Despite the ongoing incremental improvements in conversion efficiencies and cost reduction taking place in the solar manufacturing community, it would be a stretch to call most of the players truly “high tech.” Industry executives like Trina Solar’s Jifan Gao can tout his company’s “emphasis on technology breakthroughs” and its efforts to “remain at the forefront of technology improvements and innovations,” but the amount that Trina and other leading solar companies spend on research and development is paltry compared to truly innovative tech firms like Intel and Applied Materials.
A sampling of the most recent quarterly results finds six of the top solar companies—Trina, Yingli Green, Canadian Solar, JA Solar, Jinko Solar, and Renesola—amassing nearly $3.365 billion in collective revenues. They shipped some 4.4GW of product as well. All but Yingli and Renesola ended up with profitable quarters, in terms of net income, with Canadian emerging as the star performer for the quarter in terms of sales and earnings.
But the sum of their R&D spending for the period—$49.2 million—represented an underwhelming 1.46% of those revenues. Only the R&D expenditures by Yingli (3.09%) and Renesola (3.57%) even exceeded the 3% of revenues threshold, while Trina (0.89%), Jinko (0.9%) and Canadian Solar (0.35%) fell below 1%. Not exactly what one would call an R&D arms race.
U.S. stalwarts First Solar and SunPower’s R&D spends weren’t much larger last quarter. Although First Solar led the sector in its total research and development expenditures with just under $37.6 million, that amount still represented only 3.78% of its $889.3 million in quarterly revenues. SunPower’s $17.29 million in R&D spending penciled out to about 2.6% of its $662.7 million in Q3 revenues.
Contrast these numbers with the latest figures from the aforementioned Intel and Applied Materials. Intel brought in $14.6 billion in revenue during its last quarter and spent $2.84 billion on R&D (or 19.5% of revenues), while AMAT amassed $2.26 billion in sales and had an R&D outlay of $360 million (or 15.9% of revenues).
Looked at another way, Applied–which still plays in the PV manufacturing equipment arena and counts many of the top companies above as customers—spent over seven times more on R&D than the “Big 6” Chinese companies combined last quarter.
Intel and AMAT latest figures echo the semiconductor and adjacent high-technology sector mantra that a company must spend somewhere in the low to high teens of its revenues on R&D, percentage-wise, to remain innovative and competitive. The only example of a solar company that comes close to matching that level of R&D expenditure is Enphase. The PV microinverter and energy management systems aces spent 12.2% of their Q3 revenues on technological innovation activities. (Full disclosure: I have done some work for Enphase on behalf of my employer, Impress Labs.)
It may be unfair to compare the levels of solar R&D spending by the top solar manufacturers with those of Intel, AMAT, and other true tech titans. The vast amounts of capital and technological acumen needed to develop and produce current and next-generation nanoscale semiconductors at volume dwarf those necessary for high-efficiency n-type solar cells or tandem-junction thin film panels—at least the capital part. You won’t find any $100 million process tools or $10 billion factories in the solar realm.
So the next time a solar industry exec claims his or her company deserves to be called a “high-tech leader,” remind the speaker of the R&D spending metric and call bullshit. Solar, for the most part, is not a high-tech business.
PHOTO COURTESY OF APPLIED MATERIALS
Tags: crystalline silicon, inverters, market research, next-generation PV, PV / photovoltaics, R&D / research & development, renewable energy, solar cells, solar energy, solar modules, solar power, solar production, solar production equipment, thin film photovoltaics