The recent acquisition of Q-Cells by Hanwha Group is not only the largest consolidation effort to date in the solar industry, but an example of South Korean companies playing an influential role in the development and growth of the solar industry. South Korean Nexolon is one of the largest global solar wafer manufacturers, with 1.7GW of mono and multi crystalline capacity. In June, multi-wafer processing cost reached $0.16 per watt, a level shared with the best Chinese companies. The company is planning to return to the black in Q1, 2013.

In recent news Nexolon combined efforts with OCI Solar, an EPC and Development company and the subsidiary of OCI Chem, to build solar plants in the US. As part of this agreement Nexolon made a commitment to erect a 200MW module assembly plant in Texas, US.

We had a chance to conduct a conversation with Mr. Je-Hyun Yoon, Nexolon’s CEO, and Mr. Tae-Jin Chung, Head of IR, on the company’s technological advances and recent developments in the US.

SPVI:We understand that Nexolon has been growing shipments in n-type wafers with the objective of reaching 5% of total shipments for 2012. You refer to “advanced” technology to produce n-type wafers; can you differentiate between n-type from Yingli Green Energy Hold. Co. Ltd. (ADR) (NYSE:YGE) and yours?

Nexolon: We categorize N-type mono wafer and FSQM (Full Square Mono wafer) as higher efficiency products and we will differentiate ourselves from other peers by focusing on N-type mono wafer and FSQM due to demand shift to higher efficiency products. Our higher efficiency wafers shipment out of total mono wafer shipments posted 12% in 1Q 2012 and 17% in 2Q. We target 20 -25% in 2012 full year and 50% in the long-term view.

There are two important differences between Nexolon’s N-type mono wafer and Yingli’s. Firstly, we have FSQM technology in our N-type mono wafer. Full-square mono maximizes the wafer’s exposure to light, which produces an additional 3% power output compared to the traditional pseudo-square, thereby producing best performing modules. FSQM technology is one of Nexolon’s greatest prides because it’s not a common technique you can see easily in the solar industry. 

Secondly, we can satisfy all our customers’ requirements. Because Nexolon started off as a solar company specializing in wafers, we’ve been focusing on sophisticating our wafers not only in terms of technology but also with the control to fulfill various cell processing. One example is regarding resistivity range. Each cell company has its own cell processing and the wafers need to fit cell processing. We elaborate our technology and manage specification requirements of many cell companies around the world. Closely refining our ingot growing technology to best optimize for ourclients’ conditionsis our comparative advantage that enables us to maintain a wider coverage of global customers. Yingli, however, mainly profits by selling modules. It can safely be assumed that their control range is very limited and only fits their cell process. Nexolon’s competence to mass produce wafers that are compatible with diverse cell processes through detailed control is another great distinction. 

SPVI: Can you describe to our readers FSQM (full square mono) technology? Mono ingots are traditionally round due to the process used.  To produce 156mm*156mm wafer the round ingot is a lot larger and there would be a lot of material cut off in the squaring process, does this add cost?

Nexolon: FSQM technology is to produce mono crystalline wafers with a perfect 4 edge square instead of conventional pseudo-square with 8 edges. As you mentioned, mono ingots are generally produced with a 6-inch diameter, which cannot draw a 156X156mm perfect square. In order to cut out a perfect full square, we grow bigger mono ingots with 8” diameters. This is difficult to achieve because obtaining consistent crystal uniformity in all areas is crucial. In other words, growing a bigger ingot itself is our “advanced” technology. That’s why only a few companies can produce FSQM wafers and Nexolon is the leader in solar wafer industry.

Of course, when an ingot is bigger, the parts being cut off also become bigger. However, we do not waste cut-off parts of mono ingots. Since cut-off parts are also poly-silicon byproduct, we can always recycle the cut-off materials, which mean that we reuse in producing multi ingots. Possessing both mono and multi production lines largely helps in saving cost and this is one of the reasons why we’ve been able to reduce cost atsuch a fast pace. 

SPVI: In 2011 you have run bet a DSS™ MonoCast™ from GT Advanced Technologies Inc. (GTAT); how do you facilitate this program in your current production?

Nexolon: It is true that we’ve succeeded with mono cast technology and mono-like multi wafers were acquired. However, it is not being mass produced yet due to high cost. Our R&D team is making efforts to not only further reduce production cost but also improve conversion efficiency. Meanwhile, we are commercially producing high efficiency multi wafers, which are under customers’ qualification test. It seems they are welcoming high efficiency multi more than mono-like multi due to technological reasons. 

SPVI: You have mono casting technology, but you are also having high conversion multi with average of 17.2%. We are curious; what is the distinction between the two?  Companies like ReneSola Ltd. (ADR)(NYSE: SOL) produce high conversion wafers using a mono-cast technology, but they actually call it “quasi-mono.” High conversion wafers cost more, what improvements is Nexolon employing to lower it?

