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NSP and DelSolar Merger is Good for the Taiwanese Solar Cell Industry

The merger between two of Taiwan's leading solar cell makers NSP and DelSolar is not just a good move for the two firms but also a positive sign that consolidation is finally happening in Taiwan's solar industry. This according to M.J. Wang, an analyst for the Industrial Economics and Knowledge Center, a branch of Taiwan's leading research center, the Industrial Technology Research Institute (ITRI).

“It’s a good beginning for Taiwan’s solar industry,” says M.J. Wang in a recent telephone interview.

The boards of both firms have just approved phase 2 of their merger — 100% share swap — following NSP’s successful tender for a 15% stake in DelSolar. The merged firm will combine NSP’s 1.3 GWs of installed capacity with DelSolar’s 600 MWs for a total of nearly 2 GWs, making it Taiwan’s largest and the world’s second largest solar cell maker.

Wang says that small scale is one of the key limiting factors for Taiwan’s solar makers. Taiwan has over 20 companies sharing less than 8 GWs of cell manufacturing capacity. “For individual companies it’s hard to compete with Chinese companies in terms of scale and reducing costs,” he observes. The larger scale of the new firm is likely to give it a stronger bargaining position in terms of raw materials cost and access to more markets and sales channels, says Wang.   

The number of smaller players competing in the market is also one factor in the price wars that have gutted profits throughout the industry. “The immediate benefit should be to reduce competitors,” he notes.

NSP is Taiwan’s second largest cell maker by output, while DelSolar is number 5. The merger will see each DelSolar share swapped for .735 NSP shares. Power electronics maker Delta Electronics, DelSolar’s parent firm and largest shareholder will remain the largest shareholder of the new company with a 17% stake. The new firm will be called NSP.

The merger offers a number of compelling synergies. Both employ technology and manufacturing processes developed in public/private research center ITRI (Industrial Technology Research Institute). DelSolar was founded in 2004 as a joint venture between ITRI and Delta Electronics, while many of NSP’s top officers spent part of their careers in ITRI’s vaunted Green Energy labs. Wang says the ITRI link indicates that “both firms are very concerned with R&D” and invest substantial resources in innovation.

And, like ITRI, both companies are also located in Taiwan’s technology hub Hsinchu City in northern Taiwan. Wang feels proximity should enable the two firms to integrate their operations more easily as well as benefit the firms from the Silicon Valley-like atmosphere of the technology cluster.

NSP was founded in 2005 as a dedicated solar cell maker and has staked a strong position in the global solar supply chain. DelSolar has a much smaller presence in the market and has a more research oriented culture.  “NSP focuses on how to commercialize the technology, but DelSolar focuses on all kinds of possibilities,” Wang observes.

This presents opportunities for both firms. DelSolar can learn from NSP’s more experienced management team, while NSP can gain access to DelSolar’s R&D.

NSP and DelSolar operate under different business models. NSP only produces cells under its own brand name. ITRI’s Wang explains that NSP positions itself as a dedicated cell maker. “So they think if they also produce modules, it will make some customers have doubts over whether NSP can provide the best product.” NSP operates only 60 MWs of module making capacity under a different brand.

DelSolar, by contrast, stretches the respected Delta Electronics brand into not only solar cells but also modules, systems, installation and EPC services. DelSolar has 240MWs of module making capacity, nearly 40% as large as its 600 MWs of cell capacity. DelSolar’s vertical integration and brand name help give the firm access to global markets, Wang notes, but management inexperience has limited their success. The merger will give NSP access to DelSolar’s markets.

“Their sales channel resources could be used more effectively by NSP,” says Wang.

With Taiwan’s solar industry continuing to struggle, Wang says “producers need more channels to export their products.”

Also, as losses mount in the upstream, solar makers are looking downstream for solutions. Wang says that NSP is very interested in getting in on the systems side of the industry. DelSolar has experience delivering systems, and Delta Electronics is Taiwan’s top maker of inverters needed for solar systems.

The two companies still face a number of hurdles. NSP uses mostly European made equipment in its plants, while DelSolar uses U.S. made gear, and Wang says this may present problems for them to integrate their production lines. Also, as many have noted, getting into systems delivery will put them in competition with their own customers in U.S., Japan and European markets. And as neither firm has indicated they are looking to reduce capacity, it will do little to address the fundamental problem facing the industry, capacity imbalance.

Wang observes that the discussions are “only the first step. It’s a long road to for these two companies to complete this merger.” 

Lead image: Illustration of a solar cell via Shutterstock

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