An Interview with Xiaofeng Peng, Chairman and CEO of LDK Solar

An Interview with Xiaofeng Peng, Chairman and CEO of LDK Solar

Interviewed by Doris Dong, Semiconductor Manufacturing magazine, SEMI China

Four years ago, Xiaofeng Peng was pondering his next career move while he travelled around Europe. He realized that renewable energy would have a big future. In July 2005, Peng founded LDK Solar—now one of the fastest-growing suppliers of solar wafers in the world.

Today, if you search for “Xiaofeng Peng” in Google, thousands of “hits” (articles) appear, including the Forbes (March 4, 2008) “World’s Richest People: Young Billionaires” ranking. Peng’s business and social standing has grown quickly—along with LDK Solar and the photovoltaic industry.

During the “4th Annual China SoG Silicon and PV Power Conference & Exhibition” held in Shanghai in June 2008, the author interviewed Xiaofeng Peng, Chairman and CEO of LDK Solar Co., Ltd.

Doris Dong: Facing the “swelling tide for polysilicon manufacturing” in China at present, Trina Solar announced the suspension of the US$ 1 billion polysilicon project in April. What do you think about the future for polysilicon market in the world?

Xiaofeng Peng: At present, the polysilicon industry enjoys a high profit rate, and it is really normal that numerous people rush into this industry. However, we’ve also noticed that some enterprises blindly squeeze into this industry with absence of capital, technology and market, which really makes us worried. Although this market really requires great amount of economic polysilicon, the key points are the production technology, capital source and sales market, followed by the cost. We can find many domestic manufacturing plants with a production capacity of 300 tons, 1,000 tons and 3,000 tons. But for the market of solar energy, 10,000 tons is a minimum of the basic economic scale, for which the manufacturing cost of polysilicon would be controlled between US$ 15_25 (by means of improved Siemens method), and the cost can be reduced to US$ 15_20 if silane process is applied. I think investment in the polysilicon industry can be a comparatively sound choice if all the above conditions can be met.

Two years ago, (the polysilicon industry) was a sound opportunity for those who would like to stride into the industry, but now it’s too late. When people think highly of a certain industry and flood into it, it is usually the time that we withdraw—and it is always unadvisable to make an investment decision at that moment.

DD: How do you look on the market of thin-film solar cells? Will it impact the traditional market of crystalline-silicon solar cells?

XP: In a broad sense, it is a misunderstanding that competition exists between thin-film and crystalline-silicon solar cells. Just like water and apple juice, both of them are beverages but have different markets. The thin-film market and crystalline-silicon market have different emphasis. More and more solar cells and modules manufacturers will own several technologies at the same time by manufacturing thin-film cells and crystalline silicon cells, e.g., Suntech, Sharp, etc. In the coming decade, the crystalline-silicon solar cells will continuously play a leading role, accounting for 70_80% of the market share, while the market share of thin-film cells will be gradually increased from less than 5% to above 20%.

DD: It was announced by Sony that dye-sensitized solar cells, with no silicon materials, had been successfully developed recently— the cost of the new technology is only one-fifth to one-tenth of that of silicon-based solar cells. Do you think this R&D result would have significant influence on the polysilicon industry and even the photovoltaic industry?

XP: New R&D results in photovoltaic industry happen nearly every week, which should be seen from two aspects. First, it is a long journey for a new technology to go from successful research and development to industrialization. Half a century has passed from the successful research and development of current crystalline-silicon solar cells in Bell Laboratories in 1953 to its commercialization at present. Secondly, in terms of materials, silicon is the element with the largest reserves in the world which can be most easily obtained with no pollution to the environment.

DD: People always say that “polysilicon industry is a high energy consumption industry.” Do you agree with this point of view?

XP: If you go abroad to visit some large plants overseas, e.g., Wacker in Germany, which are all established in the scenic area, you can not find any polysilicon manufacturer or any pollution or high energy consumption. Actually, polysilicon manufacturing itself is not a high energy-consumption and polluting industry. Because most of the domestic (China) manufacturers have not mastered the advanced manufacturing technology, and have not solved the most fundamental environmental protection problems, people may have the impression that you’ve mentioned.

From another point of view, the energy payback period of polysilicon solar cells is around one year—i.e., the electric power consumed during the manufacturing process can be recovered within one year after power generation by the solar cells. Calculated on the normal life of 30 years for the solar cells, it means an efficiency of 30 times, which is an extremely cost-efficient business.

