1. Industry Evolution and Growth
Strategies for International Solar PV
Module Manufacturers
Dan Baldauf

2. Solar PV Overview
• Varied solar technologies
• Varied companies along the solar PV value chain

3. Global Industry
Manufacturers in USA, Taiwan, Europe, China, Japan, India

4. Literary Review
• Michael Gort and Stephen Keppler (Industry
Evolution)
• Igor Ansoff (Growth Strategies)
• More recent academics were added to ensure
theories were up to date.

5. Research Methodologies
• Primary Sources (3 interviews)
• Secondary Sources (annual reports, market reports,
academic literature, and internet searches)

6. Industry Evolution (Gort and Keppler)
1. First
commercialization
of product 5. Net entry levels
reaches
approximately O
2. Rapid rise in net
entry 3. Net entry 4. Period of
reaches negative net entry
approximately O “Shakeout”

7. International Solar PV Module Industry
*Data was collected from multiple industry directories and with internet searches.

8. Stage 1 (1958-2001)
First solar companies enter the industry
*1st crystalline solar module commercialized in 1958

9. Stage 2 (2001-2009)
Rapid Rise in Net Entry
In Stage 2 the number of module manufacturers increase from 120 to 340.

10. Stage 2 (2001-2009)
Price Decrease
From 2007-2011, average module prices decreased by 57%.
Average Selling Price $/watt
First Solar Trina Suntech Yingli SunPower Hanwha Canadian Solar
31/12/2007 2,48 3,80 3,72 3,86 4,48 4,42 3,75
31/12/2008 2,37 3,92 3,89 3,88 4,71 3,92 4,23
31/12/2009 1,75 2,10 2,40 2,00 3,63 2,24 2,13
31/12/2010 1,49 1,75 1,82 1,75 3,59 1,75 1,80
31/12/2011 1,26 1,33 1,51 1,43 2,94 1,41 1,34

11. Stage 2 (2001-2009)
Over Capacity
As prices decrease, companies seek to lower their costs, mainly with economies of
scale (Keppler K. S., 2001).
*As over capacity increases, it makes it
harder for companies to move inventory

12. Stage 2 (2001-2009)
Profit Decline
* Prices dropped faster than costs causing margins to be squeezed.

13. Stage 2 (2001-2009)
Incumbent’s Advantage
• As companies increase their capacity and expand their businesses, they
gain valuable experience.
• Their larger economies of scale also give them a cost advantage.
• Incumbents with better resources and experience begin to dominate
innovation.

14. Stage 3 (2001-2012)
Shifts in the Sources of Innovations
Outside the industry includes..
•Research institutes
•Universities
•Inventors
•Companies not manufacturing modules
42%

15. Stage 3 (2001-2012)
Shifts in the Types of Innovations
As companies have larger capacities, the incentive to make process innovations is
greater. Each innovation can save costs or increase quality per unit created.
Unit 2 Unit 3
Unit 1
Unit 1
Unit 4
Process Unit 2
Innovation Process Unit 5
Innovation
Unit 3
Unit 6

16. Stage 3 (2001-2012)
Product Innovations Still Relevant
*The rate of product innovations has been increasing. The diversity of innovations is also
increasing.

17. Stage 4 (2012-20??)
Static Optimum Shakeout
Exit rates increase while entry rates decrease. The intensity of the shakeout usually
depends on the amount of innovation and demand in the industry. High amount of
innovation lead to more intense shakeouts.

18. Stage 4 (2012-20??)
Demand
Demand is likely to increase when the technology hits grid parity, or when it
becomes as cheap as conventional power. Large amounts of demand allow for
more growth opportunities, leading to higher survival rates.

19. Stage 4 (2012-20??)
Consolidation
Demand will increase and more firms will exit so consolidation must occur. Few
firms will occupy a majority of the market by the end of the shakeout.
Global Market Share Top 10 Global Share
2000 5%
2001 7%
2002 9%
2003 11%
2004 15%
2005 21%
2006 28%
2007 39%
2008 53%
2009 58%
2010 54%
2011 47%

20. Industry Comparison
Differences
Some differences between the previously studied industries and the solar industry..
•Shaped by international forces
•Subsidy driven (unpredictable demand)
•Higher acquisition rates

21. Industry Comparison
Similarities
Some similarities between the previously studied industries and the solar
industry..
•Shakeouts also caused by innovation
•High entry followed by high exit (Static Optimum Shakeout)
•Significant entry will happen

22. Yingli
Shakeout Survival
First
Suntech
Trina Solar
Early Entrants
Other factors that influence survival are..
•Early entry (experience and ability to innovate)
•Economies of scale

23. Yingli
Shakeout Survival
First
Suntech
Trina Solar
Low Cost
Some ways to lower costs..
•Process innovation is the key during Stage 4.
•Vertical integration allows better cost control, but less flexibility.
•Companies lay off employees to lower costs.

