So­lar firm weath­ers storm with sound prin­ci­ples

China Daily (Hong Kong) - - BUSINESS COMPANIES - By ZHENG YANGPENG zhengyang­peng@ chi­nadaily.com.cn

There is a kind of com­pany that will never be the rock star of an in­dus­try. Un­like the lu­mi­nar­ies that rise and fall pre­cip­i­tously, these quiet for­tunes start from hum­ble be­gin­nings and progress s l owl y and steadily. Rarely do they make head­lines, but they are able to dodge risks and sur­vive the worst crises.

Changzhou- based Trina So­lar Ltd is one such com­pany.

Among the four big­gest pho­to­voltaic prod­uct man­u­fac­tur­ers, Trina, along with the rest of the PV in­dus­try in China, is on a road to re­cov­ery: In the third quar­ter, the com­pany saw its first net profit in sev­eral years.

Af­ter a two-year cold spell caused by over­ca­pac­ity and a trade war with the EU and US, global de­mand in the in­dus­try is ris­ing once more.

As for Trina, its pro­duc­tion lines are run­ning at full speed. In fact, so many or­ders have come in that it has had to out­source some busi­ness to other man­u­fac­tur­ers, ac­cord­ing to the com­pany’s ex­ec­u­tives.

This is in stark con­trast with a year ago, when so­lar panel prices plunged, and vir­tu­ally ev­ery PV com­pany suf­fered huge losses.

Wuxi Sun­tech Power Co, once the shin­ing star of China’s PV sec­tor, ex­panded ag­gres­sively be­fore the bot­tom fell out, then failed to cover its debts and had to en­ter into bank­ruptcy pro­ceed­ings this March.

Other man­u­fac­tur­ers faced sim­i­lar tra­jec­to­ries: The tide rose, promis­ing cease­less growth, en­thu­si­as­tic in­vestors and lo­cal gov­ern­ments with money to spend it was hard to re­sist the temp­ta­tion of adding in­vest­ment. Then came the 2008 fi­nan­cial cri­sis, and ev­ery­thing changed. Over­ca­pac­ity and bad debts be­came by­words of the in­dus­try.

When the tide ebbs, it is time to see who is swim­ming naked on the beach.

“The prob­lem with China’s PV in­dus­try is that few com­pa­nies have core com­pet­i­tive­ness, which is what keeps you from be­ing copied by other peo­ple,” said Steven White, as­so­ci­ate pro­fes­sor at Depart­ment of In­no­va­tion, En­trepreneur­ship and Strat­egy of Ts­inghua Univer­sity.

“Over­ca­pac­ity oc­curs when too many peo­ple are mak­ing the same thing,” White said. “But dur­ing the boom, com­pa­nies were tempted to ex­pand their ca­pac­ity.”

Trina was among the few that re­sisted that temp­ta­tion.

Gao Ji­fan, Trina’s CEO, told China Daily that at the end of 2007, board mem­bers of the com­pany, some from the US, sensed a loom­ing cri­sis as mort­gage gi­ants Fan­nie Mae and Fred­die Mac be­gan melt­ing down. They felt that the econ­omy could dip soon and that in­vest­ment should be par­tic­u­larly cau­tious.

As a re­sult, a $ 1 bil­lion polysil­i­con project in Shang­hai was can­celed even while many other PV firms were

The prob­lem with China’s PV in­dus­try is that few com­pa­nies have core com­pet­i­tive­ness, which is what keeps you from be­ing copied by other peo­ple.” STEVEN WHITE AS­SO­CI­ATE PRO­FES­SOR AT DEPART­MENT OF IN­NO­VA­TION, EN­TREPRENEUR­SHIP AND STRAT­EGY OF TS­INGHUA UNIVER­SITY

com­pet­ing to in­vest heav­ily in sim­i­lar projects.

Gao at­trib­uted Trina’s cau­tion to the com­pany’s in­her­ent man­age­ment cul­ture.

