Suntech Power Holdings Company Ltd.

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Suntech Power Holdings Company Ltd.

17-6 Changjiang South Road, New District
Wuxi, Jiangsu Province 214028
China
Telephone: (+86 510) 5345000
Fax: (+86 510) 5343049
Web site: http://www.suntech-power.com

Public Company
Incorporated: 2001
Employees: 1,374
Sales: $598.9 million (2006)
Stock Exchanges: New York
Ticker Symbol: STP
NAIC: 334413 Semiconductor and Related Device Manufacturing

SLIPPING INTO SOLAR POWER

RETURN TO CHINA IN 2001

JOINING CHINA’s WEALTHIEST IN THE NEW CENTURY

PRINCIPAL SUBSIDIARIES

PRINCIPAL COMPETITORS

SLIPPING INTO SOLAR POWER

Zhengrong Shi came of age in the early 1980s, at a time when China’s technological and industrial prowess remained in a far-off future. After earning a bachelor’s degree in optical science at the University of Jilin, Shi continued his education, pursuing a master’s degree at the Shanghai Institute of Optics and Fine Mechanics. Shi then began working toward his doctorate, earning a Ph.D. in physics in 1988. In that year, Shi joined in the exodus of Chinese students seeking employment and educational opportunities outside of China. While the country had begun to institute the series of economic reforms that were to transform China into one of the driving forces in the world economy in the 20th century, the country remained crushed by an overbearing bureaucracy and its inefficient network of state-owned corporations.

Shi, who had expected to pursue a career as a researcher, traveled to Australia, where he survived on a small government grant and by working in a restaurant. In Australia, Shi completed a year of postdoctorate work at the University of New South Wales, studying under Martin Green. That experience was to have a profound effect on Shi’s future career. By then, the University of New South Wales had established itself as one of the world’s foremost centers for solar power technology. That field, launched in the mid-1970s in response to the oil crisis, had achieved notable strides in the 1980s, particularly in solar cell efficiency. The efficiency of fuel cells remained an important factor in the future viability of solar power as an alternative energy source. Researchers struggled in their effort to post efficiency gains, working toward a goal of more than 20 percent. In 1985, Green-led researchers at the University of New South Wales successfully achieved an efficiency rating of 18 percent in the laboratory. Later the New South Wales laboratory set a new standard, achieving a 24 percent efficiency rating in laboratory conditions.

By the 1990s, the technological advancements enabled the University of New South Wales to launch an effort to develop commercial applications for its technology. Shi became involved in this effort following his completion of his postdoctorate. In 1992, Shi was hired as a senior research scientist by the university, and placed in charge of the Thin Film Solar Cells Research group at the university’s Centre of Excellence for Photo-voltaic Engineering. The following year, Shi, who married in Australia and had two sons there, took on Australian nationality, with the intention of settling there permanently.

Commercialization of the university’s technology was launched in the mid-1990s, with the creation of Pacific Solar Pty. Ltd. in 1995. In that year, Shi was named as the new company’s research director, as well as its executive director. Over the next several years, Shi continued to lead advances in the group’s technology, becoming a widely published author of articles and studies in most of the world’s photovoltaic-related journals. Shi’s work ultimately resulted in the granting of 11 patents.

RETURN TO CHINA IN 2001

Although Shi had no plans to return to live in China, his position as an expert in photovoltaic technology often brought him back to his home country in order to give lectures on solar power in the late 1990s. By then, the reform of China’s economy had begun to yield results, as the country’s economy went into overdrive. By the end of the decade, China boasted one of the world’s fastest-growing economies. At the same time, the Chinese government had established a goal of developing not only the country’s industrial capacity, but its technological capacity as well.

The effort to raise China’s industrial and technological infrastructure came at an enormous cost for the country. More than 20 years of unbridled growth, coupled with a reliance on a largely inefficient coal-based energy sector, had caused considerable damage to the country’s environment, and with nearly all of its land, water, and air highly polluted, China had become one of the most toxic places in the world.

COMPANY PERSPECTIVES

Across the globe, demand for energy is accelerating on a daily basis. While traditional fossil fuels continue to play a major role, the demand for alternative energy sources is outpacing the global market. Clean, reusable and affordable solar power is increasingly being recognized worldwide as the leading alternative energy source for the 21st century.

Our Vision: As one of the largest solar energy companies in the world, Suntech is passionately committed to delivering alternative energy choices through lasting partnerships in order to build a brighter, sustainable future. At Suntech, we see energy as a central environmental issue with implications for the entire world. Additionally, because we share in a need to address tomorrow’s energy supply, we believe that energy should be affordable for everyone.

Our Mission: At the forefront of addressing tomorrow’s energy needs today, Suntech combines pioneering solar technology with nature’s most abundant resource to deliver the cleanest, most affordable and energy efficient solutions for a green future.

