You are on page 1of 25

Bhavin Shah Asia Pacific Equity Research

(852) 2800-8538 07 January 2008


bhavin.a.shah@jpmorgan.com

Solar cell supply chain


AC
Gokul Hariharan Solar power and solar cell
Shoji Sato Solar cell is a semiconductor device, made from polysilicon, which generates
Carrie Liu electricity by converting the photons from the sun. Solar power, the electricity
produced by solar cell, has received a lot of attention recently in the wake of growing
environmental concerns. Solar power is generated using the sun’s energy—it is clean,
renewable and environment friendly.
Solar cell
Based on a market survey done by the Photon International, the PV industry
worldwide produced 2,536MW of energy in 2006, implying 40% Y/Y growth. We
believe global solar cell production will continue to grow at 25% in the next 5-10
years due to strong support in the form of government subsidies. Extrapolation of the
government’s targets for solar installations indicates a CAGR of 28% from 2005 to
2010 (Figure 122). Currently, Germany, Japan and the US (mainly California) are the
key proponents of solar energy. New initiatives are starting to pick up in China,
Southern European countries and rest of the US.

Figure 122: Global solar cell production


MWp
7,000 6,000
Source: www.motech.com.tw. 5,776
6,000
CAGR: 28%
5,000 4,279
4,000 3,170
2,536
3,000
CAGR: 43% 1,815
2,000 1,256
560 750
1,000 202 287 401

0
1999 2000 2001 2002 2003 2004 2005 2006 2007E 2008E 2009E 2010E
Solar cell production

Source: Photon International, JPMorgan estimates.

Table 138: Features of solar cell systems


· Enormous amount, non depletion, clean.
· Ubiquitous, use waste energy.
Use solar energy
· Low density, depends on meteorological characteristics, no function of
storage.
· Generate from scattered sunlight even if it's a cloudy and rainy day.
· Easy structure, no moving part, easy to use, easy to be unmanned.
Directly convert sunlight into electricity · Change capacity by module units.
· Lightweight and can be used as roof, short construction time.
· Less energy for production, recover in 2-3 years.
· Meet demand in location where power is generated, electric transmission
facility not required.
Distributed system
· Meet daytime energy needs, reduction of load power.
· Diversity of power supply, contributes to a stable supply.
Source: JPMorgan based on NEDO.

Environmental value of solar cell systems


When generating electricity, solar cell systems are clean systems that do not require
fuel, but a large volume of energy is required in their manufacturing process. If a
solar cell system requires more energy for its manufacture than it can generate during
its lifespan, then it is not an efficient form of electricity generation. If the volume of

249
Bhavin Shah Asia Pacific Equity Research
(852) 2800-8538 07 January 2008
bhavin.a.shah@jpmorgan.com

CO2 emissions resulting from a solar cell system’s manufacture exceeds the reduction
of emissions it achieves via electricity generation, moreover, then it is
environmentally harmful in terms of global warming. The lifespan energy
profitability and overall CO2 emissions are measured in energy payback time (EPT)
and lifetime CO2 emission units.

EPT is a measure of how many years of operation is required to generate the energy
used in the manufacturing stage, and if this value is smaller than the lifespan of the
system it is profitable in terms of energy. Lifetime CO2 emission units are a measure
of CO2 emissions per 1kWh of electricity generation over the entire lifespan of the
system, and the CO2 emission efficiency of solar cell systems can be compared with
other forms of electricity generation using this value.

We estimate that the EPT for household solar cell systems is approximately 1–1.5
years in Japan and 1–3 years in Europe, which are both very low values compared to
the expected lifespan for solar cell systems of 20 years. Stated differently, solar cell
systems can recoup the energy required for their manufacture in one to three years
after their installation, and thereafter they add value by becoming net energy
producers and enabling lower consumption of fossil fuels.

We estimate that household solar cell systems result in 53g of greenhouse gas
emissions (CO2 equivalent) per 1kWh of electricity generation, with the majority of
this produced during their manufacture. We estimate that commercial power sources
result in 360–378g of greenhouse gas emissions (CO2 equivalent) per 1kWh, and that
thermal electricity generation on average results in 690g, which is more than 10x the
volume of solar cell systems. We thus estimate that the CO2 emission reduction
impact of solar cell systems is 307–637g per 1kWh of electricity generation.

