Analysis: Hanwha merger creates top-five module supplier

What is your first reaction to the news today that Hanwha Q Cells and Hanwha SolarOne will merge?

It is a major deal in the solar industry, in the module manufacturing industry and of course it is exciting news but not completely unexpected. It is something that won’t really change our picture of the module industry. It just makes sense with regards to the companies and in respect of the Hanwha Group.

And why do you say that it is not entirely unexpected?

Because it just makes sense: Both are complimentary companies. As Hanwha SolarOne and Hanwha Q Cells join forces in a growing industry, it is just obvious that this is news that makes sense. The two companies in a joined entity will become a top-five or top-six manufacturer in the global module market, so it will increase the global footprint [of the new company] and both entities can benefit from each other.

Do you think there might be some difficulties in differentiating the two product lines and brands?

I rather see the benefits [rather than the challenges]. Maybe there are some problems in market segments that are still a bit brand sensitive like residential installations in Germany, but in general the economies of scale that can be achieved will more than compensate for that.

And do you think the production facilities are so compatible to deliver true savings from economies of scale?

[These are] economies of scale regarding not just in production itself but R&D, administration, footprint in the market – that can help them. So the merged entity can actually still retain certain module types, module brands, targeted at different market segments.

Maybe the now former Q Cells [products] from the Malaysia fab can serve the smaller [array] high-efficiency market segment and other modules for the mass market. In a general way, a new big, global player will be created and that is where we see the entire industry going.

This new player is just one example [of this trend]. If we see the companies join forces in Japan they will become number two in that market. Actually Japan is a good example, it is a market that is does lean towards high efficiency and high technology. So this market is sensitive to technology. Both companies are doing well in Japan. They are both top-ten suppliers and now they can become number two overall – in one of the markets where, even though there is a little bit of risk in 2015, will remain one of the top markets for several years.

And in the U.S. there are the anti-dumping (AD) duties, in Europe we have the minimum price: how big a factor will these dynamics play in the decision of Hanwha Group?

We do not yet know how the AD case in the U.S. will play out, but we already see the effects with the price increases in the U.S. Many Chinese manufacturers are looking at how they can circumvent AD duties, once we have a final determination that closes all loopholes and applies AD duties to every module that is somehow connected to Chinese manufacturing, then all the big Chinese manufacturers will look for alternatives. Hanwha Group already [then] has a great alternative, which is Malaysian manufacturing with Q Cells. So Hanwha would not have to go to Mexico to serve this market or any other countries.

We have spoken from a manufacturing point of view and an R&D point of view. Do you see the bringing together of the two companies flowing right across into marketing and sales, even project development and these other areas?

I don’t want to speculate too much on that. We can see in some markets brand is still something that really counts, but I think the companies can benefit from joining forces here and market different types of modules. Once you have a proven track record and a good technology then I am sure the new entity will find ways to leverage that. Q Cells still has a good reputation in the market and I’m sure that will not be given away. But I actually see that as a minor problem.

Is this just more of the narrative of consolidation that we have observed over the last few years?

You could probably view that as the case. If I look at the numbers in 2014, in the first three quarters essentially Hanwha Q Cells was number 11 and Hanwha SolarOne was number 13 in the module supplier ranking, so the merger fits in with the general picture of consolidation. Others are expanding and here we have two companies merging.

What do you see it as saying about the seriousness of the Hanwha Group in terms of its intentions to become a major player in the solar sector?

Of course, but I don’t think that this was ever to be doubted. The Hanwha Group has made long-term investments and the moves the group has made into solar tended to make a lot of sense. I clearly see this latest move as a confirmation of the company’s commitment.

The merging of two big players to become a top-five or top-six company fits into the picture [of ongoing consolidation] and the advantages are far bigger than the potential problems that could occur.