: 12:01 a.m. EDT July 3, 2008

SAN FRANCISCO (MarketWatch) — As companies like Intel Corp., IBM Corp. and Hewlett-Packard Co. have made moves in the solar power space, many have wondered if these high-tech heavyweights could use either their manufacturing or intellectual muscle to push down costs and thereby lower the price of solar power.

Perhaps eventually, but not quite so fast.

Because of the vast use of silicon wafers in the solar industry, it is easy to leap to the conclusion that these tech giants, which all have great expertise working with silicon, will have a big effect on the nearly $20 billion estimated market this year for solar cells and modules. Solar cells, encased in panels on the rooftops of homes and businesses, convert solar energy into electricity.

While the three tech giants have made investments in solar, their recent actions are unlikely to add a big new supply of solar cells to the market anytime soon. Even though the once-tight market for polysilicon, a key ingredient for the cells, is loosening up a bit, subsidies by governments and utilities currently play more of a role in the cost of solar power.

Intel’s solar ambitions

When Intel announced this week that it was spinning off a stealth in-house startup called SpectraWatt to develop solar cells, it appeared the chip giant was just the latest old-line Silicon Valley tech firm bitten by the green bug.

After all, crosstown chipmaker Cypress Semiconductor jumped into the solar game back in 2004 when it acquired SunPower (SPWR), now a leading manufacturer of solar cells and panels and an installer of large-scale solar arrays. Then the world’s biggest chip-equipment maker, Applied Materials (AMAT), retooled machines that make flat-screen video displays to produce thin-film solar panels. And just this month, Hewlett-Packard (HPQ) unveiled a deal to license solar technology to a solar cell startup while IBM (IBM) announced it would develop thin-film solar.

But it’s not just now jumping on the enviro-biz bandwagon – Intel’s solar efforts have been quietly under development since 2004. That’s when Andrew Wilson, an 11-year Intel (INTC) veteran, was chatting with a colleague while waiting for a conference call to begin. “We were shooting the breeze and I mentioned that I had replaced all the light bulbs in my house with compact fluorescent lights and my utility bill had come down by a third,” says Wilson, SpectraWatt’s CEO. “And he said, `Hey, did you know that solar cells are made of silicon?’ “

“We started talking about what a business plan would look like, because if something is made out of silicon then Intel should be taking advantage of that market,” Wilson told Fortune. A year later, Wilson and his colleagues had developed a marketing plan and secured funding from Intel’s new-business incubator to develop a business strategy and hone its technology. (It’s no coincidence that the nascent solar industry is populated by computer industry veterans from companies that put the silicon in Silicon Valley.)

When it comes to to cutting-edge solar technology, silicon-based cells are considered a bit old-school. Silicon is currently in short supply and the resulting high prices have led venture capitalists to invest hundreds of millions of dollars in thin-film solar startups that promise to dramatically lower the cost of solar by printing or otherwise applying non-silicon solar cells to glass or flexible materials that can be integrated into walls, windows and other building materials. While thin-film solar is less efficient at converting sunlight into electricity, the expectation is that it can be produced much more cheaply than conventional cells.

But thin-film solar is still largely an early-stage technology and silicon-based cells will continue to be the big market for the near-future. So the question is, how does Intel compete with established players like SunPower, China’s Suntech (STP) and Germany’s Q-Cells as solar cells become a commodity? Intel controls some 80 to 90 percent of the worldwide chip market but it’s unlikely that it – or any other player – will replicate that experience in solar cells.

Wilson’s view is that it’s early days for the solar market and that SpectraWatt’s ace in the hole is Intel’s global manufacturing experience and history of technological innovation. “The solar industry today looks like the microelectronics industry in the late ‘70s – there’s very few standards and no one is manufacturing at scale,” says Wilson. “It’s all about manufacturing processes and material sciences that will lead to fundamental breakthroughs. The product is vastly simpler than a microprocessor but the fundamental nature of a solar cell isn’t all that different. When you think of what it takes to manufacture globally and manage supply chains, that’s Intel’s core competence.”

There certainly is room for more players, given that solar was a $30 billion market in 2007 and is expected to continue to grow at a clip of 30 to 40 percent in the coming years.

Wilson says SpectraWatt has secured silicon supplies and is developing technology that will give it a competitive edge. He’s keeping mum about the details of that technology for now. “We do believe we will have a technological advantage when we get what we’re doing in the lab to manufacturing,” Wilson says.

The company is set to begin building its manufacturing facility in Oregon later this year, with production to begin in mid-2009.

SpectraWatt launches with a $50 million investment lead by Intel Capital, the company’s investing arm. Other investors include Goldman Sachs (GS), PCG Clean Energy and Technology Fund, and German solar giant Solon. (As Green Wombat has written, Solon has invested in an array of solar startups in the United States, including Sungevity and thin-film solar company Global Solar.)

Intel, IBM Get Solar Exposure

Brian Caulfield, 06.16.08, 11:33 PM ET

Intel and International Business Machines have joined the parade of technology companies making alternative-energy plays, announcing Monday separate efforts to put their manufacturing smarts to work cranking out solar cells.

Intel and IBM already have plenty of relevant manufacturing and materials know-how, with IBM’s PowerPC processors competing with Intel’s ubiquitous x86 processors to power high-end servers.

IBM and Intel, however, are taking very different approaches, with Intel tapping into its long experience working with slabs of silicon and IBM pursuing a technology based on thin, flexible films developed at its research arm.

Intel said Monday it will spin off a new venture, dubbed SpectraWatt, that will build a factory in Oregon in the second half of this year and begin sending solar modules to customers by the middle of next year.

Intel will lead a $50 million investment in SpectraWatt, an effort that will be spun out of the company’s new business initiatives arm. Other investors include Goldman Sachs subsidiary Cogentrix Energy, PCG Clean Energy and Technology Fund, and Solon AG.