Figure 123: Energy production and CO2 emissions


CO2 emissions/kWh

g-CO2/kWh net output plant and operation fuel combustion to generate pow er


1,000
800
600
887
400 704 478
408
200 53
29 22 15 11
88 130 111
0 38
medium-sized
coal-fired thermal

oil-fired thermal

LNG-fired thermal

LNG-fired thermal
power(combined)

nuclear power

geothermal power
wind power
solar power

small-and-

waterpower
power
power

power

Source: Sangyo-times.

Government incentive for solar power


The Kyoto protocol, established in 1997, sets binding greenhouse gas emission
targets for countries that sign and ratify the agreement. The protocol came into force
in February 2005. Country signatories to the protocol have agreed to reduce their
anthropogenic emissions of greenhouse gases (CO2, CH4, N2O, HFCs, PFCs, and
SF6) by at least 5% below their 1990 levels, between the commitment period of 2008
and 2012. Nevertheless, rising environmental concerns have boosted the global
demand for renewable energy, due to government subsidies.

250
Bhavin Shah Asia Pacific Equity Research
(852) 2800-8538 07 January 2008
bhavin.a.shah@jpmorgan.com

According to the European Commission’s “PV Status Report 2006”, the countries
that have made key changes in government policies for solar energy are:

Germany: The German feed-in law was introduced in 1999 and renewed in August
2004, resulting in a dramatic increase in PV installations. In its latest figures, the
German Solar Industry Association reported systems with total of 600MW installed
capacity in 2005.

Other EU countries: Italy has passed new feed-in laws in 2005. According to the “PV
status report 2006”, 50MW to 80MW capacity will be installed in 2006 with an
upper cap of 500MW for 2012. France introduced its feed-in laws in 2006. Spain’s
current cap is 150MW, which is likely to be revised up.

Table 139: Feed-in tariff system in each country


Effective date Feed-in tariffs (2007) Duration Remarks
~30KW: 0.492€/KWh
Incentives will decrease by 5% annually
2000 effective 30KW~100KW: 0.468€/KWh
Germany 20years (6.5% for other than house). 0.05 euro will
2004 revised 100KW~: 0.463€/KWh
be added when set in front of the building.
Except house: 0.380€/KWh
1998 effective ~100KW: 0.414€/KWh After 26 years, 80% of incentives will be
Spain 25years
2004 revised 100KW~: 0.216€/KWh paid.
2001 effective ~5KW: 0.444€/KWh Incentives will finish after 15 years or when
Portugal 15yearrs
2005 revised 5KW~: 0.317€/KWh total electricity reaches 21 GWh.
1KW~20KW: 0.423€/KWh Incentives will decrease by 5% annually.
Italy 2005 effective 20KW~50KW: 0.437€/KWh 20years Incentives are incremented by 10% for
50KW~1000KW: 0.467€/KWh installed in new or restored buildings.
2002 effective Corsica and overseas: 0.40€/KWh 0.55 euro/KWh will be paid when installed
France 20years
2006 revised Other regions: 0.30€/KWh in new or restored buildings.
Incentive system is different between less
For house or Business: 0.03~0.39$/KWh than 100KWh and more than 100KWh and
U.S.A (California) 2007 effective Tax-free: 0.1~0.5$/KWh (more than will be united in 2010. Incentives depend on
100KWh) total electricity (10 steps) and will decrease
by 10% annually.
Source: JPMorgan views based on PV news.

China: The Standing Committee of the National People’s Congress of China


endorsed the Renewable Energy Law on 28 February 2005, which came into effect
on January 1, 2006. The Chinese government targets renewable energy to contribute
to the country’s gross energy consumption at 10% by 2010 and 17% by 2020—a
significant increase from the current 1%. The 2010 plan includes the installation of
450MW photovoltaic systems. Also, the concept of Green Olympics for Olympic
Summer Games in Beijing in 2008 will be a strong catalyst.

US: The 2005 Energy Bill, aimed at increasing the demand for photovoltaics, was
passed by the Senate on July 29, 2005 and was signed by President Bush on August
8, 2005. The main support mechanisms of the bill are: (1) increase in the permanent
10% business energy credit for solar power to 30% for a two-year period. The credit
reverts to the permanent 10% level after two years. (2) Establishment of a 30%
residential energy credit for solar for two years. For residential systems, the tax credit
is capped at US$2,000. In addition, California has the “Million Roof Initiative”
(SB1) for solar energy. The California Solar Initiative (CSI) adopted SB1 in January
2006. It secured a US$3.35 billion long-term solar rebate plan for California to
deploy 3,000MW of solar power systems on residential, commercial and government
buildings throughout the state. In June 2006, SB1 was passed by the California
Assembly.

