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Why China Continues to Flood the Market with Cheap Solar PV – Trina Solar

August 12, 2011

In a previous post, we wondered whether the apparent availability of cheap Chinese wind turbines signals improvements in manufacturing costs, or is in fact just a sign of overproduction based on throughput manufacturing dynamics which are devoid of profitability considerations.

An interesting story has come to light which demonstrates just how over-production is occuring at one of China’s largest and most celebrated publicly-listed solar companies, Trina Solar.

For some time the global solar market has looked at a handful of China-based manufacturers, including Trina, with a sense of awe, wonderment, and fear, as their production volumes apparently increase to the horizon, with ever-diminishing product costs.

John Hempton over at Bronte Capital has accidentally dug up a great story about how Trina continues to expand production and churn out ever-increasing numbers of panels, despite falling margins and an uncertain global outlook for the product.  More product is shipped than is actually being sold.

While big dollops of debt are involved, the dynamic is actually driven by a long-term obligation to buy growing volumes of polysilicon from a supplier, who effectively has a call over the Trina business.

Bronte aren’t discounting Trina’s capacity to pull off success through their approach to ever-expanding production volumes, but will also benefit substantially if it spectacularly fails.

How many other Chinese manufacturers and companies are surviving on a through-put oriented model, and is it sustainable?


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