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Often, one sees industries making changes because market forces have made the transaction cost of manufacturing too onerous. Some industries in that case will c

Often, one sees industries making changes because market forces have made the transaction cost of manufacturing too onerous. Some industries in that case will consolidate and vertically integrate. If the pain from uncertain prices and supply gets too great, could the solar industry start with mergers and vertical integration? Or is it far too early for that?

philipkglass 8y ago
Yes, mergers have been common in solar for a while. This is one of the top manufacturers today: https://www.hanwha-qcells.com/ https://www.hanwha-qcells.com/ A Chinese cell and module manufacturer acquired a Chinese ingot manufacturer. Korea's Hanwha Group subsequently acquired this merged Chinese entity as well as the German solar manufacturer Q-Cells. The merged Hanwha Q-Cells is vertically integrated from cells to modules. A handful of manufacturers like GCL have vertically integrated even further: - Refined silicon production - Ingot production from purified silicon - Wafers from ingots - Cells from wafers - Modules from cells I don't know if that depth of integration makes sense long-term or not. Some companies have been burned in the past as they integrated with producers that weren't close enough to the leading edge. All of these steps are evolving rapidly in small increments; a vertically integrated producer has to keep pretty close to the leading edge at every stage if they don't want to see their integration advantages reverse.
- Gibbon1 8y ago
  I suspect vertical integration works when your key intermediate manufacturing inputs aren't commodities. And you have enough scale to overcome production granularity issues.
  - stcredzero 8y ago
    I suspect vertical integration works when your key intermediate manufacturing inputs aren't commodities. What if your manufacturing outputs are also getting to be commodities? The example I was thinking of was refrigerated cargo containers. The inputs are obviously commodities. The outputs are also getting to the point where the cost of financing to build stock for sale or lease is getting to be onerous for smaller players.
usrusr 8y ago
Vertical integration to the point where they could acquire cheap land songwriters to optimistically cover with surplus production? This could be an interesting difference to other markets with an overcapacity cycle, e.g. you can't just hook up a month's output of DRAM to the network and have an income stream.

philipkglass 8y ago

Yes, mergers have been common in solar for a while. This is one of the top manufacturers today: https://www.hanwha-qcells.com/ https://www.hanwha-qcells.com/ A Chinese cell and module manufacturer acquired a Chinese ingot manufacturer. Korea's Hanwha Group subsequently acquired this merged Chinese entity as well as the German solar manufacturer Q-Cells. The merged Hanwha Q-Cells is vertically integrated from cells to modules. A handful of manufacturers like GCL have vertically integrated even further: - Refined silicon production - Ingot production from purified silicon - Wafers from ingots - Cells from wafers - Modules from cells I don't know if that depth of integration makes sense long-term or not. Some companies have been burned in the past as they integrated with producers that weren't close enough to the leading edge. All of these steps are evolving rapidly in small increments; a vertically integrated producer has to keep pretty close to the leading edge at every stage if they don't want to see their integration advantages reverse.

Gibbon1 8y ago
I suspect vertical integration works when your key intermediate manufacturing inputs aren't commodities. And you have enough scale to overcome production granularity issues.
- stcredzero 8y ago
  I suspect vertical integration works when your key intermediate manufacturing inputs aren't commodities. What if your manufacturing outputs are also getting to be commodities? The example I was thinking of was refrigerated cargo containers. The inputs are obviously commodities. The outputs are also getting to the point where the cost of financing to build stock for sale or lease is getting to be onerous for smaller players.

usrusr 8y ago

Vertical integration to the point where they could acquire cheap land songwriters to optimistically cover with surplus production? This could be an interesting difference to other markets with an overcapacity cycle, e.g. you can't just hook up a month's output of DRAM to the network and have an income stream.