Suntech takeover opens door to Japan

SHANGHAI: In a bid to penetrate Japan, the world's largest solar power market, Suntech Solar Holdings is to spend up to US$300 million buying Tokyo-based manufacturer MSK.

New York-listed Suntech, China's leading solar energy producer, is to acquire a 67 per cent stake in MSK for US$107 million by the end of the third quarter, it announced yesterday.

All remaining MSK stocks will be bought by the end of next year for a total of between US$53 million and US$193 million.

The takeover, analysts say, is a sign of Suntech's strategy to expand abroad to increase its supply of solar wafers, key materials that are in short supply and vital in the manufacturing of solar cells and panels.

MSK is the largest solar panel producer in Japan and has 20 years experience in the design and application of solar panels mounted on buildings to generate electricity.

Cui Rongqiang, director of the Solar Energy Research Institute of Shanghai Jiaotong University, told China Daily that the takeover would help Suntech explore the Japanese market.

"Suntech's core competence lies in making solar cells while MSK is good at integrating the cells into panels," he said.

The buyout will not only strengthen Suntech's solar panel production, but is also likely to spark growth in the export of its cells to the Japanese market.

"Japan is the world's biggest and the most mature solar market. Its solar industry is entirely market-oriented. There are no government subsidies," Cui said.

According to one report, Japan's annual production of solar cells and panels accounts for over half of the world's yearly total.

Last year, its solar cell and panel output grew 48 per cent year-on-year.

The country also tops the world league when it comes to putting solar panels on buildings, outfitting 70,000 with the panels last year alone, Cui said.

"Private investors abound in Japan's solar industry and the market is set to grow as new technologies lower costs and solar panels become cheaper," Cui added.

Hu Hongxun, a council member of the Solar Energy Society of China, said the takeover was a way for Suntech to acquire more solar wafers.

Japanese companies including Sharp, Kyocera and Mitsubishi are world leaders in producing the wafers.

"To prevent these components flowing out of the country, Japan has strict rules on the export of solar wafers," Hu said. "So far the rules have barred Suntech from importing the wafers from Japan."

The takeover of MSK, however, will allow Suntech access to the precious Japanese components.

"After the takeover, Suntech will very likely seek components from Japan to expand its capacity," Hu said.

At capacity Suntech could manufacture solar cells capable of generating 240 megawatts of electricity each year.

This year it will only produce enough cells to generate 140 megawatts, a situation largely due to the shortage of solar wafers.

Last week, Suntech signed a 10-year contract with US-based MEMC Electronic Materials Inc, under which MEMC will supply Suntech with US$5 billion to US$6 billion worth of solar wafers.

The deal laid a solid basis for Suntech's goal of producing 1,000 megawatts of solar cells by 2010, Hu said.

In an earlier interview with China Daily, Suntech CEO Shi Zhengrong said the company was negotiating with other suppliers and expects similar contracts to be signed over the next two years.

Source: China Daily