Published November 28, 2012
Money-losing Chinese solar panel makers Yingli Green Energy Holding Co and JA Solar Holdings Co Ltd are increasing shipments at home to make up for weak sales in western markets, further risking profitability for growth.
Panel prices are the lowest in China, but companies there are cutting prices to gain share in a market that is expected to be one of the largest next year due to government incentives.
"The pricing in China is some of the most cost competitive right now," said Avian Securities analyst Mark Bachman. "So it doesn't help gross margins to ship products into China."
Margins have disappeared for most Chinese solar companies over the past four years as panel prices have plunged 75 percent due to weak demand in Europe and a rapid capacity expansion.
Yingli expects revenue from China to grow to 40 percent from 28 percent in the third quarter, during which sales were $355.9 million.
The company expects gross margins of between break even and 2 percent in the fourth quarter, compared with negative 22.7 percent in the third. The company said it expects fourth-quarter shipments to rise in a low teen percentage from the third.
JA Solar's gross margin was negative 5.9 percent in the third quarter, during which shipments to China doubled from the preceding quarter.
"JA Solar's results echo announcements from its commodity module manufacturer peers this quarter in that revenue upside simply isn't meaningful when gross margin disappears," said Raymond James analyst Alex Morris.
JinkoSolar Holding Co Ltd earlier this month said that half of its revenue next year would come from China, which in August hiked its 2015 target for solar power capacity by 40 percent to about 21 gigawatts (GW).
Raising sales at home is important for these companies as the United States has imposed steep tariffs on imports of products that use China-made solar cells. The European Union could follow suit.
JA Solar, which reported a much smaller-than-expected loss in the third quarter, narrowed its full-year shipment forecast to between 1.55 GW and 1.65 GW, from 1.5 GW to 1.
It expects total cell and module shipments to be between 380 megawatt (MW) and 420 MW in the fourth quarter, compared with 418 MW in the third.
Yingli said it would ship 200 megawatt (MW) of modules to a utility scale project in Imperial County, California, being developed by Centinela Solar Energy LLC. [ID:nPnCN19939]
Shares of Yingli were up 9 percent at $1.56 on the New York Stock Exchange on Wednesday afternoon. The stock of JA Solar, which consolidated its American Depositary Shares (ADS) last week to avoid delisting from the Nasdaq, were up 6 percent at 69 cents.