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JA Solar: Transitioning from a Cell Manufacturer to a Module Provider

JA Solar Holdings Co., Ltd., was founded in 2005 and has been listed on the New York NASDAQ (JASO) since 2007. Up to date, JA Solar has shipped the cumulative of more than 4 GW of cells and about 1 GW of modules. According to the latest SolarBuzz market research report, JA Solar is one of the largest PV cell manufacturers in the world and a rising star on the module market.
Dr. Peng Fang is the Board Director and Chief Executive Officer of JA Solar. He was formerly the President of Huahong NEC, a semiconductor manufacturer in Shanghai, and worked for Applied Materials and AMD. He was a research fellow at UC Berkeley and the Chairman of the IEEE Electron Device Society. He also received the 2004 Shaghai City ‘Magnolia’ award for making significant contributions to Shanghai’s economy.
In this interview, Dr. Fang talks about JA Solar’s core competencies and 2012 strategies.

Reported by Jeanny H. Lim (swied@infothe.com)

 

 

Dr. Fang, could you tell us some of the competitive edges that differentiate JA Solar from your competitors?

Our core competencies are in technology, quality and in forming strong partnerships. First of all, we have a superior cell and module technology. With unbeaten cell efficiencies in mass production of 18.8% on average for mono wafers, 18.3% for quasi-mono wafers and 17.1% for poly wafers, JA Solar can offer the highest module power classes in volume production on the market. On top of that, we are a low cost-per-Watt leader in this industry.

At the same time, JA Solar has adapted a world-class quality culture from the semiconductor industry, as many of our employees and managers, including myself, are coming from this sector. We take our 25-year warranty very seriously and introduced a top-notch in-line measurement system and a unique quality tracking system into our manufacturing processes. Our customers keep telling us that we are best in class with the highest quality standards at our production facilities. What is more, we have a fully equipped reliability test laboratory that has been TMP (Test on Manufacturers Premises) certified by the TUV Sud and is a Satellite Labfor Intertek/ETL; thereby being leading-edge in global standards.

Last but not least, JA Solar has attained a very good reputation along the value chain in this industry, for we protect the business of our customers by managing our sales channels well and by offering excellent after-sales services. As part of our business model, we provide our module brand and OEM services; we help our customers in their fields and we do not compete with our customers. We foster strong long-term partnerships with leading brands, such as SunEdison, Solarfabrik and Phonix Solarstrom, just to mention a few.

 

Looking back on 2011, what kind of happenings and activities went on in JA Solar? What did your 2011 performance look like?

In 2011, we were in the midst of a transition from a leading cell manufacturer to become a leading module provider and brand. In this process, we further developed our sales channels in Europe, the U.S. and China successfully. By the end of 2011, we grew our annual capacities to1.1 GW for wafers, 2.8 GW for cells and 1.2 GW for modules. At the same time, we shipped more than 1.7 GW. Our financial situation is healthy with more cash at hand than revenue, little short-term debt and some of the lowest operational expenses in the industry.  

 

Where do you put your focus this year, in terms of both business and technology development? What’s your production volume and sales target this year?

On the technology side, we will continue to expand our leadership and even further reduce our cost per Watt, with a focus on serving our customers with even higher power class modules. We will remain number one in cell production and increase our module production substantially, resulting in a total shipment of approximately 2 GW this year.

We are communicating to our green-conscious end-customers through our engagement with the Bund Deutscher Radfahrer e.V. (German Cycling Federation) throughout the Olympics in London, the U.K. However, with the stabilizing European markets and increasing demands in the U.S. and China, and with new markets emerging in different places in Asia, Australia, South Africa and South America, we need to geographically diversify our sales and marketing activities. As such, we see that leading installers, distributors and developers are working with us worldwide, and we are in good relationship with the leading global banks in the renewable energy sector. In particular, in the U.S., we just signed a frame agreement with Wells Fargo. To meet local content requirements, we are looking into some manufacturing base outside of China.

 

Taking a high-technology, high-efficiency solar cell and mass-producing it at low cost is key to mainstream adoption of solar. How are you innovating your way down the cost curve?

