Solar survivor

This year, the financial crisis finally caught up to the solar industry. Governments in Germany and Italy, the world’s biggest solar markets, have scaled back their support programs, leaving solar companies facing smaller margins and fiercer competition for contracts.

But despite these challenges, Li Xiande, a founder of JinkoSolar and the company’s current chairman, sees a bright future for the industry.

Q: What markets does JinkoSolar focus on?

A: We currently operate in major Western countries and in the Asia-Pacific, chiefly India, Israel and Australia, and we have sales offices in Germany, France, Italy and the US. We will continue to focus on the European market in the near future, since it is the largest photovoltaic (PV) market and has the world’s highest energy costs. We are also venturing into the US and Japan. It’s still a bit difficult to enter Japan: Its market was closed off for a long time, and Japanese manufacturers like Kyocera and Sharp are among the industry’s global leaders.

Q: What’s your view on the recent reduction of government support for solar in some Western countries? How is that impacting Jinko and others in the industry?

A: I think it’s a positive change overall, because the PV industry can’t subsist on government subsidies and support forever. Fewer government subsidies help drive costs down, and that makes it possible to achieve grid parity, which will ensure a bright outlook for the PV industry. Reduced subsidies will impact some players in the near future, but beyond that they will definitely have a positive effect.

Q: What are the prospects for the domestic market?

A: We are optimistic about China’s market in the mid- to long-term, but it still has a long road ahead of it. There are still some issues we have to tackle, like developing smart power grids. However, the government is putting a lot of emphasis on PV power. China’s New Energy Development Program prescribes that the country should have 10 gigawatts of installed PV power capacity by 2015. That would represent substantial growth.

Q: Competitors are expanding capacity rapidly. How are you staying competitive?

A: Our competitive advantage depends on having controlled costs, leading technology and an established brand. We are vertically integrated and have a balanced product chain, which allows us to lower cost. Our non-silicon cost, which was US$0.73/watt in the first quarter, is the lowest in the industry. I’m not worried about losing competitiveness.

Q: How is your production capacity allocated between silicon wafers, cells and solar panels?

A: Basically, we produced almost 1GW each of silicon wafers, solar cells and solar panels last year. We will continue to develop all three products equally. Our target for this year is to crank up production to 1.5GW and achieve US$1.4-1.5 billion in consolidated sales. We have no plans in the short term to raise funds from the capital market or build a new plant. Our plants are currently operating with plenty of capacity.

Q: The supply of polycrystalline silicon, your major input, now outstrips demand. What effect has this had on your margins?

A: If raw material prices fall, that boosts profit for mid- or downstream producers, although there is of course some volatility. However, in the first and second quarters, the prices of wafers and modules were falling much faster than that of polysilicon, and that encroached on our profit margin. But I estimate prices both mid- and downstream will finally stabilize in the third quarter, and we’ll be able to recover significantly.

Q: Has the price of polysilicon hit bottom yet?

A: The production cost keeps going down, and competition among manufacturers is fierce. So I wouldn’t rule out the possibility of a further drop. However, I’d say the downtrend is a good one, as it will help speed up market consolidation by eliminating manufacturers with outdated technology and less capacity.

Q: Are many solar manufacturers pursuing vertical integration, acquiring facilities throughout the product chain?

A: Many companies are pursuing this, but there are only a few that have actually achieved a high level of integration. JinkoSolar and Yingli are the only two, from my point of view. We don’t plan to acquire any silicon production for the time being, but we won’t rule out the possibility in the future as JinkoSolar keeps growing and the market changes.

Q: You and your family hold 45% of Jinko’s shares. As a US-listed company, do you think this could cause some investor concern?

A: I don’t consider this to be a problem. There are three of us that hold a large percentage of shares since we are the founding shareholders, but apart from us none of our family is involved in management. We’ve hired a great auditor, PwC, and the best lawyers. We are open to supervision of any form from investors.