IBM’s approach is based on a process developed by IBM Research to crank out so-called thin-film solar cells based on copper, indium, gallium and selenide.

Solar cells, which convert light to electricity, have long relied on silicon, the same material upon which companies such as IBM and Intel build computer chips.

The idea behind thin-film solar cells, however, is to work with flexible films, slashing costs while creating solar cells that can be wrapped around walls or even incorporated into tinted windows. It’s an idea being pursued by a clutch of start-ups, in addition to IBM.

The goal, according to IBM, is to create solar cells that convert 15% of the energy that hits each cell from sunlight into useable electricity, up from a range of between 6% and 12% today. The technology giant will collaborate with Japanese manufacturer Tokyo Ohka Kogyo on the project.

Intel spins off assets to form solar cell company

By Benjamin Pimentel, MarketWatch
Last update: 5:15 p.m. EDT June 16, 2008

SAN FRANCISCO (MarketWatch) — Intel Corp. on Monday said it will spin off key assets of its new business initiatives group to form an independent company that makes solar energy cells.

The move highlights the bid of chips companies and chip equipment makers to explore new opportunities in the growing solar energy market.

Intel (INTC) said its investment unit, Intel Capital, is taking part in a $50 million investment in a company called SpectraWatt Inc., which will make photovoltaic cells for solar module makers. Solar cells are components used to turn sunlight into electrical power.

Intel is forming the new company with Cogentrix Energy, a subsidiary of Goldman Sachs PCG Clean Energy and Technology Fund and Solon AG. The deal is expected to close in the second quarter.
SpectraWatt will break ground on its manufacturing and advanced technology development facility in Oregon in the second half of 2008. First shipments are expected by mid-2009.

Intel said the solar-energy industry is expected to grow 30% to 40% annually.

Other companies in the chips and chip-making equipment industries have expanded into that market. Three years ago, Cypress Semiconductor (CY) spun off SunPower Corp., which also makes solar cells.
Applied Materials Inc. (AMAT) has moved more aggressively into the market for equipment used for making solar panels, which analysts say has helped the company weather the uncertainty in the tech market.

Benjamin Pimentel is a MarketWatch reporter based in San Francisco.

Applied Material’s Solar Machine

by Todd Woody
GreenWombat – Fortune.com

It’s been almost a year since Applied Materials – the Silicon Valley company that is the world’s biggest manufacturer of the machines that make computer chips and flat-screen video displays – announced it was jumping into the booming solar energy business. It was a natural fit – most solar technology is silicon based and the Applied (AMAT) machines that churn out video displays can, with a few modifications, produce thin-film solar panels. And tools used to make the chips in your laptop can be reconfigured to make wafers for solar cells. Applied’s move into the solar market promises to lower the cost of solar electricity. How? By standardizing and improving the solar manufacturing process, much as the company did for the semiconductor industry, allowing companies like Intel (INTC) and Advanced Micro Devices (AMD) to produce ever-cheaper chips that made laptops and mobile phones mass commodities.

So Green Wombat recently headed down the 101 to pay a visit to Charlie Gay, a solar industry veteran who runs Applied’s Solar Business Group, for a Year One update and to take a look at the company’s big metal. An avuncular exec, Gay began his solar career more than three decades ago at Boeing subsidiary Spectrolab. He subsequently joined Arco Solar and worked at its various incarnations and later served as director of the U.S. government’s National Renewable Energy Laboratory. He recently chaired solar-cell maker SunPower’s (SPWR) advisory board.

“Things are growing very rapidly, both for the solar industry as well as for Applied,” says Gay at the company’s Santa Clara campus. In the first quarter of the year the company forecast its solar business would do $200 million in revenue in 2007. By the second quarter, it raised that estimate to $400 million, and last week during the third quarter earnings call, CEO Mike Splinter upped the ante to more than $600 million.

The reason for the optimism is Applied’s growing thin-film solar business. So far this year it has signed contracts to build thin-film production lines for half a dozen solar companies in Europe and India. Unlike traditional solar panels, thin-film manufacturing involves depositing photovoltaic materials on large and slender pieces of glass or flexible material. Though not as efficient at converting photons into electrons as standard solar cells, the promise of thin-film is that will be cheaper to produce. (Unlike thin-film solar startups like Nanosolar, which are developing next-generation technology based on copper indium gallium diselenide, or CIGS, Applied’s clients use an older amorphous silicon-based process.) “What we’ve done is lay out production lines for thin-film solar,” says Gay. “One advantage we bring is integrating the tools with the production process in a solar factory.” The aim is to cut the cost per watt of solar electricity by designing smooth-running and efficient factories.

Over at another Applied building I don a lab coat, booties and safety glasses – not quite the full-on bunny suit – and Teresa Trowbridge, an Applied senior manager in the solar group, takes me on a tour of the massive clean room where Applied builds its equally massive flat-panel manufacturing machines (photo above). Sheets of glass as large as 7 by 8 feet (2.2 by 2.5 meters) are fed into the AKT Gen 8.5 and layers of semiconductors and circuitry are applied. Once the machines are tweaked to handle thicker thin-film glass and a couple of other mechanical changes are made, they can use the same process to produce solar panels.

CIGS thin-film would seem to threaten Applied’s silicon-based thin-film market. But Gay says CIGS thin-film processes still use layers of amorphous silicon – layers that can be deposited by Applied machines. “It grows our market,” he says of efforts by startups like Nanosolar and Miasole. Applied also makes tools that can be used in the production of crystalline silicon wafers for traditional solar panels. The company has not yet done any big wafer deals but Gay hinted that some may be in offing. “There’s a real renaissance of solar,” he says.