Nexolon: Our high conversion multi, or high efficiency multi, is a completely different product from mono-like multi, or ReneSola’s quasi-mono. ReneSola’s “quasi-mono” is a mono-like multi wafer produced by mono-cast technology, which, as mentioned before, we possess but do not commercially produce. Mono-casting uses a seeded directional solidification technique. In other words, the seed enables crystal to form in a consistent direction. On the other hand, high efficiency multi is totally distinct in that it does not use seed. High efficiency multi is based on reducing dislocation density and improving impurity level. The reason it’s being welcomed by our customers is in its cell processing. Whereas mono-cast multi wafers, or quasi mono wafers, need Alkali texturing to turn into cells, high efficiency multi wafers can be processed with the conventional way of acid texturing like normal multi. This is the advantage of high efficiency multi products. Nexolon is making continuous efforts to provide both mono-like multi and high efficiency multi products with a better quality and a higher competitiveness. 

SPVI: Nexolon will build a factory in the US to assemble modules. Will you be producing own cells or have them made with some of your clients like Gintech, from Taiwan? 

Nexolon: We will be producing our own cells and module sand providing cells and modules that are particularly customized for the U.S. market. It doesn’t make sense to establish vertical integration in the solar value chain, however. As of June2012, we have a 1.7 GW ingot production capacity, whereas we are planning to have only a 200 MW cell/module production capacity. 

SPVI: OCI Solar is a new company in the US; the 400MW plant project is a large one. What is OCI’s experience in EPC? Is the venture with OCI Solar to take shape outside the US, and if so, in what regions?

Nexolon: OCI Solar Power provides and develops utility-scale solar power plants throughout the US and Canada. It was formerly Cornerstone Power Development and it has decades of experience in developing and operating power plants. OCI Solar Power has deep energy industry experience, not only with solar PV power plants, but also with natural gas, coal, hydro, wind and biomass facilities ranging in various sizes. The team has formed amicable relationship and partnerships throughout North America as they work together to build greener societies and cleaner communities. Nexolon have no doubt in OCI Solar Power’s experiences in EPC business. By working together in this project, we hope to form a stronger partnership between the two to become the best solar players. 

SPVI: Can you tell us why, at this time, Nexolon is expanding into module manufacturing, particularly with the overcapacity and global glut of inventory?

Nexolon: As we all know the solar PV industry as a whole is going through a tough time. Nexolon has been making efforts to find new growth potentials, and the US market was one of them. As a result, the CPS project is the consensus of all three players involved: CPS, OCI Solar Power and Nexolon. CPS was looking to develop a project that entailed job creation, OCI SP was interested in EPC project and Nexolon was finding a profitable new business model. Nexolon guaranteed to create over 400 jobs in the San Antonio area by building a cell and module plant. This facility not only aims to supply to CPS project but also to satisfythe growing US market with our advanced solar products. For this project Nexolon Korea will be supplying solely n-type mono wafers to Nexolon America to maximize efficiency and power productivity. We are very excited and thankful to capture this opportunity. We firmly believethe CPS project to be the stepping stone to take full advantage of both the rising US market and the next industry upturn.

We believe N-type mono market is not suffering from an oversupply problem because there are few players who can provide N-type mono wafers on the supply side due to technological entry barrier at the moment.

SPVI: With continuously dropping ASP, there is more risk of bankruptcies and shutdowns in the industry. In your opinion, what impact will this have on the growth of solar energy, and mainly solar as an investment for individual investors? 

Nexolon: Every solar player is bleeding right now due to dropping ASP, but it has two positive impacts on the solar industry.

Firstly, continuously falling ASP will eventually lead to grid parity to make solar PV industry economically independent without government subsidy on the demand side. Secondly, aglobal glut of production capacity will be wiped away due to consolidation on the supply side. As supply and demand mismatch improves, the market will be expected to be normalized. Survivors will expand their market presence when the market turns around. We have no doubt Nexolon is one of the beneficiaries. That is one of the reasons we are going to raise around KRW 68B in follow-on offerings to secure cash and make our balance sheet strong enough to survive. 

There are investment stories about the solar PV industry and Nexolon hereafter.

In terms of volume, solar demand will allegedly increase 8% -26% yoy to reach 30 -35 GW in 2012, in spite of global financial risk. We believe the solar industry will show sustainable growth going forward. As supply and demand mismatch gets balanced sooner or later, the solar PV industry will be attractive in terms of investment.

Nexolon has been improving our product mix to higher efficiency wafer with profitability and continue to reduce cost. Nexolon will remaina global leading solar company when the US project becomes visible starting from 2H 2014.

SPVI: Thank you very much for your time Mr. Je-Hyun Yoon, Mr. Tae-Jin Chung


Acknowledgments: JungHyun Ellie Oh,  IR-Assistant Manager, Nexolon, SouthKorea and Stephanie Pierce, SolarPVInvestor- Senior Editor, Tennessee, USA.