Bringing down production costs is one way of continuously improving our competitive edge, increasing efficiency is another way. As a rule of thumb, an efficiency improvement of 1% is equivalent to a cost reduction of 6%. Our strength is to focus on technology improvements without cost adder and made for mass production. In mass production, we are one grid, meaning we are at least 0.2% higher in cell efficiency than our next competitor, and we intend to continue to lead the industry with our innovation roadmap to up to 20% efficiency. Moreover, our module technology is optimized for a minimum efficiency loss during assembly, while our process control and our in-line measurement systems allow us to maximize our production yields, further improving our output quality, while decreasing costs. We have strong international R&D teams at our state-of-the-art PV research centers with a substantial semiconductor processing and materials research background. They also provide value to our customers through joint product development and product differentiation.

 

 

What does your global presence look like? Which geographical market is the biggest for JA Solar in terms of sales?

Providing cells and modules, our customer base is currently about one half in China and the other half mainly in Europe and North America. We are also a leading supplier for the emerging markets, like India and Japan. Continuously decreasing system costs and a worldwide increasing environmental awareness is leading more and more governments to introduce and maintain financial incentives for solar PV installations, while other markets are reaching grid parity and are becoming lucrative even without incentives. During the next years, we will see a transition of the markets. New business models will arise and stimulate growth. Markets will become more complex, but ultimately more lucrative. Our marketing strategy is to target each geographic market segment separately through working together with strong local partners and stakeholders.

 

How does the scaling-back of the government incentive programs in Europe and other countries of the world affect JA Solar?

The recent development was foreseeable and did not come in surprise. Government incentive programs are supposed to be cut down over time in order to accommodate and drive the path to grid parity. In particular, installations in Germany have been larger than intended for the past years. Plus, with installation costs being below electricity market prices, the German government wants to promote self-consumption, which is easier to realize for roofop than for large-scale utility projects. Our sales strategy to serve top-end distributors fits with this development.

 

From your point of view, how Asia’s solar market is different from those of Europe and North America?

We see Asia as a very inhomogeneous marketplace. Japan, for example, is becoming a major market in the aftermath of last year’s nuclear disaster, an arena with special requirements and sensitive to local brands. India, Thailand, Malaysia, as well as Indonesia, on the other hand, are markets driven by utility-scale projects. In these markets, local relationships and understanding of local business practice are particularly important. Finally, the Chinese utility market used to be dominated by large state-owned enterprises, but as it has become a fast-growing policy-driven market, it is opening up to the private sector to join in. With potentially 4 GW to 8 GW of installations in 2012, the Chinese market has the potential to become the largest market worldwide.

 

China is considered the leading PV manufacturing hub in the world. What will the PV manufacturing landscape look like in China this year?

The solar industry is still a nascent industry. Recently, it has seen a dramatic increase in the number of new PV module manufacturing sites entering this presumably attractive sector. It is estimated that worldwide more than 750 module makers exist with many of them in China. However, due to the resulting overcapacity, the ‘gold rush’ is over and the situation is changing from a sellers’ market to a buyers’ market with eroding margins along the supply chain. Consequently, the industry started to consolidate to maintain a healthy supply chain. At the end of this process, the majority of volume production will be with the leading ten manufacturers, preferably Chinese companies, who manage to deliver technology and quality at low cost, and have earned the trust of the markets for their sales and after-sales services.

 

What do you think is the next challenge facing you for further growth?

We see the current market situation as a chance for growth for us. However, trade conflicts in certain regions can hurt the global solar industry and are currently our biggest worries. We see the right response for diversified markets in diversifying our manufacturing locations to meet local content and market needs. Also, inconsistencies of governmental policies that are disruptive to the local markets are a challenge. What the industry needs is a smooth and healthy transition from incentive-driven markets to a self-sustainable marketplace beyond grid parity.

 

Jeanny H. Lim is Editor-in-Chief of InterPV. Send your comments to swied@infothe.com.

 

 

For more information, please send your e-mails to pved@infothe.com.

2011 www.interpv.net All rights reserved.

 

 

 
 

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