Suntech is back from the brink. Surprisingly though, experts believe a damaged brand is not its main challenge and a clean bill of financial health may not be its greatest asset. John Parnell reports

Looking through the archives of Solar Business Focus’ sister site PV Tech provides a potted history of Suntech’s rise and fall. The story starts with multi-gigawatt cell and wafer orders, plans for an Arizona production facility and in January 2009, a claim to be the first manufacturer to hit the 1GW production landmark for both modules and cells.

In 2012 the headlines take a more negative turn.

There are accusations of it being victim to a massive fraud in Italy and then reduced polysilicon orders. In February that year it took on US$571 million impairment charges citing “market conditions”. Manufacturing capacity is cut and then in March 2013, its Arizona manufacturing facility closed all together. The same month it defaulted on a bond repayment, a first for a Chinese company.

One year later, Eric Luo, the newly appointed CEO of Wuxi Suntech sat in a meeting room at London’s ExCel conference centre ready to present the future of the company following its divorce from Suntech Power Holdings and its acquisition from a provincial bankruptcy court by Shunfeng Photovoltaics International.

Luo repeated Suntech’s ambition to regain its global top spot. Given how far it fell, can its recovery really take it all the way back or should it just be glad to be back from the brink?

Suntech has a bright future again but big ambitions must be tempered against the reality of current market conditions. Image: Suntech.

Sales and marketing director Hui Wu believes its ambitions are realistic. Speaking at Intersolar Europe, three months into the recovery plan he believes they are headed in the right direction.

“We have a shift in the business strategy. Especially overseas with the support of Shunfeng we will probably move greater into downstream to project investment and maybe in the future project O&M,” he says.

“We are trying to develop more application products, storage, inverters so we have the flexibility to offer customers more than just panels but other parts of the whole value chain. That also means we can be more competitive,” he adds.

To its credit, Suntech has not shied away from the difficult few years. But if the wider industry is to take its confident return seriously, more details on these plans are required, says GTM Research analyst Shyam Mehta.

“From an analyst’s perspective I want to see a technology roadmap, a market strategy, I want to see what their channel strategy is for moving into other geographical markets; how they will go about achieving that? The ball is in Suntech’s court,” he says.

“The world has moved on since the last time Suntech was in the limelight for the right reasons. Suntech’s competitors have continued making strides while it was moving in the opposite direction. It has a lot of catching up to do, I would say, and it’s not clear to me how it is going to go about doing that.”

Buying power

With the backing of its new owner, Shunfeng, Mehta does not blame Suntech for feeling confident about its future, but urges it not to forget its past.

“Shunfeng has deep enough pockets to give it a good go. But they need a detail-oriented market strategy. They also need to not repeat the mistakes committed by [old] Suntech and LDK [Solar], namely overextending their capabilities and trying to do everything regardless of whether it makes sense or not. Old Suntech invested in thin-film, it tried project development in Europe, it invested in a few other technologies that ultimately didn’t pan out at all… It’s about learning from the past and executing plans that are thoroughly vetted,” says Mehta.

Shunfeng clearly has a huge role to play in Suntech’s future. It has already acquired inverter manufacturer Sunways with plans to expand the brand internationally once the right certification is in place. With resources available

“If you are well funded you can always acquire more suppliers and become the largest [supplier] in the world if you want to,” says one Chinese PV industry insider who preferred to remain anonymous, who was also cautious about the speed at which Suntech can achieve its goals.

“If we rule that out, then with the current [manufacturing] capacity, Suntech shouldn’t have any problem getting into the top ten or top 15 module suppliers this year. Shunfeng has spent so much money on acquisitions and other investment activity. The financial health of Shunfeng will be to key to the success of Suntech,” he said

Caption: Suntech must walk a fine line between expanding into new territories and technologies and not overstretching itself. Image: Suntech/Sue Murray.

New money, old habits

With the means to make numerous acquisitions and the intent already confirmed by Suntech, there is a risk that the mistakes of the past could be repeated.

Shunfeng’s major shareholder Cheng Kin-ming, through a variety of holding companies, has interests across the entire PV supply chain. Any hopes of clarity on his future plans are unlikely to bear fruit, but it should not be assumed that tying together all these investments is automatically his plan.

