Affected by the bleak global economic outlook and the sharp drop in the PV prices, certain European and American companies could not survive in the price war started by Chinese companies’ low-priced products – German company Q-cells and Amercian firms Solyndra and Beacon Power all applied for bankruptcy. The excessive capacities and stagnant demand caused product prices to further plummet. The rapid expansion of the Chinese PV industry resulted in losses of many companies. Six months into the global PV industry’ reconstruction, Chinese PV industry starts to follow suit.
LDK Solar’s stock price over the past three years
source：imeigu
Severely-in-debt LDK Solar was reported to apply for bankruptcy or become nationalized. As the representative solar company in China, LDK finally received help from the Chinese government. For this reason, a number of people believe that LDK will eventually become a state-run company.
LDK, located in Xinyu City, Jiangxi Province, China, has been rapidly expanding since its inception in 2006. In the heyday of Chinese solar industry, LDK was considered a remarkable success. As the company’s revenue continued to go up every year, so did the earnings it brought in for the Xinyu City Government. In 2006, Xinyu City’s annual income totaled RMB 3 billion, but as of 2011, it further increased to RMB 11.13 billion.
According to the government officials, LDK contributed to a large portion of the Xinyu City’s income. Should LDK apply for bankruptcy, it will greatly hurt the economics of Xinyu City. Based on the financial statistics, Xinyu City’s 1H12 income totaled RMB 6.39 billion, representing a growth rate of 2.2%, which ranked the 9th place among the cities of Jiangxi Province. Compared with 2011’s growth rate of 63.7%, LDK’s underperformance put a huge dent in the city’s taxes income.
By the end of 2011, LDK’s debt has amounted to US$30.230 billion, an increase of US$8.849 billion compared to that in 2010. Due to the continuous losses, LDK’s net assets decreased from 2010’s US$5.252 to US$4.718 at present, with the debt asset ratio rising to 87.05%.
SUNTECH’s stock price over the past three years
source：imeigu
The other solar giant SUNTECH encountered the same problem. As of June 30 this year, the company’s debt has piled up to US$1.66 billion and had only US$648 million cash. Also, SUNTECH has a huge amount of bank loan, which requires the company to pay an interest of US$32.5 million every two quarters. Unless SUNTECH can continue to acquire cash from the banks, otherwise it will be very difficult for SUNTECH to pay off the short-term debt.
According to SUNTECH’s financial statements for 1Q12, the company’s utilization rate was low. To lighten up the operation pressure, the company may reduce its self-supply of Si wafers and purchase them on the market with prices lower than the manufacturing costs.
As for those Chinese solar firms that are listed in the U.S. stock market, Trina Solar’s stock price is relatively high and is considered the potential company that could survive in the competition. However, according to the stock price trend, the company’s stock price continued to go down after 1H11, indicating the investors’ worries.
Trina Solar’s stock price over the past three years
source：imeigu
The top four solar Si wafer and solar cell makers in China are SUNTECH, Trina Solar, Yingli Solar, and Canadian Solar, with JA Solar, Jinko Solar, LDK, Renesola, and Hanwha being the major competitors. EnergyTrend notes that the top four companies can still manage to keep the companies profitable due to the ability to cut manufacturing costs. Nonetheless, the companies started to realize low manufacturing costs do not equal core competence. The downstream market is the breaking point for the solar companies to turn profitable.
Aside from a few first-tier companies, the latest statistics suggest that among over 50 Chinese solar firm that have announced their 1H12 revenues, 70% of them suffered from losses. HAREON SOLAR, SUNOWE Photovoltaic, and Chaorisolar underwent the most pronounced setbacks. EnergyTrend believes that the Chinese industry will start to weed out the weak, and only the few strong ones will remain and become the solar brands that represent China. Those second-tier and third-tier companies will be acquired or be run out of business.