Putting the Squeeze on Solar

An interesting report in the Chinese media says a company China-listed company called Shanghai Lengguang is going to stop making crystalline polysilicon, citing unprofitability of the business and a government campaign to reduce excess capacity. The fact that a no-name like Lengguang is getting out of the business is hardly newsworthy: the report says the business accounted for less than 1 percent of Lenguang’s paltry $100 million in revenue last year. What’s more significant is the fact that the government may be getting serious about forcing some consolidation in the overheated sector as it seeks to forge some true home-grown global leaders, which could play to the benefit of the big names like Trina (NYSE: TSL), Suntech (NYSE: STP), Yingli (NYSE: YGE) and LDK Solar (NYSE: LDK). Having said that, I’ll be the first to say that I’ve seen such consolidation campaigns before — most notably with the steel sector — that foundered after local interests got in the way and blocked much major movement. But given the more privately funded nature of the solar sector, versus a steel complex that was largely state owned, there’s a chance that this campaign may stand more chances of success as smaller firms see their funding and government incentives dry up and are forced to either close or get acquired.