    DD: What about LDK Solar’s short-term and long-term planning and strategies?

    XP: LDK aims at becoming the most economic and largest silicon wafer supplier for solar cells in the world. In order to become the leader of this industry, we shall hold all the trumps both in the sales volume and the market share. This May, our company announced that we will adjust the capacity expansion schedule, increasing planned capacity from 800MW to 1100MW in 2008 and 1600MW to 2000MW in 2009. By the end of 2008, LDK Solar is expected to become the largest solar polysilicon wafer supplier—with a capacity ranking of “number one” in the world.

    We do not depend on only a few key customers. Our customers are mainly the top 20 solar cell manufacturers in the world, with whom we have established long-term relationships. The purchase quantity for each customer accounts for only 4_5% of our share of total sales volume, and only our largest customer, Q-Cells, occupies nearly 10% of our total sales volume.

    In August 2007, LDK Solar invested US$ 12 billion to start up a project for annual production of 15,000-ton SoG polysilicon materials. At present, the project is going as scheduled, and the planned capacity by the end of 2008 could reach 7,000 tons and 15,000 tons by the end of 2009.

Recently, we announced the project of 200-MW highly-active mono-crystalline silicon wafer, and we are cooperating with our customers in manufacturing N-type mono-crystalline silicon wafers. As one product branch of LDK, it is planned to be put into mass production in October 2008— reaching the capacity of 200MW by the end of 2008. Currently, some customers are already planning their orders.

DD: As revealed by LDK’s financial report, the gross profit rate in Q3 and Q4 of 2007 was 30%. It is estimated that the gross profit rate in 2008 will be between 26%_31%, but in prior years LDK’s gross profit rate was as high as above 40%. Is the reduction of gross profit rate completely contributed by the rise in price of silicon materials?

XP: LDK’s market strategy is changing—not focusing on a reduction of gross profit rate. After its establishment, the company will certainly focus on the profit in order to rapidly recover the capital for manufacturing expansion. But at present, the company pays more attention to the market share. We actively reduced our gross profit rate to increase our market share. This complies with the company’s objective to become the largest silicon wafer supplier for solar cells in the world at present, and, it cannot be separated from our strategic objective.

DD: What is the greatest challenge confronted by LDK at present?

XP: LDK is a company of rapid growth. Despite of our leading position—in terms of market value, turnover, etc.—we are still a young company in this industry. It is one of the companies with the largest number of employees in the industry. Within three years, we have grown to 10,000 employees. It is really a great challenge to train so many employees to be qualified LDK people, so the employee training, employee management and employee operation is changing, complying with rapid development of the company. We are an international company with employees from scores of countries, and it is also a great challenge to integrate their cultural backgrounds into LDK.

DD: It is said that more than US$ 30 million has been invested into LDK’s R&D Lab. How about the direction for research and development at present?

XP: It is the greatest contribution to the photovoltaic industry by reducing the manufacturing cost, and our R&D Team mainly focuses on how to reduce the manufacturing cost during their work. Thickness of the silicon wafer has been reduced from 330µm at the very beginning to 180µm at present. The 160µm silicon wafer is also now in trial operation, which might be thinner in future. The manufacturing process and yield are increasing continuously from 9g/W previously to 6_7g/W at present. The ingot weight is also increased from 270 kg to 450 kg at present. It is rather a great advancement to gain these achievements in less than two years. We shall take the lead in R&D activities in order to become the largest silicon wafer supplier of solar cells in the world. Our R&D Team is still expanding, and R&D activities will be conducted wherever semiconductor industry is prosperous in the world. We will endeavor to utilize global resources.

From DD: In addition to his acute market sense and operational concepts, Peng’s success depends on his great utilization of global resources—from technology to talent and from capital to market. On June 24, 2008, GreenTech Media reported that a new company, Best Solar, aims to become the world’s largest supplier of thin-film solar panels. Peng founded and funded this new company, Best Solar, which is unrelated to LDK (other than sharing a founder), in Nanchang of China. Will the thin-film solar market become the next stage for this “Legend in the Polysilicon Industry”?

Xiaofeng Peng was interviewed by Doris Dong, executive editor of Semiconductor Manufacturing magazine, SEMI China on June 6, 2008.

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