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The Story behind JA Solar’s Inorganic Growth

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Dec. 4 2020, Updated 10:53 a.m. ET

JA Solar’s Silver Age acquisition

A significant portion of JA Solar’s (JASO) capital expenditure is confined to China. The company’s solar (TAN) module manufacturing units are located in China and Malaysia. However, the company’s investment in its global distribution network has helped it cater to the demand across its operating geographies.

In November 2011, JA Solar announced the acquisition of a 100% equity interest in Silver Age Holdings. According to company filings, the acquisition was intended to increase JASO’s silicon wafer manufacturing capacity, secure wafer supplies, and reduce the cost of silicon wafers for the company’s solar manufacturing. The acquisition helped the company achieve a more vertical integration of its solar products business.

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Acquisition of Hebei Ningjin Songgong

In January 2013, JA Solar completed the acquisition of a 65% equity interest in Hebei Ningjin Songgong Semiconductor from M. Setek, a polysilicon and wafer manufacturer based in Japan. According to a company press release, the value of the purchase was about $39 million.

The acquisition was part of JASO’s agreement with M. Setek to settle the outstanding prepayments made for the polysilicon supply.

In addition to the above acquisitions, JASO acquired an additional 50% equity interest in MEMC Electronic Materials in 2014, a joint venture for a consideration of $7.7 million in cash.

Capital expenditure

JA Solar’s growth was primarily driven by the organic expansion of its manufacturing capacity. Historically, the company used its capital expenditure to purchase property and equipment, to invest in project assets, and to construct and expand its solar product manufacturing lines.

The sharp fall in PV (photovoltaic) module prices led to a sudden fall in the company’s capital expenditure in 2012. However, capital expenditure picked up from 2013. For 2015, JASO reported capital expenditure of $142 million compared to $105 million in 2014.

The upstream solar industry is a capital-intensive business. Players such as JA Solar, Trina Solar (TSL), First Solar (FSLR), and Canadian Solar (CSIQ) are required to spend a large amount of capital up front to enhance and continue growth.

Next, let’s look at JA Solar’s service and product suite.

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