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Cypress Semiconductor Corporation Message Board

  • floppy_6 floppy_6 Apr 23, 2006 8:45 PM Flag

    SPWR CC - Part II

    7) Exiting the year with Opex down to 10% of the sales.
    8) Wafer thickness => lower gram/watt consumption (i.e. 7 gram/watt).
    Line 1 exhausted 255 micron, is running 220 now. Line 2 is running 190 to 220, Line 3 running at 190, line 4 will start at 194. (One analyst comments that progress extremely attractive when compared against peers ? they said to produce 200 micron the first-half of 2006. But one other analyst said that Sharp down to 180 and Q-cell down to 130, SPWR claimed that wafer thinness is their expertise, they can down to 150 to 160. For now, they stick to 190 micron target).
    SPWR claims that most of solar makers lost energy conversion ratio when they makes wafer thinner. And SPWR actually increases conversion ratio when it gets thinner. Peers find difficulty to push thinner cell to module assembler, it is difficult to handle a thinner cell. At SPWR, because of the interlocking method from back-contact patent, we don?t have such problem.
    9) total capex up to the second facility, six lines will be $230 millions.
    10) Silicon cost increased 25-30% from Q4 to Q1, remain stable for Q2 because contract on hand. Poly cost remains single percentage change throughout year, largely flattish.
    11) Exiting year with $60 millions cash.
    12) Conclusion: Conversion efficiency is leveraged through the value chain, all the way from cell-making, module making and ultimately installed at the fields. I don?t think there is a single solar maker or silicon maker believing that poly price to be remained at today?s price. Everybody forecast that poly price will come down, abate in time, a matter of when. When that happens, the power of efficiency will clearly flow through our income statement. We?ve been very open that we do have higher capital cost (Note: I don?t think they were open on particular higher cost on mono-crystalline). That higher capital cost is more than offset by higher efficiency. Then we accrue the benefit in the module and installation through the value chain. We are in the early part of game. Historically, solar makers are competing on basis of small differences between conversion ratios. The channel starts to discover the type of efficiency value that they are recognized when you transport the product to the sites, put it on the roof, and the labor saving, etc. One competitor, in their recent CC, mentioned 1% improvement on efficiency ratio, resulted in 7% cost reduction along the value chain. There is growing awareness of this higher efficiency value, and we are pushing it in the front line.

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    • ="When thickness gets thinner 1/3, wafer usage improves by 1/3?"

      I believe less than 1/3. first is the defect of wafers, second you need to make more cuts, lose some silicon on the cut. improves 1/4 may be closer.

      ="monoCrystalline and multiCrystalline vs STP and SPWR"

      Mono and Multi crystalline process has slightly different margin. That is valid by the same company. Sunpwer mono vs Suntech mono is not cmpareable. Sunpower mono vs Suntech multi is larger in difference.

      One of Chinese PV engineer said double the capacity will reduce average costs 10%. I meant SPWR buys silicon at 2005 price, produce multicrystalline by year-end. then SPWR will have profit margin close to STP in Q4(25%). otherwise, Sunpower is hard to get there. The industry trend is to produce PV at lower costs, 10%-15% solar efficiency is aceptable. I expect soon every one will have ASP pressure. low cost is critical in this group.

      ="Bought a little bit of Solarworld. Gosh! It is expensive - $317 U. S. Dollars"

      If it split 4-by-1, then price per share is cheaper, should be right on the coner. Do you have market cap, revenue and other data on Qcell and Solarworld? I like to read them.

    • Wenh,

      Ok! You caught me! Jefferies' statement of "Mono takes 50% of COGS, more than 20-30% in the mutli's scenario" has continuingly bothered me. That's why I hesitate to apply the same formula you calculated on STP to SPWR.

      Well, since you conclude that Mono-crstalline is just "slightly" more expensive than Multi-crystalline to build cell, I think I will just take your theory. If there is huge difference in costs, the gross margins between STP and SPWR should have a wide gap. The fact that their gross margins do not differ very much validifies your statement of "slight" difference on cost.

      Bought a little bit of Solarworld. Gosh! It is expensive - $317 U. S. Dollars.

    • >Single Crystalline PV has slightly lower profit margin.
      =="Do you have any source to back that?
      ==(only slightly? Jefferies thinks it 50% vs. 20-30%.)"

      Monocrystalline Silicon Cells:
      Made using cells saw-cut from a single cylindrical crystal of silicon, this is the most efficient of the photovoltaic (PV) technologies. The principle advantage of monocrystalline cells are their high efficiencies, although the manufacturing process required to produce monocrystalline silicon is complicated, resulting in slightly higher costs than other technologies.

