We noticed you're browsing in private or incognito mode.

To continue reading this article, please exit incognito mode or log in.

Not an Insider? Subscribe now for unlimited access to online articles.

Sustainable Energy

Once-Mighty Suntech Struggles to Survive

The Chinese solar giant is in deep trouble, but even its collapse wouldn’t be enough to stabilize a massively oversupplied market.

The world’s largest supplier of solar panels, Suntech Power, based in Wuxi, China, is teetering on the brink of insolvency. The Chinese business icon (see Solar’s Great Leap Forward”) will likely survive, but its woes show how it’s become nearly impossible for any company to be profitable selling solar panels.

Cloudy days: Employees of Suntech at a trade show in Shanghai in March.

Suntech’s founder (and solar industry pioneer) Zhengrong Shi has been replaced as CEO by former chief financial officer David King, a Chinese-American who joined the company last year.

The surprise move is meant to get Suntech’s financial house in order after four consecutive unprofitable quarters and a stock price that has fallen more than 50 percent this year. The company has a crushing debt load of over $2.2 billion and says it was a victim of a fraud involving solar projects in Europe that could further damage its balance sheet.

In many ways, Suntech is suffering from the stifling market conditions it helped create. To achieve greater scale, it borrowed heavily and rapidly expanded production to lower solar panel costs and keep pace with competitors (see “The Chinese Solar Machine”). But now, the market is flooded with panels, and the leading Chinese solar manufacturers are overextended financially.

It’s created a situation where even the most technically advanced and established companies are operating at a loss. “Even if Suntech were to vanish overnight, it wouldn’t have a profound long-term effect on the market,” says analyst Nathaniel Bullard at Bloomberg New Energy Finance. “It may spook the others, but it’s not enough to address the supply-demand dynamic.”

What will happen now to Suntech and other debt-laden Chinese manufacturers is anyone’s guess. Suntech could ratchet down expenses to remain independent, or it could combine with another large business. Some sort of debt relief from a government-owned Chinese bank is possible, too, since solar is a strategic industry in China and Suntech is a high-profile company.

But such a move could inflame tensions in the ongoing trade case against Chinese solar manufacturers accused of dumping products and receiving unfair government subsidies (see “Analysis: Chinese Solar Companies Sell Below Cost”). “There’s already a backlash and [a debt write-off] will add further scrutiny,” says Mark Bachman, an analyst at Avian Securities.

Suntech says the management shake-up will allow Shi to focus on strategy for navigating a turbulent market and to commercialize technology from its labs.  However, the management shuffle appears to be a setback for Shi, a solar industry visionary who started Suntech with $6 million in funding from the local government in Wuxi. A former research scientist in Australia, his technical credentials and the company’s focus on innovation helped set Suntech apart from other Chinese solar companies.

Shi seemed to be financially shrewd as well. Suntech went public on the New York Stock Exchange in 2005, which gave the Chinese upstart more validity in the eyes of investors and solar project financiers. But now being a public company listed in the United States comes with added disclosure burdens and pressure from skittish investors.

All the leading Chinese solar manufacturers, including Suntech, have advanced technologies to make silicon solar cells incrementally more efficient. If one of these giants does fall, those innovations would be lost unless they are purchased from competitors.

But Suntech and other solar companies’ problems are economic, not technical. With a supply of solar panels roughly double what the demand is, there’s no sign that the ongoing shake-up has run its course. “We need some of these companies to go out of business for the industry to survive and be profitable,” says Bachman.

AI is here. Will you lead or follow?
Join us at EmTech Digital 2019.

Register now
More from Sustainable Energy

Can we sustainably provide food, water, and energy to a growing population during a climate crisis?

Want more award-winning journalism? Subscribe to Insider Basic.
  • Insider Basic {! insider.prices.basic !}*

    {! insider.display.menuOptionsLabel !}

    Six issues of our award winning print magazine, unlimited online access plus The Download with the top tech stories delivered daily to your inbox.

    See details+

    Print Magazine (6 bi-monthly issues)

    Unlimited online access including all articles, multimedia, and more

    The Download newsletter with top tech stories delivered daily to your inbox

You've read of three free articles this month. for unlimited online access. You've read of three free articles this month. for unlimited online access. This is your last free article this month. for unlimited online access. You've read all your free articles this month. for unlimited online access. You've read of three free articles this month. for more, or for unlimited online access. for two more free articles, or for unlimited online access.