251
Bhavin Shah Asia Pacific Equity Research
(852) 2800-8538 07 January 2008
bhavin.a.shah@jpmorgan.com

Japan: In June 2004, the Japanese Ministry of Economics, Trade and Industry
(METI) announced the “Vision for New Energy Business”. This strategy report aims
at developing an independent and sustainable new energy business with powerful
support measures for PV. Further, in a June 2005 symposium on “Photovoltaic
Generating Systems” titled Beginning of the era of GW PV market”, the director of
the New and Renewable Energy division of METI announced that the mid- to long-
term strategy aims to reduce oil dependency by 40% by 2030. Japan Photovoltaic
vision paper predicts that Japanese domestic market consumption will increase to
1,200MW and exports will increase to 1,000 MW by 2010.

Table 140: Evolution of cumulative solar electrical capacities till 2030


GW
2000 2010E 2020E 2030E
USA 0.14 2.1 36 200
Europe 0.15 3.0 41 200
Japan 0.25 4.8 30 205
Worldwide DCP 1.00 8.6 125 920
Worldwide AIP 1.00 14.0 200 1830
Source: Japanese, US, EPIA roadmaps and EREC 2040 scenarios. Note: DCP stands for Dynamic Current Policy Scenario, AIP
stands for Advanced International Policy Scenario.

Solar cell module market


The 2006 shipment volume of solar cell modules expanded 35.5% Y/Y to 1,870MW.
We estimate a per watt price for solar cell modules at US$3.78, and therefore
estimate a market scale for solar cell modules at US$7.07 billion. Including
installation costs, we estimate a market scale for the solar cell industry at around
US$13 billion. We identify three drivers for the demand for solar cells.

1. The emergence of viable business opportunities owing to price declines and


greater subsidies.
2. Environmental regulations and government subsidies.
3. Increased environmental awareness among individuals.
The shipment volume of solar cell modules expanded at a CAGR of 49.1% between
2000 and 2006. The annual growth rate was in excess of 50% up to 2004, but growth
then slowed to 29.9% in 2005 and 35.3% in 2006. We attribute the slowing to factors
including: (1) a supply shortage for the main raw material, polysilicon, and (2) a
decline in subsidies in Japan, which made up 24.1% of global demand in 2004. We
expect the supply volume of polysilicon to expand from 2H 2008, thereby removing
one factor holding back the production volume of solar cell modules. Furthermore,
countries in addition to Germany have started to introduce subsidies for solar cells as
part of their measures to counter global warming, including the US and European
countries like Spain, Italy, France and Portugal. We expect increased supply volume
for polysilicon and greater subsidies to boost shipments of solar cells, and we believe
that 2010 shipments will even exceed the optimistic projection shown in Figure 125.

This optimistic projection assumes that shipments of solar cell modules will expand
at a CAGR of 46.7% from 2007 to reach 8,600MW in 2010. Even if the module price
falls to $1.79 per watt by 2010, it would still result in a market scale of $15.51 billion
in 2010, representing growth of 120% from the market in 2006.

We believe that changes in the supply/demand balance for polysilicon from 2H 2008
will boost the supply of solar cell modules, and cause their prices to fall. If the price
of solar cell modules falls substantially, earnings at companies involved in solar cell

252
Bhavin Shah Asia Pacific Equity Research
(852) 2800-8538 07 January 2008
bhavin.a.shah@jpmorgan.com

manufacturing could suffer. A war of attrition caused by falling prices could


therefore break out between 2H 2008 and around 2010. Nevertheless, lower prices
for solar cell modules should boost demand, and we foresee a major opportunity for
substantial earnings growth through 2020 at companies involved in solar cells that
survive the war of attrition or succeed in greatly lowering their manufacturing costs.

Figure 124: Solar cell module market demand by region Figure 125: Global solar cell module market demand
MW MW

2,000 10,000

8,000
1,500
6,000
1,000
4,000
500 2,000

0 0
CY2000 2001 2002 2003 2004 2005 2006 CY2000 2002 2004 2006 2008E 2010E

Europe Japan US/CANADA ROW DOWNSIDE UPSIDE BASE CASE

Source: PV news, July 2007. Source: PV news, July 2007.