      Multicrystalline Silicon Cells:
      Made from cells cut from an ingot of melted and recrystallised silicon. In the manufacturing process, molten silicon is cast into ingots of polycrystalline silicon, these ingots are then saw-cut into very thin wafers and assembled into complete cells. Multicrystalline cells are cheaper to produce than monocrystalline ones, due to the simpler manufacturing process. However, they tend to be slightly less efficient, creating a granular texture

      this link, describe techs in 3 years ago.

      it will take some time to explain why STP not motech,,, later.

    • Nice job, Floppy.

      There are very few people really study the fundamentals. Even we have some argument before, you are still one of the best around. I read the Q1 report, Sunpower profit margin dropped to 16.7% from 19.8%. I see no reason and don?t understand why.

      - Silicon cost increased 25-30% from Q4 to Q1 is negative.
      + Near fully ramped up line #2 vs significant output in Q4 is a big plus.
      + Line #1 upgraded to 220um(16%) more si efficient than it was.
      + Line #2 is also 16% more si efficient than current line #1.
      + Solar cell efficient increased.
      + Possible appreciation in solar product prices.

      All of these I see even-out or slightly positive to profit margin in Q1. the fact was 3% decrease, very large change in short 3 months. You claim Sunpower will match Suntech in profit margin (28%) by year end. That do you think now?


      • 1 Reply to Wenh99
      • Wenh,

        Research is my hobby. It does necessarily help the profit in this puzzling environment.

        Gross margin drop was the reason of SPWR's sell-off, but not the right reason. 200 base points drop was due to partly Phillipinos' stock options converted to stock grants, line 3 ramp-up cost and increased poly cost.

        Raw silicon price did increase approximately from $60 per kg to $70 per kg in last 90 days. It will hurt STP in some degree too but probably not as proportional as SPWR since the latter use more expensive mono-crystalline, STP uses more multi-crystalline.

        Since you follow STP, do you know how much is their poly cost in percentage to sales? SPWR, according to Jefferies, goes as high as 50% vs. multi-crystalline users' 20-30%. I suspect this ratio exggerated. Maybe you have some idea from STP side. STP deos use some mono for higher efficiency product.

        STP offers very little communiation except ER, SPWR offered a lot. This is plus or minus, hard to say.

        Right now, poly shortage is getting extremely serious. In SPWR's cc, it is indicated that there is almost no spot market out there. Either you have poly or you don't. You can't even go out there to buy spot when you realize that you are in short. Although STP sits in the hub of Chinese semi., I am not sure how they deal with this issue, how prepared they are? From last CC, it seems a bit problem there.

        I own neither one except CY. I do own Q-CELL, which is 50% cheaper in terms of EV/S or P/E. They are slower grower but supply is more defined. I Checked several sources, it is all indicated that their gross margin as high as 37%, probably owing to automated plant and German generous susidized program. In German, solar maker can even flow downstream the increased wafer cost to end-user. In any event, if any investor here ever studied how the world market values German Solars, Taiwan Solar - Motech & Japan solars, they won't be comfortable with U. S. solar valuation.

        I believe that SPWR's original target was to meet gross margin of 27% by year-end. Looks like they are short of this target by promising 25-26%. But with wafer usage down from 9 gram/watt to 7 gram/watt (mathmatically, that's 20% wafer saving) starting end of 2006, it looks like SPWR's gross margin will surpass STP's if STP does not find other technological improvement. SPWR targets 10% opex at year-end, I am not sure how is STP's Opex ratio?

        Right now, China largest semi - SMIC, European Semi - STM are all trying to get in this market. Japan solar is expanding factory trying to export (they have efficiency ratio of 18-19%). 3-4 Taiwanese solars are stepping behind Motech. Wenh - If you don't find STP striving in wafer usage improvement in this CC, that's a dump, serious! You don't have niche, you will fade out, epsecially valuation not cheap at all. Maybe Chinese labor cost is cheaper, but looks at German's Q-cell automation power. ELSR also develops some furnance efficiency. Maybe STP's Opex lower, but I don't believe that strong enough.

        As for SPWR, I am not sure. They do stand in innovation front. In the end of last CC, they did try to "sell" the concept of growing realization of high energy efficiency ratio eventually flowing down the value chain.
        As they are continuously on ramp mode, it is hard to figure out what's their final "normailzed" gross margin. They have 200 MW more generation-2 plants coming out in 07 and 08. Of course, mono-crystalline cost is a concern, I am still dubious on Jefferies' estimate.

        Good luck.

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