Two weeks ago we reported on rumors and speculation that Applied Materials might look to scale back or even sell its group that makes equipment for amorphous silicon solar panels. Applied declined to comment on the rumors and emphasized that the company will invest more into the amorphous market.
Despite Applied's protestations, we suggested that the SunFab a-Si tool -- essentially a factory in a box -- has a cost structure inferior to c-Si, CdTe or even CIGS, for that matter. We suggested that a reasonable business case could be made for AMAT to abandon the a-Si SunFab business entirely.
It would appear people are listening. Like folks at Goldman Sachs.
From a Goldman Sachs note of March 28:
...We believe that solar will be a key area of focus, with investors looking for management to be more open minded about its strategy in thin-film given the business’s continued operating losses. We note that there has been some speculation in the press (Greentech Media) several weeks ago about Applied exiting the solar business, which we believe has been one of the drivers behind the recent upward move in the stock (shares are up +8% in two weeks). In our view, with the shares already up 8% heading into the analyst meeting, it will be difficult for the stock to outperform coming out of the event unless management is willing to express some open mindedness about exiting the thin-film solar business.
From the AMAT Analyst meeting on March 30: Applied raised its revenue outlook for the year to $8 billion to $8.5 billion for fiscal year 2010. Even the Energy and Environmental Solutions segment is expected to grow more than 5% relative to earlier guidance of plus or minus 10% according to a Reuters report.
But Applied plans to lower its investments in its SunFab solar technology amid disappointing results and losses in the arena, according to EE Times.
According to Barron's, Applied Materials did not sound very confident on the momentum for thin-film solar and commented that the investments in the segment need to reflect the market potential and that most of the losses in EES were related to the thin-film business. In Barrons' view, Applied Materials' thin film technology does not appear to be as cost effective as other thin film competitors.
Mark LaPedus, semiconductor editor for EE Times:
''Not long ago, Applied was bullish about SunFab and the technology looked promising. More recently, several unforeseen events have taken place: 1) Polysilicon prices fell; 2) This caused prices for silicon-based solar modules to fall; 3) Suddenly, thin-film solar technology, except at First Solar, did not look so attractive; 4) Let's not forget [sic] solar downturn. So in my opinion, this is the beginning of the end for SunFab. Applied CEO Michael Splinter said that SunFab must stand on its own feet and become profitable. During the event, he said there is no timetable for that goal. He also said Applied is not afraid to drop an unprofitable product. I admire Applied's efforts in solar. I am cheering them on. But I'm afraid SunFab is doomed. It will never become price competitive. It may become a niche. The problem for Applied is the [sic] customers who bought the SunFab technology. I wonder if they regret that decision. I'm sure they are not happy right now.''
C.J. Muse, analyst with Barclays Capital:
"Applied aims to get to a cost level of $0.85/W by the end of 2010 and then to $0.59/W by the 2012 timeframe. If achieved, this gives Applied's TF solar technology, potentially a fighting chance against crystalline solar technology -- though we continue to view this as quite a long shot.''
Edwin Mok, analyst with Needham & Co.:
''Applied finally admitted that its thin film business lacks competitiveness, and is reducing spending in this area. Clearly, this is a positive step."
Earlier this year, GTM Research analyst Shyam Mehta wrote: "Few a-Si manufacturers are currently in a position to compete with the incumbent [c-Si] heavyweights." Mehta estimated that SunFab equipment can cost up to 30 percent more than standard equipment.
But Applied even lags behind a-Si competitors like Oerlikon in advancing its technology. Oerlikon has been more aggressive in promoting higher efficiency amorphous technologies like micromorph and tandem-junction technology.
We asked a major solar executive at a company that makes both crystalline and amorphous solar panels if he had heard if Applied had any plans afoot to get out of amorphous. No, he said.
"But they should," he quickly added.