Taiwan's solar industry needs to improve from its weakness of lacking brand recognition and control over distribution, said Ellick Liao, chairman of Taiwan Solar Energy (TSEC).
Currently, the total supply of solar products is about 150-200% more than demand and this imbalance has existed for 18 months, said Liao. It is because Europe is still the largest solar market in the world, and hence, as Europe demand began to fall due to the debt crisis in the second half of 2011, global demand fell, added Liao. As for supply, China-based solar firms began to expand capacity significantly in 2011 despite falling demand, Liao pointed out.
The imbalance has caused product prices to collapse. According to studies, as of the end of 2012, solar product prices were only 25-43% of the prices back in January 2011, added Liao. In addition, in the past two years, the total operating loss of Taiwan-based wafer and cell firms exceeded NT$20 billion (US$675 million). The conditions in China are even worse, said Liao, with more than 60% of its firms having suspended production.
Trade war provides rare opportunity
Despite all the pessimism surrounding the industry, the solar industry still has been one of the fastest growing industries in the world in the past 10 years, said Liao. The solar PV system market had a cumulative annual growth rate (CAGR) of 60% between 2002-2011. The first stage of commercialization for solar energy will be completed as soon as the cost of generating power by solar in developed countries such as those in Europe, Japan, Canada and Australia falls below the cost of using fossil fuel, Liao noted.
The trade war started by the US and Europe is giving Taiwan-based firms some breathing room, said Liao. The trade war, which is curbing massive capacity expansion by China-based firms, can narrow the cost difference between Taiwan- and China-based firms, Liao stated.
Despite the rare opportunity, Taiwan-based firms have gone through more than 20 months of consecutive losses and have less resource to fuel growth. If Taiwan-based firms cannot strengthen its competitiveness, once Europe and China reach some trade terms, Taiwan-based firms will again face a limited market, said Liao.
Taiwan lacks branding and marketing
Liao pointed out that Taiwan's solar industry does not have horizontal or vertical integration. Also, it is because Taiwan only produces midstream products; without own-brand products and distribution channels, the industry has been lacking connection to the end market, added Liao. Furthermore, Liao said, mergers and acquisitions take a lot of time, and will not be able to capture the current opportunity.
A large-size sales representative firm
"My suggestion is to set up a joint venture by four or more solar cell makers and some wafer, conductive paste and module firms to form a large-size sales representative firm to build own-brand products. In addition, the firm can cooperate with one or two international firms to build the solar PV system business and promote 'Made In Taiwan' products. With the government acting as a funding agent, the firm can expand into the international market," stated Liao.
According to Liao, the firm can focus on major markets such as Europe, the US and Japan, setting up sales offices, as well as storage and OEM solar module production facilities in overseas locations to reduce transportation costs and possible trade issues. In addition, Liao noted, the firm can operate own-brand business. As for materials, a majority of them can be provided by the shareholders while the firm maintains certain power to procure materials from outside sources to stay competitive, added Liao. Furthermore, the firm can establish an R&D center to develop next-generation products and can cooperate with investment banks to develop solar power investment packages for investors, said Liao.
