Friday, November 4, 2011

LG to buy Suntech?

Very interesting.  LG has denied making the offer but allegedly they offered Suntech (STP) $1 billion (USD) for the company. As STP's stock has a market capitalization of roughly $500 million, is it worth it? No doubt market consolidation will force unwilling bed-fellows but STP lost $280 million in Q2. Ouch! STP was a high flyer and they bet the farm on growth. They invested heavily in manufacturing assets so they could dominate the PV market. Vertical integration was the strategy de jour. Trina, Yingli & Jinko all believed in a vertical world. No lies, it made sense to me. In just 18 months the world for solar has changed.  The smart growth strategy of yesterday is today's Achilles heel.  With low cost silicon & wafer producers like the young giant GCL, STP and others are left holding older lower efficiency manufacturing assets.

Earlier this year I met Dr Shi at the opening of STP's Goodyear AZ plant & jumped at the chance to shake his hand.  How often do you get the chance to shake the hand of a billionaire!?  When I started in the industry 17 years ago we used to joke about being thousand-aire's, and that was on a good month.  Next time I meet him, his personal net worth could be a fraction of what it was.  How the mighty shall fall.  The issue is not about one man's wealth; it's about ten's of thousands of jobs providing sustenance for hundred's of thousand of families.  Hopefully some good will come of this.

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