Michael Zhu gazes at the watch he's placed in front of him on the glass table in his office. He'll have to get a move on. He has to walk over to the factory and continue to work on forcing the Germans out of the very market they've created.
Zhu is the vice president of Suntech Power, which has an annual output of 10 million solar panels. No company in the world makes more than his, and no country in the world buys more than Germany.
"We really have to thank Germany," says Zhu, whose office is in Wuxi, a city on China's eastern coast. He raves about Germany -- about the clean air, about the politicians who decided early on to subsidize the production of green energy, and about the country's eco-conscious customers. Nearly one-third of the modules from his factory are sold to Germany.
Reiner Beutel stands in his solar technology plant 8,500 kilometers (5,300 miles) away, in Bitterfeld-Wolfen, and says he's not prepared to simply admit defeat.
"We intend to undercut the Chinese on price," says Beutel, who is CEO of German solar cell maker Sovello. Although he originally comes from near the southwestern city of Stuttgart, Beutel's job brought him to this industrial park, known as Solar Valley, on the outskirts of town. In a conference room, he steps up to an exhibit that is 1.5 meters long and 90 centimeters wide (about 5 feet by 3 feet). It's a solar module from Sovello's "T Series" which is particularly well-suited for roof installations and is manufactured in the nearby production halls.
Two Continents and Two Economic Systems
He raps on the aluminum frame and says, in English: "Made in Germany." Beutel wants to save the German solar panel. Though he's fighting an uphill battle, he still believes he has a chance. Nevertheless, he was hit by yet another setback when his company filed for bankruptcy two weeks ago. Now he's hoping to find new investors who, under the more favorable terms of the insolvency proceedings, are prepared to put money into this future-oriented industry.
Beutel is engaged in a fight being waged between two continents and two economic systems. In China, the communist government controls the economy, meaning that it steers and supports large, private companies, including manufacturers of solar panels, like Suntech. Its competitors, German manufacturers of solar technology, suspect that companies like Suntech have only grown so powerful thanks to government assistance and that China is providing its solar companies with cheap loans.
In a sense, it's a battle of state capitalism versus market capitalism. But there's not a genuine market for solar modules in Germany, either. Instead, there's a market that politicians created in 2000 with the Renewable Energy Sources Act (EEG), which promised tens of thousands of green jobs and now steers half of its 14 billion ($17.6 billion) in annual funding toward the solar industry.
People in Germany aren't buying all these solar modules because the sun shines particularly often in their country. They're buying them because they will receive subsidies known as feed-in tariffs for the electricity for 20 years. The state has guaranteed every producer of solar power a price that was initially 50 euro cents per kilowatt hour higher than the market price.
The Makings of a Solar Bubble
Under these circumstances, politicians have generated the demand for solar modules, including the one Beutel is standing next to in Bitterfeld, which is made up of 108 polycrystalline-silicon cells and weighs 17.4 kilos (38.3 pounds). Although size and weight vary from manufacturer to manufacturer, the basic principle remains the same: A solar module consists of solar cells, which are silicon wafers on which ribbons of silver and aluminum are printed. They are then soldered together, sandwiched between films and under glass in a frame, and provided with a plug.
Since making solar modules is no longer difficult, more and more companies have entered the sector in recent years, not only in Germany and China, but also in Japan and Korea. However, the subsidies available in Germany have not been limited to electricity produced by German-made solar panels, as politicians did not specify where the modules should come from. In Italy, by contrast, power customers receive a bonus for installing solar panels made in Europe. As a result, the German subsidy program has had an effect across the world, and primarily in Asia.
This led to a bubble in the solar-technology market. Manufacturers worldwide were soon making far more modules than customers wanted to purchase, and they started to undercut each other's prices, which fell by 50 percent last year.
Since then, one manufacturer after the other has filed for bankruptcy, more than half a dozen in Germany alone since December. Many solar-panel production facilities are in eastern Germany, in Brandenburg, Thuringia, Saxony and Saxony-Anhalt, where Bitterfeld is located. In April, the town lost Q-Cells, the city's first and best-known solar company. Its production halls are located across from Beutel's factory in Solar Valley. In Bitterfeld, they were hoping that Sovello, at least, would survive the crisis. The firm has a workforce of 1,250, or more than the other solar-technology production plants here.
