Yingli shifts gears to power ahead

Tough market conditions in Europe prompt Chinese solar companies to search for new growth prospects in Asia, Africa

Emerging markets may soon pip Europe in attracting Chinese solar panel companies, as a saturated market, shrinking margins and punitive actions are clouding investment prospects on the continent, experts say.

Yingli Green Energy, the world's largest solar manufacturing company, says that though the European Union has decided not to impose punitive duties on Chinese solar panels, it is better for Chinese solar companies to focus on other emerging markets.

Miao Liansheng, founder and CEO, says Yingli will focus on emerging markets like Malaysia and South Africa and on providing downstream services, rather than expand further in Europe. "This will ensure steady, long-term growth and also reduce risks," he says

Last month, the European Union said it had reached a settlement in its long-standing dispute with Chinese solar producers, and said Chinese companies would sell domestically produced solar panels at minimum or near spot market prices. The agreement came after six weeks of intense negotiations that began after the EU decided to impose provisional anti-dumping duties of 47.6 percent on imports of Chinese solar panels, cells and wafers.

Yingli, based in Baoding, Hebei province, was set up a decade ago by Miao as part of his endeavor to diversify into the energy business. Miao says that while the solar business was relatively unknown in China in the early days, it was a flourishing and thriving business in Europe. "To some extent, that was also why several Chinese solar companies expanded into Europe."

Yingli decided to focus on overseas markets, particularly Europe, after its solar panel output reached 50 mega watts. "In 2004 we entered the European market, by selling our products in Germany."

The European strategy proved successful for Yingli and it was able to raise more than $220 million through a series of private investments, and ultimately get listed on the New York Stock Exchange in 2007.

The company has also grown from a small local company to one that has more than 12,000 employees and more than 26 million solar panel deployments in 40 countries, including Germany, Italy, Japan and the United States. More than 60 percent of its revenue till last year came from Europe.

The EU directive earlier this year forced the company to pare its sales targets in Europe and instead focus on the domestic market and other regions like South Africa and Japan.

While the problems in Europe did have a bearing on Yingli's ultimate decision to branch out into other markets, it was also necessitated by its higher output. Yingli's output of photovoltaic products is expected to reach 3.2 to 3.3 gigawatts this year, an increase of 39.4 percent from the previous year, necessitating the need for newer markets for its products.

"We have shifted our focus from the European Union and United States to the emerging markets during the past two years to reduce risks from punitive duties and maintain stable growth," Miao says.

A report released by research firm NPD Solarbuzz says global solar photovoltaic demand is forecast to reach 20 gW in the second half, 22 percent higher than in the corresponding period last year. "This increase will be driven largely by the aggressive PV developments in China and Japan, and will also drive full-year 2013 PV demand to a record high of 35.1 gW," says the latest NPD Solarbuzz Quarterly report.

"The solar PV industry continues to transition from a European-dominated environment to a global market, with a wide range of countries contributing to growth in the overall PV market," says Michael Barker, senior analyst at NPD Solarbuzz. "The PV industry remains highly dependent on a small group of countries currently at the multi-gigawatt level."

Miao believes that though the European market accounted for more than half of the global market, this year, PV deployment will be concentrated mainly on just two countries, China and Japan.

"In my opinion, these two countries will account for more than half of the global PV demand this year, while the European region may see a considerable decline."

NPD Solarbuzz also says that the European market will account for a global market share of less than 30 percent by the end of this year.

Companies like Yingli have already started making the necessary transitions, Miao says. "China will reach at least 7 gW PV installation this year. I expect that our domestic and emerging markets will account for 40 percent of our total sales this year".

In May, Yingli won the bid to supply 220 mW PV modules for China Power Investment Corporation. The modules are expected to be used for five PV power plants in Hebei and Qinghai provinces.

Given the economic crisis and the fall in the European solar market, many export-driven Chinese PV manufacturers of solar cells and modules are facing great challenges, experts say.

Many small PV companies have gone bankrupt or ceased operations, while some big companies are also in trouble. Miao says that in such a scenario it is important for big players to cash in on the market opportunities.

The State Council recently released several guidelines to provide some relief for the battered industry. These were based on six principles for the healthy development of solar energy, including subsidies, grid access and financing. It also said that new installed capacity would reach 10 mW annually from 2013 to 2015.

For the past two years, the domestic market accounted for about 24 percent of overall sales for Yingli.

European experts say newly installed photovoltaic capacity will grow 50 percent in China this year, while in Japan the market is expected to triple last year's level.

Besides the domestic market, Yingli is also eyeing other emerging solar energy countries such as Brazil, South Africa and Malaysia. It is one of the official sponsors of the 2014 FIFA World Cup in Brazil.

Total shipments to new markets such as Japan, India, Malaysia, Jordan and African countries are forecast to increase from 1.7 percent in 2010 to 23.1 percent this year.

Apart from the big deal at home, Yingli has also won contracts in South Africa and Malaysia. The company will supply 96 mW PV modules to the Jasper PV project in South Africa's Northern Cape, one of the largest solar projects in the country.

It is also supplying 10 mW PV modules for the Amcorp Power project in Malaysia. The project is the largest single site PV power plant in the country.

"We're delighted to make this breakthrough in Southeast Asia," Miao says, adding that this will help reduce Yingli's dependency on Europe.