BUILDING A SOLAR BOOM

Applied Materials' scaling up process began when it applied its experience in computer industry semiconductor manufacturing to silicon solar panel production. But now it is using its flat panel manufacturing experience to scale up low cost thin film production.

Seems like that’s the direction the solar energy industry is going. Vishal Shah of Lehman Brothers says solar prices have to come down 50% to reach price parity. Solar materials will surely have to be thinner and less silicon intensive for that to happen.

Applied Materials’ main rival is Oerlikon Solar. Oerlikon is concentrating on thin film and thinks thin film will bring the silicon panel $4-to-$7 cost per-watt to $1.20-to-$1.50 per-watt soon and below $1 per-watt by 2010. But that is not as low as conventional sources of grid energy and there are signs some governments will soon cap subsidies.

Applied Materials’ CEO Mike Splinter isn’t worried: "Japan and Germany are great examples of where smart government policies have helped create a booming market…By guaranteeing a market for a period of time, public policy can help accelerate solar quickly to a place where subsidies are no longer needed."

As New Energy Finance solar energy analyst Jenny Chase points out, "In a gold rush, it's the guys who sell the picks and shovels who make the money."

Not much doubt about the industry's growth potential. (click to enlarge)

Fueling the Solar Energy Boom; Applied Materials, a leader in chipmaking equipment, is ramping up on solar-panel machines and counting on European regulations for business
Jennifer L. Schenker, February 1, 2008 (Business Week)

WHO
Applied Materials (Mike Splinter, Chief Executive), Oerlikon Solar (Jeannine Sargent, Chief Executive)

Splinter of Applied Materials

WHAT
To meet unprecendented demand for solar energy installation, Applied Materials is selling machines specialized to produce solar panels faster and cheaper than ever. Its sales are growing as fast as the company can produce its machines.

WHEN
- Applied Materials has been doing semiconductors and flat-panel precision manufacturing for 40 years.
- The EU goal of 20% power from New Energy by 2020 is likely to require 200 gigawatts of solar panels. That is 25 times the world’s yearly solar panel production.
- Sales of solar panels will reach $80 billion to $100 billion by 2010.
- 2007: Applied Materials’ $165 million in solar equipment sales was 2% of its business. By 2010, solar equipment sales will be 25% ($3 billion). Its goal is to have its machines making 75% of all solar panels by 2011.

Thin film: The new new thing?

WHERE
- Applied Materials has been acquiring European facilities (Germany, Switzerland, Italy) in order to better serve the European market.
- The company has acquired thin film customers in India and Spain.
- Government subsidies to solar energy in France, Germany, Italy and Spain are driving volume increases, facilitating a price drop toward grid parity. But Italy and Spain are comtemplating subsidy caps.

WHY
- The goal of volume solar production is to drive solar energy-generated electricity cost-per-watt down 25%.
- Applied Materials is also developing thin film tools, both those with a glass foundation and the "crystalline silicon" type. It has more than 20 customers already. Thinner panels cuts costs and ups volume.
- Solar panel sales will be bigger than semiconductor sales within 5 to 10 years.
- Applied Materials’ main competitor: Switzerland’s Oerlikon Solar.
- The tremendous effectiveness of Applied Materials and Oerlikon Solar may increase world solar capacity 5 to 6 times in the next 3 years.

As Hamlet said, THAT is the question. (click to enlarge)

QUOTES
- Splinter, Applied Materials: "Applied has a history of using technology and smart engineering to lower cost and grow markets…We see a real opportunity to change the cost equation for solar power through adoption of our existing technology and new innovation."
- Jenny Chase, solar energy analyst, New Energy Finance, on potential overproduction of solar materials in response to subsidy-driven demand: "[Demand] could tail off if governments reassess subsidies…We are really relying on government to be extremely generous with their subsidies…"