The Group is a manufacturer of high-performance solar cells and related solar energy products. The Group has focused on developing, manufacturing and marketing monocrystalline solar cells in the past. Its sales volume recorded a rapid growth of 71.7% between 2008 and 2010, and increased from 24.4 MW in 2008 to 71.9 MW in 2010. Meanwhile, in the first 5 months of 2011, the Group's solar battery sales reached 116.1 megawatts. The Group has now signed long-term contracts with legal effect with 12 customers. These customers will purchase 380 MW, 521 MW and 561 MW solar cells from the Group in the 3 years 2011-2013.
To match the increase in sales, the Group has significantly increased its annual solar cell production capacity from 25 MW in 2007 to 420 MW at present. The group also plans to increase production capacity to 660 MW and 900 MW by the end of 2011 and 2012, respectively. In addition to expanding production capacity, the Group is also committed to improving the quality of solar battery products. Through improved technology, the average conversion efficiency of the Group's solar cell products has increased from 16.7% in 2008 to 17.7% in 2010. It is expected that by the end of 2011, the conversion efficiency will further increase to over 19.0%.
Due to intense competition in the solar cell market and the declining trend in raw material prices over the past few years, the average selling price of the Group's solar battery products fell from RMB 23.1 per watt in 2008 to RMB 8.7 in 2010. However, at the same time, the Group also cooperated with internal R&D teams and third party equipment manufacturers and suppliers to effectively improve production efficiency. As a result, the group's processing cost per watt was reduced from 1.62 yuan per watt in 2008 to 1.18 yuan per watt in 2010, which is lower than the average processing cost of Chinese solar cell manufacturers of 0.22 US dollars per watt (about 1.4 yuan) per watt in 2010. Through cost control, the Group's gross margin also increased from 12.0% in 2008 to 20.9% in 2010.
In addition to focusing on developing the solar battery business, the Group has also begun to gradually implement a vertical integration strategy. The group began producing silicon tablets and silicon wafers in 2011. Silicon tablets are the raw materials for manufacturing silicon wafers, and silicon wafers are used to produce solar cells. It is estimated that by the end of 2011, the Group's silicon tablet and silicon wafer production capacity will reach 660 MW and 500 MW, respectively. By expanding into upstream business, the group can obtain a more stable and lower cost supply of raw materials.
In addition to expanding into upstream business, the Group also plans to purchase manufacturing equipment for solar components in the fourth quarter of 2011 and reach an annual production capacity of 300 megawatts by the end of 2011. In the past, solar cells produced by the Group were mainly sold to solar component manufacturers in China (including Changshu Artus Solar Power and Jiangsu Huilun Solar, etc.), but in the future, the Group will be able to produce solar components on its own. The Group has also set up a strategic alliance framework agreement with Huadian New Energy Development Co., Ltd. (Huadian), a subsidiary of China Huadian Group. Based on the agreement, Huadian will purchase solar components produced by the Group at market prices.
By becoming a vertically integrated manufacturer of solar energy products, the group will be able to profit at multiple links in the industry value chain, while simultaneously reducing the impact of profit rate fluctuations or supply restrictions on individual links.
According to Solarbuzz's data, the size of China's optoelectronics market reached 532 megawatts in 2010, and the target set by the Development and Reform Commission is that by 2011 and 2020, China's solar energy installation capacity will reach at least 2,000 megawatts and 20,000 megawatts, respectively. The future growth space is huge.