“From the very be­gin­ning, we have never aimed to be the largest in the in­dus­try. In­stead, we pur­sue ‘sus­tain­able devel­op­ment’’, he said.

The dovish stance that kept Trina from be­com­ing a shin­ing star in the sunny days also helped it to be bet­ter­po­si­tioned when it rained: Gi­ants that ex­panded reck­lessly are now deal­ing with heavy debts, a ma­jor fac­tor weigh­ing on them be­sides plum­met­ing prices.

But thanks to a lighter fi­nan­cial bur­den and bet­ter cost con­trol, Trina lost less money in the chill­i­est times.

Buck­ing pre­vail­ing opin­ions, Gao be­lieves that rapid ex­pan­sion be­fore the cri­sis was not what caused the en­su­ing catas­tro­phe. The rea­son, he be­lieves, comes down to cor­po­rate man­age­ment.

“It is not be­cause the ex­pan­sion was too fast but be­cause the fast ex­pan­sion was not ac­com­pa­nied by good man­age­ment. It is like houses that are not prop­erly main­tained af­ter they are built,” he said.

Ac­cord­ing to Gao, be­fore the cri­sis, the in­dus­try was daz­zled by the bright prospects of the so­lar in­dus­try, as in­vestors, most with­out much ex­pe­ri­ence in the sec­tor, flocked in. They spent huge amounts on land and fa­cil­i­ties. But much of it was left idle af­ter it was bought.

Gao, how­ever, never hid his con­tempt for these “spec­u­la­tors” and be­lieves he be­came a sen­try for the in­dus­try.

In 1997, when few in China had even heard the word “pho­to­voltaic”, Gao started his com­pany. He had al­ways be­lieved that de­mand for so­lar power would grow.

But even as leader of the com­pany, Gao said he never sin­gle- hand­edly makes all the ma­jor de­ci­sions. Those are all fully dis­cussed at the man­age­ment level be­fore any ac­tion is taken. The di­ver­sity of the board and man­age­ment team — ev­ery re­gional com­pany of the NYSE-listed firm is man­aged by lo­cal tal­ent — en­sures that Trina is well-in­formed on op­por­tu­ni­ties and risks of lo­cal mar­kets.

“I’ve al­ways said that solid man­age­ment was the fun­da­men­tal guar­an­tee of our suc­cess. As early as 2006, when we went pub­lic, we re­al­ized it was es­sen­tial to build a global tal­ent pool,” Gao said.

This means that Trina has ex­pended great effort to find the right tal­ent for dif­fer­ent ar­eas, whether it is pro­duc­tion, sales, qual­ity con­trol or en­vi­ron­ment pro­tec­tion.

In ad­di­tion, “we man­u­fac­tur­ers should not al­ways talk about ‘grand con­cepts’. Spe­cific work should be done, and no part (of the com­pany) can af­ford to have prob­lems,” Gao said.

In fact, the com­pany’s cor­po­rate man­age­ment is so for­mu­la­rized that some em­ploy­ees com­plain it some­times can be too rigid. “It is more like an Amer­i­can com­pany,” said one for­mer em­ployee who re­fused to be iden­ti­fied.

Trina might not seem like an ex­cit­ing place to some em­ploy­ees, but its fi­nan­cials are solid. In the third quar­ter of this year, sales rev­enue surged 24.4 per­cent over the sec­ond quar­ter to hit $ 548 mil­lion.

And it is re­as­sur­ing to see how the com­pany’s rev­enue sources have changed. A year ago, the Ger­man mar­ket made up 42.1 per­cent of Trina’s rev­enue, while China con­trib­uted only 5 per­cent.

Now, China has emerged as the largest mar­ket, con­tribut­ing 39 per­cent of the com­pany’s rev­enue while Ger­many has re­treated to 16 per­cent.

Gao Ji­fan, chief ex­ec­u­tive of­fi­cer of Trina So­lar Ltd

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