Korea: Shinsung puts capacity plans on hold; shifts focus to PV project business

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Korea-based Shinsung is well aware that 2012 is a key time for realigning its business strategies, if it is to survive the difficult market conditions, which are placing enormous pressure on even the biggest of solar players.

The company, which began manufacturing solar cells in 2008, currently has an annual capacity of 350 megawatts (MW). Before the solar storm hit the industry last year – characterized by plummeting costs, reduced remuneration and insolvency announcements – Shinsung was planning to ramp this up to one gigawatt (GW) by 2015. However, in light of the present situation, these plans are now on hold.

Overall, the company has five fully automated solar cell production lines. While it bought the first one from Germany’s Centrotherm, it developed the rest itself. This was possible, explains Wan-Keun Lee, chairman and CEO of Shinsung, due to the company’s background in the semiconductor industry.

The situation is the same for its photovoltaic module business. While it has an annual capacity of 150 MW, plans to increase this have also been postponed. Nonetheless, Wan-Keun Lee says the company has an option for outsourcing modules, meaning it can remain flexible.

Markets

Shinsung’s main sales markets are in Europe, in particular, Germany, Italy and Spain. China, says Wan-Keun Lee, is too competitive, due to the heavy levels of investment being made by the government and domestic companies. The Chinese are also impacting on other companies’ chances in the European market, he believes, since they both produce a lot of stock and sell at very low prices.

Changing track

As aforementioned, the company is not resting on its laurels and, having recognized that selling modules is no longer a profitable prospect, it has expanded into the photovoltaic project development business.

Currently, Shinsung is working on a 13.3 MW photovoltaic project at Korea’s Formula 1 race track. Systems will be installed on the parking lot. Shinsung, Korea Western Power, SK D&D and Solar Park have established an SPC (special purpose company) for the project, and construction is expected to be completed this year. After testing, Korea Western Power will take the project over.

Overall, Wan-Keun Lee says it is very difficult to obtain outside financing from the country’s banks and government, due to their conservatism; foreign investment is equally difficult to obtain. As such, investment for the projects either comes from companies, like Shinsung, or the power companies, which are now required by law to provide around two percent of their electricity from renewables annually.

He goes on to say that although the Korean photovoltaic installation market is not exactly booming there are still a lot of possibilities for installing projects in the country. Specifically, rooftop systems installed on industrial buildings receive remuneration that is 50 percent higher than for ground-mounted projects, under the new Renewable Portfolio Standard (RPS), which came into play this year.

A spokesperson for the company explains, "There are the weights of RPS system in Korea. For example, using [an] existing roof facility can get 1.5 times [more remuneration]. In case of ground, 0.7~1.2 times." Consequently, Shinsung is focusing on this area of project implementation. No further details could be divulged, however, regarding future projects, remuneration rates or installation costs.

Speaking to pv magazine at this year’s International Green Energy Expo in Daegu, South Korea, Min-Chul Kim, assistant manager of the photovoltaic system team at LS IS Co. Ltd says that for a rooftop project, the electricity can be sold to the government for 150 Korean Won (around US$0.13) per Watt, compared to a ground-mounted project, which receives just 100 KRW.

Furthermore, a spokesperson for SunPower said that for a smaller system of around three kW, installation costs range between $4 to 4.25 per Watt, while costs for ground-mounted systems are between $2.6 to 3.2 per Watt.

Competitive strategies

Another competitive strategy being employed by Shinsung is to strengthen its customer relationships. Previously, says Wan-Keun Lee, the company took a business-to-business approach. However, in order to be closer to the customers, it has since adopted a business-to-customer model. Shinsung is also investing in polysilicon, and is a shareholder of Korea-based HK Silicon.

So, although the photovoltaic module business has become hard for the majority of suppliers, many companies are employing a number survival strategies. For Shinsung, this means placing its capacity ramp ups on hold, developing its EPC abilities, making strategic investments and getting closer to its customer.