“He is very, very low profile. People didn’t pay too much attention to him and the PV industry certainly didn’t expect him to come and be one of the largest investors in the sector,” the Chinese industry insider explains. “It is a possibility that these investments could knit together but it is not necessarily going to go that way. I don’t think anyone can really know what he is going to do. The market is also wondering if he can raise enough funding to support the ambitious targets he has set in the upstream and downstream sectors for Shunfeng and Suntech.”

A lot of focus is being placed on Suntech’s debt-free status but Mehta warns that this is not necessarily a hugely beneficial differentiator for the company.

“Companies like Yingli and Trina are in a less than ideal position. The end market is growing, we’re in a new phase in terms of the manufacturing sector business cycle but both because of new regulations inside China and the fact these companies have massive amounts of debt, they are highly capital constrained. Their ability to expand supply capabilities, even though demand is outstripping supply, is limited. Suntech doesn’t have that issue,” Mehta explains

“That is hardly the prime determinant of success in the modern PV market, however. Three, maybe even five years ago that was the name of the game: expand capacity as fast as possible, that was pretty much the only way companies were going about expanding their capabilities. Now, there are many different strategies including OEM arrangements, joint ventures with downstream companies in emerging markets and even using manufacturers outside china to serve markets like the US and EU where there are tariffs,” explains Mehta. “Yingli is the biggest by shipments in the world but one third of its output is not produced by Yingli. They have been using OEM partners.”

With Yingli, Trina and other indebted Chinese companies still able to secure open lines of credit with Chinese banks, and poor balance sheets not stopping Yingli’s march to 4GW, debt isn’t necessarily a deal breaker.

“One area where it could be an advantage is that it will make financiers and customers more comfortable with a company’s long-term feasibility, but to be honest, I think that is a bit of a red herring too. We have seen this in the Chinese space, and with Suntech itself. At the end of the day, whether it is from local government or central intervention, companies like Yingli, Suntech and even LDK, it’s difficult to see them going out of business because of how strategically important they are and how many people they employ,” says Mehta.


One less tangible asset than factories and finances is the company’s brand. It had the dubious honour of becoming the first Chinese company to default on a bond. Were it not for a more high-profile failed solar player in the US, it could have found itself being the byword for failure among the sector’s detractors.

Mehta is not convinced that the new Suntech needs to be concerned.

“I think brand in PV doesn’t mean as much, it’s not the be all and end all in the PV module supply business. Historically customers are not very sticky. They are more likely to make a decision based on the price first. If brand was the most important thing then Solarworld would still be the most successful company in the world,” he says.

Breathing new life into the brand still holds some value in the industry – just look at the investment Yingli made in its World Cup presence. For Suntech, Mehta has one suggestion that could help.

“If they were able to recruit high quality personnel [it would help]. They lost a lot of people at the end of the Old Suntech era. In the US they bled their operations, some very talented people left. They need to win back this key talent. If they can do this then they can resuscitate the brand. The market is forgiving in that respect.”

Perhaps the knowledge that its brand has not suffered is part of the reason why Suntech is so bullish. Bull-related idioms can also refer to reckless destruction. Mehta says Suntech will need to know at what point growth becomes self-defeating.

“There’s no shortage of optimism and aggressiveness from many of the big Chinese companies, that needs to be tempered. Some of the biggest, like Trina and Yingli, have done better than Suntech at being aggressive but then knowing when to pull back and save money, when not to expand capacity blindly.

“This is where I would like to see the new Suntech doing business a little bit smarter compared to the old Suntech, where the thinking was ‘let’s throw money at the problem’,” says Mehta.

The ability to make acquisitions now could accelerate Suntech’s position and level the playing field with competitors that rode out the solar shake-out. The key for the reborn company will be to know when to apply the brake and ensure that it matches the solar industry’s sustainable future with a sustainable business model.

What’s in a name?

It’s worth pointing out that at present two companies, Suntech Power Holdings and Wuxi Suntech, are in operation. With two orders of magnitude more staff and control over the manufacturing facilities, Wuxi Suntech is the Suntech referred to in this article. The Old Suntech, as has been referred to in this feature, is used to describe the combined entity and all its related subsidiaries, including Wuxi Suntech, prior to bankruptcy proceedings. For ease, Wuxi Suntech, is simply referred to as Suntech throughout.

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John Parnell
Deputy head of content, Solar Media

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