Waiting for the tide to turn

Solar panel maker sees bright future for industry in the long run despite market turbulence

Performing morning exercises, singing military songs and learning English are part of the daily ritual for the tens of thousands of workers at Yingli Solar, a leading solar energy company and one of the world's first fully vertically integrated photovoltaic manufacturers, based in Baoding, Hebei province. The morning tradition initiated by the company's founder and chairman Miao Liansheng has remained relatively unchanged for several years, in line with the billionaire entrepreneur's vision to run his company like an army, school and family.

However, the English words that Miao's employees are learning and chanting in the morning have recently changed to "increase efficiency and lower cost" in line with the fierce consolidation taking place in the solar PV sector due to domestic oversupply and uncertain overseas prospects.

The turmoil in the PV sector has left several Chinese companies in the lurch, with companies like the Jiangsu-based Suntech getting a delisting warning from the New York Stock Exchange last week, while others like the Jiangxi-based LDK Solar appear to be heading toward bankruptcy.

Yingli, however, is on a roll and looks set to buck the general trend and become the global leader in solar PV panel shipments this year. The company's shipments are expected to exceed 2 gW, or account for about 7 percent of global demand, according to NPD Solarbuzz, the California-based solar energy market research and consulting company.

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Though moving products fast doesn't necessarily bring in profits, the words "increase efficiency, lower cost" do function as Miao's strategy to keep the company's deficit to the minimum and secure enough cash flows to survive the market turmoil. Miao says that he believes that the solar industry will bounce back from its worst ever period by the end of next year.

Sitting in his spacious office in Yingli's headquarters in Baoding, Miao goes on to explain that his assumption is backed up by numbers.

"The world's total production of polysilicon is around 300,000 metric tons every year. This can produce only 50gW of solar energy, while the global demand is projected to reach 70gW by 2014," he says.

"It is a tricky situation, and one that companies need to handle with care. Though several companies are exiting the sector, demand is increasing steadily. It is ultimately a question of hanging on till the tide turns. I am confident that the companies that can do so will emerge as winners in the long run."

The personal fortune of Miao shrunk dramatically to 2.2 billion yuan last year ($350 million, 273 million euros) from 14 billion yuan in 2007, according to Hurun Rich List, which tracks the wealth of China's richest individuals.

Miao, a former member of the People's Liberation Army, however, has no plans to hang up his solar boots like some of his peers have done. Admitting that he faces formidable challenges, the solar energy pioneer contends that his ultimate aim is to make solar energy affordable to all.

Like most other entrepreneurs who have made it big, Miao was able to spot the potential of the solar sector well in advance. When he entered the industry in 1997, very few were convinced about the long-term potential for the sector.

"My instincts were triggered by the small article on solar PV panels that appeared in the Economic Daily," he says.

Despite accumulating abundant experience as well as cash in various sectors, including cosmetics, water delivery and pig farming, Miao had dreams of taking the "one big step".

"I realized that solar panels can not only change the nation's energy mix and propel China's clean energy drive, but could also be a sector that China could excel in," he says.

"Other industrial sectors in China, such as machinery, are far behind Western players. Solar PV sector is one of the few sectors China has, that is at the same level or even better developed than its rivals in developed countries."

His strong belief in solar energy as a game changer and his ambition to be part of the industry has helped Yingli traverse many mazes.

Though the company's shares are currently trading below par at around $2 compared with an initial listing price of $11 and a high of $41.7 on the New York Stock Exchange some years ago, Miao has no plans to trim his 32 percent holding in the company, says Tian Jing, deputy director of investor relations at Yingli Green Energy Holdings.

"That's not a surprise. Unlike other founders of leading solar companies in China, who rode the solar wave in the early 2000s and used venture capital to build up their power, Miao believes in building a solar empire from scratch," says Wang Hongzhi, director of the policy research office at Yingli Group, and someone who has known Miao since he was a young entrepreneur.

Over the past 15 years, Miao has turned Yingli Solar from a company with an annual production capacity of just 3mW a year in 1998 to a giant player capable of producing 6mW a day.

That journey, however, was not easy, considering that very few had heard of or seen a solar panel when he started the business.

