Merger of Gintech, NSP and Solartech Will Contribute to Taiwan’s Solar Industry by Speeding Up Vertical Integration and Stimulating Investments, Says TrendForce

Taiwan’s three solar companies Gintech, Neo Solar Power (NSP) and Solartech signed an MOU on October 16 announcing their intention to merge as one single corporate entity by the third quarter of 2018. According to EnergyTrend, a division of TrendForce, the combined production capacity for photovoltaic (PV) cells of these three companies is projected to reach 5 gigawatts (GW). This estimate not only takes account of their combined 3.5GW capacity in Taiwan but also their combined 1.5GW capacity from their facilities located in Mainland China, Thailand and Vietnam. The company that resulted from this merger – United Renewable Energy Co., Ltd. (UREC) – will not only become the largest solar enterprise in Taiwan but also the world’s fifth-largest cell maker in terms of capacity and second-largest cell suppliers in terms of overseas shipping.

EnergyTrend analyst Rhea Tsao pointed out that the three companies are different from each other in terms of target markets and product portfolios. NSP focuses on high-efficiency products and is shifting to mono-Si PERC and HJT processes. Gintech owns two subsidiaries – wafer supplier Utech Solar and module maker Gintung (also known as Apollo Solar Energy Company or ASEC), both of which are strategically important for creating a vertically integrated solar giant. As for Solartech, it is the most active among domestic cell makers in deploying and using the multi-Si PERC technology. “The foremost advantage from this deal is that the three companies will be able to complement each other,” said Tsao.

Besides cutting down redundancy in operational and R&D expenses, this merger will allow a more efficient as well as flexible use of capital. When negotiating with the material and equipment suppliers in the upstream of the PV supply chain, UREC with its scale will be in a better position.

With respect to the production capacity for PV modules, Gintech, NSP and Solartech together have around 600 megawatts (MW). Following the merger, the new solar company intends to raise its module capacity to 3GW as part of its vertical integration effort. Based on the latest plans made by domestic manufacturers, the module capacity of the entire Taiwanese solar industry is set to expand by more than 5GW. Much of the module capacity on the island will be used to supply the high-efficiency segments of the domestic and overseas markets.

The formation of UREC is a response to the growing competition in the international market. The Chinese solar companies in the recent period have made great technological strides and are on their way to catch up to their foreign competitors. While the Taiwanese solar industry is still slightly more advanced than the Chinese, it is starving for capital needed to maintain the technological edge. As for production capacity, Taiwanese solar companies are simply no match against the Chinese.

The consolidation of Gintech, NSP and Solartech into a single company will result in improvements related to sales and cost controls. Furthermore, the resources of the three companies will be pooled together for the acquisitions of higher-end manufacturing equipment and R&D. The newly formed company may also restructure or spin off the various business under its ownership. This will reduce redundancy in expenditure planning and reinforce the specific market advantages originally attributed to the three companies.

Generally, Taiwanese solar companies have the technological expertise to capture market shares in Europe, Japan and the U.S., where product margins tend to be higher. If Taiwanese companies can further optimize cost control and the distribution of production capacity towards particular regional markets, they may be able to rise above their current difficulty in the global market.

This merger deal is expected to serve as an example to other domestic solar companies as well. With guidance and support from the government, UREC can expand into the downstream of the PV supply chain. The company can then accumulate experiences as it works on PV power plant projects in the domestic and overseas markets.

Looking at Taiwan’s solar market, the PV capacity installed on the island during the first half of 2017 totaled just 130MW. The Taiwanese government’s official two-year target between mid-2016 and mid-2018 aims to add 1.52GW to the island’s total capacity. However, the installations related to this target in the first year have only reached 394MW. The domestic demand was lower than expected. The government’s solar policies therefore still require refinement in order to stimulate the cautious domestic market.

“Going forward, the Taiwanese government will step up the promotion of PV generation via the Forward-looking Infrastructure Development Program and the amendments to the Electricity Act,” said Tsao. “It will also actively support deals similar to this merger as to strengthen the domestic solar industry. We expect that Taiwan’s solar market will gradually heat up in 2018, when policies mature and the grid infrastructure is in place.”