Why Investors Are Crazy About Chinese Solar Companies

Chinese solar

As countries all over the world begin pivoting towards renewable energy sources in order to reduce carbon emissions, more of investors’ attention is being paid to the solar industry.

Some of the biggest bets in this sector are Chinese solar companies.


One reason: Solar itself is getting cheaper, which could lead to industry growth. Roughly a year and a half ago, photovoltaic panels cost about $3.50 a watt. Today they’re less than $2 a watt, and by sometime in 2012 they’re predicted to be less than $1 a watt.

But why China specifically?

See why investors are going crazy for Chinese solar companies >

The solar market is headed for big time growth in 2010

CEO of Nanosolar, Inc. Martin Roscheisen (pictured at left) knew solar was on the up back in 2004. Pretty much all investors know it now. Analyst Jesse Pichel at Piper Jaffray & Co. sees 40% sales growth in 2010.

'2010 is going to be an enormous surge year,' says Tom Rooney, CEO of SPG Solar. 'We may do two, three, four times as much work as we did in 2009.'

Long Term Growth Looks Good Too

Longer term, as the cost of solar power approaches that of coal and natural gas, look for the industry to shoot up dramatically.

Chinese government subsidies

China wants to dominate solar (like they already dominate the global wind turbine market)

The Chinese government is overwhelmingly supporting the growth and creation of the chinese solar industry.

'That's going to be their market. That's how they feel about it,' says CEO of SPG Solar Tom Rooney. 'They've put a very, very high priority on winning the race for global leadership on solar.'

Manufacturing costs are low in China...

They're so low that European and Japanese suppliers can't compete with the low cost of Chinese products

It's quality, not just quantity

Only the best equipment is used in China. The Chinese solar panel quality is as good or better than the top brands in Europe or Japan.

Chinese companies are employing Americans here in the U.S.

One of the most labour intensive elements of solar panel manufacturing is the final assembly, says SPG Solar CEO Tom Rooney.

Despite China's greatest advantage being its low cost of labour, Chinese companies are beginning to do final assembly in the States.

'Employing Americans is just good business,' says Piper Jaffray analyst Jesse Pichel. 'And the government offers tax breaks and strong local support.'

Chinese management teams are efficient

Chinese management teams are aggressive, and have generally been smarter with investor capital versus European firms that have wasted billions on flawed strategies.

Earnings for Chinese solar companies were better than expected in 2009

Shares of Chinese solar product makers Suntech Power Holdings (STP.N) and Trina Solar (TSL.N) tripled between March and July of 2009, easily outperforming Western counterparts First Solar Inc (FSLR.O) and Q-Cells SE (QCEG.DE).

Trina Solar's net income went from $18.9 million in Q3 2009 to $40.1 million in Q4, which led to earnings per share of $1.29, 54 cents better than the Zacks Consensus Estimate.

(via Zacks.com and Reuters)

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