Solar Cell Suppliers Are Falling Behind


We've heard from the best. Now it's time to hear from the rest of the solar manufacturers. I'm cringing already.

The numbers are in
JA Solar
(NAS: JASO) reported revenue of $413.0 million, a decrease of 26.7% sequentially, as demand for solar products waned. As previously announced, gross margins fell into negative territory at 2.7%, and a net loss of $35.4 million, or $0.22 per share, was the result.

Part of the issue was a fast drop in module and cell prices at the beginning of the quarter and a lagging drop of poly and wafer prices. This put margin pressure on JA Solar, some of which is reversing itself in the third quarter, so investors can at least hope that this will be the bottom.

Management does see demand picking up in the third quarter, as certainty has returned in Germany and Italy. And the United States is also expected to grow into a major market, with as much as 2.5 GW of installations in 2011.

It gets worse
LDK Solar
(NYS: LDK) was the big loser of the week after announcing a drastic drop in guidance this morning. I've heard of guidance being off, but LDK really dropped the ball this quarter. Here's how expectations have changed:


Previous Guidance

Current Guidance


$710 million-$760 million

$480 million-$500 million

Wafer shipments

500 MW-550 MW

410 MW-430 MW

Module shipments

200 MW-220 MW

75 MW-80 MW

Gross margins



Despite high expectations for revenue and margins, LDK isn't going to be anywhere near where it originally thought. We'll know all of the details when earnings are officially released on Aug. 29.

Stick to quality
I've been telling investors to stick with only the highest-quality names in solar, and this quarter demonstrates why. First Solar (NAS: FSLR) and SunPower (NAS: SPWRA) didn't have blowout quarters, but they weren't put in as tough of a position as JA Solar and LDK Solar were.

I've also said that vertically integrated companies will provide more shelter than suppliers, who are the first to be squeezed. JA Solar and LDK Solar showed just how bad it can get for suppliers in the solar sector. In China, Trina Solar (NYS: TSL) and Yingli Green Energy (NYS: YGE) provide more stability than either JA Solar or LDK solar because of their vertical integration and strong position in module sales.

Speaking of Yingli Green Energy, check back on Monday for my take on the company's recently announced earnings. Here's a preview: It's one of the few impressive reports to come out of the solar sector recently.

And be sure to add you favorite solar stock to My Watchlist, and My Watchlist will find all of our Foolish analysis on the stock.

At the time thisarticle was published Fool contributor Travis Hoium owns shares of First Solar, LDK Solar, and SunPower and has sold puts in SunPower. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings, or follow his CAPS picks at TMFFlushDraw.Motley Fool newsletter services have recommended buying shares of First Solar. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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