Yingli Solar (YGE) produces ingots, wafers, solar (TAN) cells, and PV (or photovoltaic) modules. The company derives the majority of its revenue through PV modules sales, and its future success largely depends on its ability to expand its manufacturing capacity and output.
According to the company’s filings, Yingli Solar’s manufacturing capacity for modules, solar cells, wafers, and ingots stood at 4,000 MW (megawatts), 3,200 MW, 3,000 MW, respectively, at the end of 2015. Yingli Solar’s capacity expansion was consistently on the rise until 2012. However, the sharp fall in average selling price of PV modules due to a supply glut in global markets didn’t deter Yingli Solar’s expansion plans.
The company continued to expand its capacity to capture market share, which resulted in underutilization of its manufacturing resources during the downturn. This, in turn, impacted its profit margins and bottom line. Moreover, much of this capacity expansion was funded through external debt and was highly leveraged. Continued loss from operations ultimately led the company’s subsidiary, Tianwei Yingli, to default on repayment of its medium-term notes due on May 12, 2016.
As a part of its business strategy, Yingli Solar forayed into the downstream solar business to leverage its expertise in capturing the cost benefits associated at every stage of the PV product value chain. According to the company filings, vertical integration helped the company to improve the conversion efficiency of its PV cells, reduce the lead time needed to fulfill the orders of its customers, and reduce the quality of polysilicon that is used in making the company’s PV modules.
Yingli Solar’s module efficiency
Yingli Solar continues to invest in R&D (research and development) to develop more efficient, low cost, and reliable solar modules. Any increase in module conversion efficiency will decrease the cost of raw materials used in module manufacturing. In 2015, Yingli Solar announced a new efficiency record of 20.5% for its PANDA commercial production lines. In contrast, the company reported a cell conversion efficiency rate of 21.5% in the lab.
In the next part of this series, we’ll discuss Yingli Solar’s downstream project pipeline.