JA Solar Holdings Co Ltd expects pressures on its gross margins to ease in the second half of this year because it expects supply of polysilicon, the solar industry’s key raw material, will rise sharply, its chief executive said on Friday.
“The upstream supply chain will see changes fairly quickly,” Fang Peng said in an interview.
The expected sharp rise in global polysilicon output, a result of last year’s investment frenzy, will push down high polysilicon prices, easing JA Solar’s cost pressures, said Fang.
“Polysilicon prices will normalize gradually,” said Fang.
JA Solar, the world’s largest maker of photovoltaic solar cells, which are put together to create solar panels, reported last month sharply higher fourth-quarter earnings and revenue but gross margin fell to 19.2 percent from 22.5 percent in the third quarter.
JA Solar plans to invite other solar companies to invest in its planned $2 billion photovoltaic production facility in Hefei, Anhui province, said Fang.
“We will not be doing this exclusively. Many companies are talking with us, some of them are from the upstream side and some are downstream,” he said.
Foreign misconception
The long-term outlook for stand-alone solar cell makers such as JA Solar looks uncertain as many of their customers are making their own cells now, Morningstar Equity Research said in a research report dated March 18.
Fang, who had studied and worked in the United States, said JA Solar’s business model still works well for the company because demand for its products is still strong, calling criticism of its business model “foreign misconception.”
JA Solar, which is now positioning itself as a photovoltaic production solutions provider, is pinning its long-term success on the Hefei project, said Fang.
The company wants to replicate its partnership with MEMC Electronic Materials Inc at the Hefei facility, he said.
JA Solar and MEMC announced last month a 50-50 joint venture to build and operate a 250-megawatt facility at JA’s site in Yangzhou, Jiangsu province to make solar cells.
“We will invite those who are interested in working with us to invest in the facility,” said Fang, describing the strategy as “harvesting eggs using other people’s hens.”
The Hefei facility will allow JA Solar to expand across the photovoltaic supply chain through partnerships while maintaining its leading cell maker status.
The Hefei facility will be built in four years and will have a capacity of 3 gigawatts.
The company expects first phase construction to be completed by the end of 2011 and production to start in 2012.
JA Solar’s Nasdaq-listed shares have gained 2.3 percent so far in 2011. Shares of LDK Solar and Suntech Power on the New York Stock Exchange were up about 21 percent during the same period.
Nine of 24 analysts tracked by Thomson Reuters I/B/E/S had a Hold rating on JA Solar. Of the remaining 15 analysts, 3 rated the company as a sell, one rated it as an underperform and 11 rated it as either a strong buy or a buy.