As the country moved into the 20th century, however, the Chinese government recognized the need to develop alternative energy sources, amid an overall effort to bring the country’s environmental crisis under control. Meanwhile, the search to build up alternative energy resources in the West was well underway, with markets such as the United States, Germany, and Spain growing rapidly. Japan, too, became a center for the developing solar power market; in 2002, for example, the Japanese government led in the installation of more than 25,000 solar-panel rooftops across the country. By then, total photovoltaic energy production had topped 1,000 megawatts, up from just 21 megawatts in 1983. While solar power remained highly expensive compared to fossil fuels, it offered a clear perspective as a major energy source in the future.

A number of Shi’s friends began encouraging him to return to China in order to set up his own business producing solar panel cells. Then, the government Wuxi, near Shanghai, offered him $6 million in start-up funding to found his own company there. In 2001, therefore, Shi took the leap, and established Suntech Power. Shi quickly assembled a staff of 20, then succeeded in raising another $5 million in research funding.

With a number of patents to his own name, Shi set Suntech on a course of developing its own in-house technology. Rather than invest in developing automated production facilities, the company used its limited funds to hire more staff, a situation made possible by the extremely low wages still prevalent in the Chinese workplace. In another money-saving move, the company picked up its machinery secondhand, buying the production equipment of failed U.S. company Astrosolar. In this way, the company was quickly able to ramp up production of its PV cells, expanding the Wuxi site to more than 120,000 square feet, while producing PV cells at a 10 percent discount to it major competitors.

Suntech quickly outgrew its Wuxi plant, and began establishing a number of new factories, again attracting start-up funding from regional governments eager to take part in the country’s technological boom. The company also poured its earnings back into its research and development program, and by mid-decade was spending more than $20 million per year on research alone.

The effort to build up its manufacturing base soon paid off for Suntech. By 2004, the company was able to claim a spot among the world’s top ten producers of photovoltaic cells. By then, too, Suntech had become the Chinese solar power leader. While this market remained rather limited, and continued to account for just 10 percent of the group’s total sales into the second half of the decade, the gathering momentum of environmental reform promised to transform China into a major solar power market as well.

JOINING CHINA’s WEALTHIEST IN THE NEW CENTURY

Suntech continued to build up its production base, jumping ahead to the number eight ranking by 2005. In that year, the company’s sales more than doubled, to $226 million, as the company’s PV cells came under global demand. Part of the reason for the group’s success was its strong investment in research and development. In particular, the company developed a method for purifying the silicon used in its cells, which enabled it to drive their efficiency rating to 18.5 percent in the field, fully 1.5 percent ahead of the company’s competitors.

Suntech bought out the investment made in it by the Wuxi government as it prepared to launch its initial public offering (IPO). This came in December 2005, when the company became the first privately held company in China to list its shares on the New York Stock Exchange. The IPO was hugely successful, directly raising $455 million, and valuing the company at more than $5.5 billion. Overnight, Shi joined the ranks of the wealthiest of China’s fast-growing capitalist class, with a net worth ranging from $1.4 billion to $3.3 billion.

KEY DATES

2001:: Zhengrong Shi, a noted developer of thinfilm photovoltaic cells, returns to China from Australia and establishes Suntech Power.
2005:: Suntech goes public on the New York Stock Exchange.
2006:: Company establishes U.S. subsidiary, Suntech America; acquires MSK Corporation in Japan.
2007:: Company establishes Suntech Europe in order to support MSK operations in Europe.

The offering gave Suntech capital to invest in expanding its international presence. The company set up a U.S. subsidiary, Suntech America Inc., in August 2006. Shortly after, the company made its first acquisition, of Japan-based MSK Corporation, which not only produced PV cells, but had also established itself as a leader in the emerging and fast-growing market for building-integrated photovoltaics (BIPV). This market promised enormous growth in the future. MSK also brought Suntech a strong presence in the European market. In support of this, Suntech then established a European subsidiary as well, based in Germany, at the beginning of 2007.

The rising demand for silicon wafers, the core component in PV manufacture, had begun to place these in short supply. In December 2006, however, Suntech secured its supply of silicon wafers through the signing of a five-year supply deal with Sunlight Group, a U.S.-based company with operations in China and Japan. The total value of the contract was expected to range between $366 million and $670 million.

In the meantime, Suntech continued to grow strongly. By the end of 2006, the company had claimed the number four spot among the world’s PV manufacturers, with total revenues of nearly $600 million. This achievement also brought recognition for Shi, who was named one of China’s top ten entrepreneurs.

Suntech showed no signs of slowing down. In February 2007, the company signed a new deal to supply PV cells to U.S.-based Conergy, a major solar systems integrator operating in the United States and Europe. The company also announced the start of construction on a new factory in Shanghai, as it boosted production in order to meet rising worldwide demand, and the coming boom in demand from within China, which still only accounted for 10 percent of Suntech’s sales. With solar power expected to become a primary energy source, Suntech Power’s future appeared particularly bright.

M. L. Cohen