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Energy

Chinese Solar Firms Will Die Before Being Acquired (JKS, STP, LDK)

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By Paul Ausick Published
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A disastrous supply glut of solar PV panels could lead to the shuttering of many of the weaker Chinese competitors, according to the CFO of Jinko Solar Holding Co. Ltd. (NYSE: JKS). China’s largest solar makers, like Suntech Power Holdings Co. (NYSE: STP) and LDK Solar Co. (NYSE: LDK) are likely to survive, but shouldn’t look forward to any takeovers of the country’s failures.

Zhang Longgen, CFO of Jinko, is quoted in a report from Bloomberg News:

We won’t see many mergers and acquisitions at home. Many Chinese companies are more willing to die rather than be bought because it is against their culture to be acquired.

Zhang also pointed out that state-owned or controlled companies are far likelier to survive:

The power of these companies is very incredible as they have enough capital to overcome difficult market conditions. They can shut factories temporarily and resume production when the market recovers.

He did not name any specific companies, but China offered more than $25 billion in loans to several solar makers in 2010, not including Jinko.

Solar panel pricing fell nearly 50% in 2011, to an average of about $0.94/watt. Some of the industry’s largest manufacturers, like Suntech and LDK, doubled their manufacturing capacity during the same year.

Like many others in the solar industry, Zhang is not sanguine about prospects for the industry in the first half of 2012 and expects demand to drop another 10%-20%.

Paul Ausick

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About the Author Paul Ausick →

Paul Ausick has been writing for 247Wallst.com for more than a decade. He has written extensively on investing in the energy, defense, and technology sectors. In a previous life, he wrote technical documentation and managed a marketing communications group in Silicon Valley.

He has a bachelor's degree in English from the University of Chicago and now lives in Montana, where he fishes for trout in the summer and stays inside during the winter.

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