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Foxconn Bailout of Sharp Throws Into Doubt Solar Business Future – Bloomberg

Foxconn Technology Group’s decision to take a majority stake in Sharp Corp. throws into doubt the fate of the Japanese electronics maker’s solar operations, a business that once made the Osaka-based company the world’s largest seller of solar cells.

Under the terms of the sale, the parent of Hon Hai Precision Industry Co. will control 65.9 percent of Sharp after buying stock, beating out a rival offer from state-backed Innovation Network Corp. of Japan.

“Sharp will probably wind down their solar-panel business,” Hideki Yasuda, an analyst at the Ace Research Institute in Tokyo, said by phone Thursday before the announcement. “There is no longer merit to keep it under Sharp because it is a business that relies on subsidies. It is a business with big swings dependent on the levels of subsidies and feed-in tariffs.”

A retreat from solar would mark an inglorious end to nearly 60 years of involvement for Sharp that began in the industry’s infancy, grew to include solar cells and panels, and ultimately saw Japanese leadership ceded to Germany. In turn, overproduction and crushing debt loads have seen the industry’s focus shift yet again from Europe to China.

Thursday’s announcement provides no definitive answers to what Sharp intends to do with its solar operations, though the Japanese company continues to hold out the prospect of some kind of partnership or realignment.

Energy Business

According to earlier Japanese media reports, Sharp’s solar business could have been streamlined and integrated with Solar Frontier K.K. had the INCJ offer been successful.

“In order to improve the revenue at our energy-solutions business, Sharp will make the utmost efforts for options, including a strategic alliance and a joint venture,” the company said in the filing announcing the share sale.

Sharp’s energy-solutions business, which includes solar products, posted a loss of 5 billion yen ($ 45 million) in the three months through Dec. 31. The company projects a loss of 7 billion yen for the fiscal year ending March 31 for the segment, according to a Feb. 4 filing.

Sharp, which started in the solar business in 1959 and remains its oldest major manufacturer, has been restructuring by mainly shutting overseas operations. Last year, it sold Recurrent Energy LLC, a San-Francisco-based solar development unit to Canadian Solar Inc. for $ 265 million.

The company in 2014 withdrew from an Italian solar venture — its last overseas panel-manufacturing plant — shortly after announcing that it would give up its half share of a separate undertaking with Enel Green Power to develop solar projects.

Also in 2014, the Japanese electronics maker stopped making panels at plants in the U.S. and U.K.

New Focus

Earlier this year, company executives signaled that manufacturing solar panels was no longer key to its energy business.

“What we plan to do is to expand the business” with devices such as energy management and storage, President Kozo Takahashi said at a news conference on Feb. 4. “Some may ask if we will withdraw from solar panels, but we have not made such a decision at this point.”

The company plans to set aside 10 billion yen from the Foxconn share sale for the energy-solutions business, including 5 billion yen for investments in software related to home energy management system development, according to Thursday’s filing.

“We will push through reform from a business centering on the existing businesses such as photovoltaic module sales to a new entity which puts energy solutions at the core,” Sharp said.

Sharp’s diminishing profile is a familiar story in the solar business, which has repeatedly seen the rise and fall of key players.

Industry Origins

The industry’s genesis stretches back to the early 1950s when Bell Laboratories in the U.S. announced the invention of the world’s first silicon solar cell. NEC Corp. followed in Japan with production of its first solar cell. Sharp began mass production of the products in 1963.

The 1973 oil crisis prompted the Japanese government to compile a set of plans called the “Sunshine Program” for clean energy such as solar and hydrogen energy to provide support for technology development. Kyocera Corp. entered solar development in 1975.

By 1999, panel production in Japan surpassed the U.S., according to the trade ministry-affiliated New Energy and Industrial Technology Development Organization.

In 2000, Sharp became the world’s biggest solar cell manufacturer, holding onto that position until 2006, according to a history of the business on Sharp’s website. But Japanese panel makers were soon eclipsed by German rivals such as Q-Cells, where the market was being spurred on thanks to favorable incentives.  

Japan’s solar market got a boost in July 2012, a year after the Fukushima nuclear disaster prompted the country to diversify its energy sources. With the introduction of incentives known as feed-in tariffs, Japan’s solar capacity jumped from 5,208 megawatts in 2011 to almost 37,000 megawatts in 2015, according to Bloomberg New Energy Finance.

“There are many Chinese panel makers that can make them cheaper,” Ace Research Institute’s Yasuda said. “Japan is not in an environment yet where individual consumers are willing to buy solar panels.”


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