"In 1990, people were not at all convinced that solar panels could convert sunshine into energy. We had to struggle till 2004, when thanks to Germany's decision to offer subsidies, the solar energy sector got a big boost," he says.

"It was tough, as I had to sell my last car to pay salaries. Often I had to carry big barrels of water with me so that I could travel and reach out to more and more people."

Wang adds: "Miao was the pioneer who carried a backpack and went from one ministry to another, trying to make more people understand about solar energy and get valuable support for the development of the sector."

But one thing that Miao always had was resoluteness and a firm conviction, traits that he retains today, even as his employees praise his extraordinary business vision.

"He seems to keep everything in his radar, knowing exactly what is going on in the solar sector and always making decisions that people didn't quite understand initially, but which were later proven to be right," says Tian, who leads a team of five, delivering two daily reports on the latest moves in the solar sector to Miao.

In 2009, when the global financial crisis started to spread into the solar sector, many domestic companies suffered due to the sharp fall in orders during the first six months of the year.

"We thought we were also in trouble, but Miao decided in July that year to expand production capacity and add shifts to produce more panels," says Song Dengyuan, chief technology officer at Yingli.

"Then one month later, the global market was back on its feet and demand suddenly surged. Apart from us, very few companies were able to keep up with the sudden change and provide enough products."

But what really makes Miao more of a maverick is the fact that he is still an old-fashioned businessman who does not use a computer. The only modern gadget that he uses is a mobile, which has as its ring tone the famous military song, We Soldiers Are Not Like Ordinary People.

Though he is not at all familiar with the Internet, he is an avid reader of newspapers and watches television. He gleans information from a variety of sources like the People's Daily and the news programs on China Central Television.

According to Liang Tian, head of public relations at Yingli, it is Miao's unique channel of gathering information that has always helped him to make the right moves.

"He keeps an eye on every political move around the world, and believes that politics and economy are closely integrated," Liang says.

Though the entire industry has criticized the EU decision to conduct anti-dumping investigations against Chinese solar firms, Miao says it was something that was bound to happen.

He analyzes the trigger of the situation, not only the eurozone crisis but also the transfer of political power and presidential elections around the world.

"This year is very special due to a reset in the political and economic order. Every sector is at their lowest point, and so is the solar industry," Miao says.

"All the solar panel makers had been busy expanding production capacities and hiring more workers between 2004 and 2011. The current situation offers us an opportunity to look back and improve our technologies and better train our workers."

Miao says he has no plans to slow production or lay off workers despite the sharp erosion in gross profit margins, from 970.1 million yuan in the second quarter of 2011 to 141.5 million yuan in the second quarter of 2012.

On the other hand, Yingli is still one of the few companies undergoing expansion. His goal to nearly double Yingli's production capacity to 4gW by 2014 has not changed nor his outlay for research and development to boost overall product quality.

Looking to the future, Yingli has already decided to do away with its European market focus and instead rely on a three-pronged strategy that targets the euro zone, the dollar zone and the renminbi zone separately to avoid market turbulence.

Miao is also redesigning the company's production profile in such a way that 30 percent of its products will now be for higher-efficiency and higher-end panel users, with 30 percent lower-end products. The balance 40 percent are products for small PV power stations, a sector that he considers has excellent long-term prospects.

Miao says that diversification is the key for survival and says that Yingli will always be on the lookout for profitable and suitable downstream opportunities.

Being a soldier, Miao understands how important the morale of troops can be in a battle.

This year Miao organized an expo at the Yingli factory from Oct 1 to 15 to showcase the latest technologies and production tools invented by assembly line workers. The event aims to motivate his more than 20,000 employees to improve their working skills and invent more techniques and tools to lower production costs.

Miao and his senior staff greet the workers at the factory entrance every day between 6:40 am and 7 am. Inside the Yingli compound are his villa, a small building with a pool and a garden full of plants from South China's Hainan province. Most of the time he can be seen sitting on a camp chair and fishing at the man-made lake. "It is all planned out and we got everything under control," he says.

But from his office's window hang big red banners with the slogans "Climbing up the solar PV snowy mountains" and "Crossing the solar PV meadows", inspired by the arduous Long March of the People's Liberation Army's history.

mengjing@chinadaily.com.cn

(China Daily 10/05/2012 page16)