Applied Materials Sees Solar Growth in China

By JERRY A. DICOLO
China represents the largest opportunity for solar panel makers, based on its government's commitment to establishing solar manufacturing and spurring demand, said Mark Pinto, head of Applied Materials Inc.'s solar unit.
With the help of government stimulus and a push by all levels of government, from local mayors to the Central Committee, the China market is developing rapidly from an area devoted primarily to manufacturing solar panels to one of the world's largest buyers, he said in an interview.
Despite making about 40% of the world's solar panels last year,China consumed nearly nothing. But in the next two years, he said, China will pass market leader Germany and the still-nascent U.S. market to become the largest consumer of solar in the world.
Applied Materials makes equipment for producing computer chips and solar panels. Its solar business sells individual products to solar panel makers as well as a full manufacturing line -- called SunFab -- for making thin-film panels, which are cheaper but less efficient than traditional solar cells.
While its individual equipment sales to solar makers are profitable, its SunFab lines have continued to post losses. In the last quarter, the company's energy and environmental solutions unit, which contains both product lines, had an operating loss of $53 million.
SunFab is considered a "turnkey" manufacturing line because the product is sold in a ready-to-use state. Applied Materials sells the complete line to customers, trains the operators on how to make panels and negotiates the pricing of raw materials. Panel makers can also purchase service and maintenance contracts from Applied.
Currently, six of Applied Materials' 14 deployed SunFab lines are in production, Mr. Pinto said.
Demand in some of the largest solar markets, such as Spain and Germany, have been hurt by tight credit conditions and reduced government subsidies. Meanwhile, a supply glut of panels has pushed down prices, hurting many European manufacturers and leading to allegations that Chinese makers are dumping panels or selling them below production costs.—Martin Rapp contributed to this article.
Write to Jerry A. DiColo at jerry.dicolo@dowjones.com