24. Yingli
Shakeout Survival
First
Suntech
Trina Solar
Product Differentiation
Companies can survive shakeouts by serving a niche area..
•In the solar industry module efficiencies range from 14.0% - 20.4%
•The three main solar customers are residential, commercial, and utility
Residential Commercial Utility

25. Growth Strategies
Growth Matrix
Igor Ansoff is regarded as the father of strategic management, and is most famous
for his growth matrix.
Additional integration growth strategies will also be included to further build on
Ansoff’s Matrix.

26. Growth Strategies
Market Penetration
When a company seeks to increase the sales of their product in its current market. – Igor Ansoff
The term market refers to customer groups purchasing a product designed for a specific
mission. The mission of solar modules is to convert sun light to electricity that then feeds into
the grid.
Market penetration strategies include..
•Increase sales to current customers
•Find new customers
•Foreign geographic markets are included

27. Growth Strategies
Market Penetration
• Instead of using price reductions or promotions, companies should focus on maintaining a
competitive advantage via innovation.
• Stage 4 is when process innovations are key. Firms should then focus on process
innovations to become more efficient than their rivals.
• More efficient firms can make a better product offering which will ensure customer loyalty.
• Small process innovations are the least risky way to grow a business.

28. Growth Strategies
Product Development
Product retains the same mission, but characteristics of the product are changed to better
serve the mission. – Igor Ansoff
•Small incremental product innovations.
•If product is marketable no large risky product innovation needed.
•Large product innovations only used when market is demanding them and technology is
ready. Not to fix lackluster growth.
•Acquisition as a product development strategy. Companies can acquire innovation from
failing companies if there is still value.

29. Growth Strategies
Market Development
An adaptation of a present product line, generally with some modification in the product
characteristics, to new missions.– Igor Ansoff
•Commercial passenger planes to transportation planes. Non grid connected modules for
solar industry.
•Risks can be lower if synergies exist.
•Similar to product development, market development strategies should only be used if the
marketplace and technology are ready.
•Non grid connected market too small.

30. Growth Strategies
Diversification
A simultaneous departure from the present product line and the present market structure.–
Igor Ansoff
•The riskiest strategy.
•Categorized by “related” and “unrelated” diversification.

31. Growth Strategies
Related Diversification
•Related diversification is when there are meaningful commonalities between the company’s
core business and the new venture it is taking on.
•Economies of scale and synergies can be achieved.
•Technologically related companies use this to enter into new markets.

32. Growth Strategies
Unrelated Diversification
•Unrelated diversification is when there are no meaningful commonalities between the
company’s core business and the new venture it is taking on.
•This involves a very high amount of risk. Failure rate of 90-99%. (Park, 2004).
•This strategy should not be used to solve lackluster growth.
Solar manufacturers should avoid both types of diversification because they are in a high
growth industry and they have limited funds from the shakeout.

33. Growth Strategies
Backward Integration
Advantages:
•Guaranteed access to supply
•Access to more innovation
•Cost savings
•More control over quality
Disadvantages:
•Expensive to integrate (Billions associated with polysilicon production)
•Risk of failure associated with diversification
•Reduces flexibility

34. Growth Strategies
Backward Integration
Levels of Vertical Integration
Company First Solar Trina Suntech Yingli SunPower Solar World Q Cells LDK
Level of Vertical Integration
Polysilicon Production Procured Procured Procured x - x - x
Ingot Production x x x x - x - x
Wafer Production x x x x Procured x Procured x
Cell Production x x x x x x x x
Module Production x x x x x x x x
Installation of Large Power Plants x x x x x x
Recycling x x
Companies can also use supply contracts.

35. Growth Strategies
Forward Integration
This involves companies entering into installation.
Risks associated are:
•Same risks with related diversification
•Possible lack of distribution channels and expertise
•Competing with customers
Benefits include:
•Saving on the margins charged by installers
•Industry output will grow and so will opportunities in this field

36. Conclusions
Ansoff’s Strategies
• Least Risky • Small incremental product innovations
• Process Innovations to gain competitive • No large product innovations unless
advantage market and technology are ready
✓ ✓
✗ ✗
• Should only be used if market and • Solar industry is a fast growing market
technology are ready • Not enough resources to diversify
• Market too small but could become because of shakeout
significant in the future

37. Conclusions
Integration and Final Comments
Solar firms considering backward vertical integration should understand that the solar PV
technology is far from finished evolving.
New technologies offer promise of better efficiencies and/or lower costs.
Generally speaking, solar companies with successful products should focus on improving
their business efficiency along with small product improvements.

38. THANKS FOR YOUR ATTENTION