A 'Challenging Situation' for All
By contrast, there are 12,000 people working in the production halls underneath Zhu's office in Wuxi. Every morning and every evening, when their long shifts begin, the company picks them up with 55 shuttle buses that circulate through the various districts of this city of over 6 million.
Zhu grew up in Shanghai, 45 minutes away by high-speed train. But before he came to Wuxi, he spent half his life in the United States. A few years ago, he returned to China as a manager, with an American first name and an American approach to business. He's 49 years old, a tall, lanky man who wears a white shirt and a bright red tie; white and red are the colors of his company. His office is sparsely furnished. Next to a glass table stands a simple desk, and there's a plastic water dispenser on a shelf. Zhu only came to Suntech last year, when the solar industry's crisis was already in full swing.
Instead of referring to it as a crisis, Zhu calls it a "challenging situation" -- but the drop in prices is, of course, also affecting his company. He snaps his fingers and says "the profit margin" -- meaning that it's gone. Suntech is also losing money, and its stock price has plummeted.
Zhu finds the question of who is to blame for this an odd one. Instead, he asks whether Germany isn't also a market economy and notes that it's a simple, well-known principle that every oversupply is followed by a market shake-out. That's how it is with capitalism, he says. There's no sense in complaining about it.
When asked about the cheap loans from the Chinese government, Zhu says his company has never received any.
Zhu is in charge of product development, which these days mostly means he has to find a way to produce solar panels even more cheaply. Zhu's strategy for combating falling prices -- which, in turn, could lead to yet another deterioration in prices -- is "aggressive cost-cutting." The idea is for the workers to assemble the modules even more quickly. Laminating a solar panel -- that is, gluing the cells between films -- takes 18 and sometimes up to 20 minutes. Perhaps 15 minutes would be enough, Zhu says. They also have to reduce the amount of materials they use, he says, so they've made the modules' aluminum frames even thinner.
Sensing that this could prompt some criticism, he points to a document with a blue and white emblem and the words "top brand." Since just recently, his modules have been allowed to bear this emblem. It's awarded by a company that tests photovoltaic products, and the best thing about it is the fact that the tester is based in the western German city of Bonn. "A German seal of quality," Zhu says, pausing briefly for effect.
Arriving in the Real Economy
German quality at Chinese costs -- that's where things now stand. In principle, this is also what Beutel wants to achieve in Bitterfeld. His modules also have quality seals, including the one from Bonn.
"Ten to 20 percent more output with the same workforce," is what Beutel is aiming to get out of his production plant. This is his strategy in the duel. It sounds a lot like the one pursued by Zhu, his Chinese competitor.
Beutel also didn't enter the solar industry until two years ago, when the crisis was already underway. He had previously spent many years working for a company that manufactures power tools and for automotive-parts suppliers. The 52-year-old, broad-shouldered man keeps his hair combed back and has furrows on his brow. He speaks in short sentences and introduces himself as an "expert in restructuring, reorganization and cost-cutting."
"Solar has arrived in the real economy," says Beutel -- where men like him come from.
In the real economy, competitive pressure is high and often comes from Asia. Beutel was already dealing with the Chinese 20 years ago, when he was working in the power-tools business. He's a veteran of Germany's struggle to retain its market share. At the time, he learned that you mainly have to reduce costs if you want to stand your ground with them.
Solar Fairy Tale
Beutel came to Solar Valley to save a subsidiary of Q-Cells. He had been hired by an investor. He shrugs his shoulders when asked about the time before the crisis, about the early years in Solar Valley. It wasn't a real economy, he says.
When others in Bitterfeld talk about Solar Valley's humble beginnings, it sounds more like an illusion, a fairy tale. Eleven years ago, four men came from Berlin -- three technicians and a business consultant -- and built a factory for solar cells in a village. They called their company Q-Cells, which stood for quality cells. The village was located near Bitterfeld and Wolfen, the urban centers of the then-defunct chemical industry of the former East Germany. Tens of thousands of people had lost their jobs here after the fall of the Berlin Wall. The mayor quickly arranged for building permits and low taxes. Q-Cells hired a few hundred people, established a subsidiary and created Solar Valley, which soon boasted 3,000 jobs. People said that it would soon be 10,000. Back then, no other company in the world made more solar cells than Q-Cells did in Bitterfeld.
Nevertheless, until late last year, Q-Cells only built solar cells, rather than the complete modules that their competitors in China and elsewhere did.