Leveraging Synergies for Profitability
In pursuit of lowest cost/watt, module manufacture will be outsourced to EMS partners.
An economic crisis is not the best backdrop for any event, but as was clear at the World Future Energy Summit held in January in Abu Dhabi, the downturn has done little to dent the alternative energy industry’s optimism – or its potential. In his review of the event for Time, Bryan Walsh noted that developers of renewable energy “know they’ll win.” This is because once the downturn has ended, demand for energy will continue to rise and “no one – including oil giants of the Middle East – believes that fossil fuels alone will meet that [demand].”1 The German Advisory Council on Global Change agrees, stating that, by 2100, 80% of energy must be generated from renewable sources.2
The world’s political heavyweights too are adding their support for cleaner energy. In Abu Dhabi, the UK’s former Prime Minister Tony Blair called for a new global deal that would set tough interim targets up to 2020, giving business a “clear, unequivocal signal to invest in a low-carbon future.”3 Last year, in launching his country’s National Mission on Solar Energy, India’s Prime Minister Dr. Manmohan Singh promised to “…pool all our scientific, technical and managerial talents with financial sources to develop solar energy […] to power our economy and transform the lives of our people.”4 But perhaps most significantly for the wider global context, President Barack Obama pledged in his inaugural speech to “harness the sun and the winds and the soil to fuel our cars and run our factories.” In January, he was quick to follow his promise with his proposal to launch his stimulus bill, a massive (and much-discussed) program designed to boost the economy with measures that include hefty support for alternative energy industries.
It is therefore clear the fundamentals driving the photovoltaics (PV) industry – the need for secure, sustainable, low-cost energy, as well as solid government backing – are as robust as ever. All of which points to an industry with a great future.
This makes PV manufacture an attractive proposition for electronics companies on the lookout for new revenue streams, especially as the technology used is well within the comfort zone of most SMT companies and Tier 1 EMS providers. For example, the wet chemistry, printing and post-print curing processes used to manufacture PV cells, even if they imply something of a learning curve, are nevertheless similar to those used for PCB assemblies. The challenge, if anything, is to produce quality, high-resolution solar cells repeatably and reliably at the PV industry’s considerably faster three-second beat rate, without damaging the extremely fragile, expensive silicon substrates. Thus processing and handling equipment must be chosen carefully for built-in high-speed precision, handling and resolution capabilities.
As electronics companies consider the PV manufacturing arena, it is natural to focus on the benefits it offers, but we should also remember this is a two-way street. Our company, for example, is applying known printing principles used in the advanced electronics manufacturing arena to extend their value in cost-effective production to parallel industries such as PV cell manufacture. Similarly, as New Venture Research Corp. concluded in a study conducted early last year, EMS providers will be key to the success of the solar panel manufacturing industry.5 This is because they have accrued an impressive raft of skills that range from technological know-how and Lean manufacturing to business acumen and resource management that will enable the PV industry to reduce costs and improve processes and efficiencies significantly. Key for a fast-growing industry that only recently has transitioned from niche status, EMS providers can also provide advanced logistics capabilities for improved supplier management and materials handling, as well as support for rapid ramping to volume production.
Many EMS providers also add the advantage of location – and even multiple locations. This, in combination with their other offerings, makes them ideal module assembly partners, setting arrays of solar cells into panels for companies whose capital-intensive solar cell fabrication plants may be based in lower-labor-cost countries such as China and India. In this way, they reduce the costs of manufacture while offering a route – and even distribution proper – into lucrative target markets.
One such example is Celestica, which commenced module assembly at its Valencia plant last year, and Jabil Circuit, which concluded an agreement in December to manufacture solar modules for Day4 Energy. As the PV industry chases lowest cost/watt, this business model is likely to catch on, and we can expect to see more cell producers outsourcing their module manufacture to EMS partners, just as we can expect to see growing and increasingly profitable synergies developing between the broader electronics and PV industries.
References
1. Bryan Walsh, “Will Green Enterprises Survive the Economic Crisis?” Time, Jan. 22, 2009.
2. World Energy Council, Survey of Energy Resources 2007.
3. Terry Macalister, “Tony Blair Insists Economic Downturn Must Not Hamper Green Energy Plans,” The Guardian UK, Jan. 21, 2009.
4. BBC News, India Unveils Climate Change Plan,” June 30, 2008.
5. New Venture Research Corp., “EMS Manufacturers Come to the Rescue of Solar,” January 2008.
Darren Brown is business development manager, alternative energies at DEK International (dek.com); dwbrown@dek.com. This column will run periodically.
