Japan's Sharp Corp, Italy's Enel SpA and a third partner are likely to invest more than $2.6 billion in Italian solar power ventures to tap growing demand for cleaner energy despite a global economic slowdown. Top solar power firms are hurrying to expand capacity even as the sector smarts from a worsening global economy.
Which is drying up financing for new ventures, forcing smaller solar power firms to push back capex plans and putting pressure on big players to recoup their investments faster. Sharp, the world's No 2 maker of solar cells, said on Thursday it and Italy's largest power company Enel planned to spend about 100 billion yen ($1.05 billion) to set up solar power generating plants in Italy with a total generating capacity of 189 megawatts by the end of 2012.
The two and another manufacturer also plan to build a factory in Italy to produce thin-film solar cells, with an initial investment of at least 72 billion yen, it said. That could grow to more than 150 billion yen when the factory reaches full capacity of about 1 gigawatts.
Sharp is stepping up investment and overhauling its business model in an effort to retake market share from No 1 solar cell maker Q-Cells of Germany, whose aggressive capital spending plans outstrip those of its rivals. The consumer electronics maker is reinventing itself as a device maker, supplying or planning to supply liquid crystal display panels to Japanese TV makers such as Sony Corp, Pioneer Corp and Toshiba Corp.
It will now sell equipment to the joint venture and charge fees for its technology and solar operations know-how, in a step towards becoming an all-rounder in the solar power industry, its Executive Vice President Toshishige Hamano told a news conference.
Sharp, which cut its annual profit outlook by one-third in October, could boost its sales in the short-term by selling its technology and any equipment it develops in a joint venture with semiconductor equipment maker Tokyo Electron Ltd.
But that could hurt its brand and deplete its technological edge in the long-run, an analyst said. "With LCD prices sliding, Sharp is under more pressure to recover its initial investment quickly, and the temptation for a quick fix is understandable," said Yoshihisa Toyosaki, President of J-Star Global Inc, an IT consultancy in Japan. "But this raises the cost performance of rivals with lower personnel costs and government backing. It is not a strategy for a company with decades of experience and an established brand," he said.
In the future, Sharp also plans to step up production of silicon wafers and tie-up with a major US polysilicon supplier to help it secure a steady supply of silicon starting in 2010.
Sharp previously said it would take a 34 percent in the solar power generating venture, with Enel holding the rest, but it later retracted the statement to say that nothing has been decided, other than that Sharp will take a minority stake. Sharp will also take a minority stake in the solar cell venture, which will have an initial output of 480 megawatts.
Capex at Sharp, which also plans a solar plant in Japan at a cost of 72 billion yen with an initial output of 480 megawatts by March 2010, still lags Q-Cells, which has said it plans to raise capacity to 1,000 megawatts in 2009 and 2,500 megawatts in 2010. The global downturn is beginning to hurt the industry, though. No 3 solar cell maker Suntech Power Holdings Co of China cut its sales forecast last week. Shares of Sharp ended up 3.7 percent, outperforming the Tokyo bourse's electrical machinery index, which rose 0.9 percent.