Historical production volume of solar cells


The global production volume of solar cells expanded 40.3% Y/Y in 2006 to
2,500MW. According to PVnews, 2007 solar cell production is expected to be 5,523
MW. In regional terms, Japan was responsible for 927.5MW or 37.1% of overall
production in 2006, but Japanese production only expanded 11.3% Y/Y. In contrast,
production outside of Japan, the US and Europe expanded 121.4% to 714MW in
2006, with Chinese and Taiwanese companies mainly being responsible for this
growth. Among the top ranked companies, growth at Japanese companies was
limited by difficulties in procuring enough silicon, and the end of government
subsidies in Japan. Meanwhile, growth was very rapid at Q-Cells (Germany),
Suntech (China) and Motech (Taiwan).

253
Bhavin Shah Asia Pacific Equity Research
(852) 2800-8538 07 January 2008
bhavin.a.shah@jpmorgan.com

Table 141: Top 18 solar cell production companies


Company 2000 2001 2002 2003 2004 2005 2006 2007E Ranking Ranking
2007 2006
Sharp (JP) 50 75 123 198 324 428 434 710 1 1
Q-Cells (DE) 28 75 160 253 516 2 2
Suntech (CH) 28 80 158 470 3 4
Motech (TW) 35 60 110 280 4 7
Kyocera (JP) 42 54 60 72 105 142 180 240 5 3
SunPower (PH) 63 210 6 11
First Solar (US) 60 210 7 13
Gintech (TW) 15 210 8 31
E-Ton (TW) 32.5 200 9 19
Deutsche Cell/SHELL (DE) 17 28 38 86 185 10 9
JA Solar (CH) 25 175 11 24
Sanyo (JP) 17 19 35 35 65 125 155 170 12 5
GEEG Nanjing (CH) 60 160 13 14
Schott Solar 14 23 30 42 63 95 96 150 14 8
Mitsubishi (JP) 12 14 24 40 75 100 111 135 15 6
Isofoton (ES) 10 18 27 35 53 53 61 130 16 12
BP Solar 42 54 74 70 85 90 86 118 17 10
Baoding Yingli (CH) 35 118 18 18
ERSOL (GE) 40 15
Photowatt (FR) 14 14 17 20 22 24 36 16
USSC (US) 3 4 4 7 14 22 36 17
Shell Solar (US) 28 39 58 73 72 59 2 20
Total of 18 companies 232 314 451 637 1,044 1,476 2,093 4,387
Others 56 85 109 122 151 306 643 1,166
World Total 288 399 560 759 1,195 1,782 2,500 5,553
Y/Y% 38.50% 40.40% 35.50% 57.40% 49.10% 40.30% 122.13%
Source: PVnews.

Figure 126: Production ratio of companies in CY2007E


Q-Cells (DE)
Sharp (JP)
10%
13%
Suntech (CH)

Others 9%

40%

Motech (TW)
Deutsche
5%
Cell/SHELL (DE)
3%
Ky ocera (JP)
4%

SunPow er (PH)
E-Ton (TW)
4%
4% First Solar (US)
Gintech (TW) 4%
4%

Source: PV news, JPMorgan estimates.

Figure 127: Global cell production


MV

3,000
2,500
2,000
1,500
1,000
500
0
CY2000 CY2001 CY2002 CY2003 CY2004 CY2005 CY2006
US Japan Europe ROW

Source: PV news, JPMorgan estimates.

254
Bhavin Shah Asia Pacific Equity Research
(852) 2800-8538 07 January 2008
bhavin.a.shah@jpmorgan.com

Types and characteristics of solar cells


The most important characteristics of solar power generation systems are their usable
lifespan, and the efficiency at which they convert light into electricity. Both the light
conversion efficiency and the lifespan depend upon the solar cell, which is the most
important part of solar power generation systems.

Conversion efficiency (%) = (electrical energy output ÷ solar energy input) x 100

The module conversion efficiency value of solar cells systems currently under mass-
production is usually in the range of 10–19%. The module conversion efficiency
value varies according to the type of solar cell, with normal values of 15–20% for
monocrystalline silicon solar cells, 12–18% for polycrystalline silicon cells, and 8–
12% for amorphous silicon cells.

Solar cells can be broadly divided into silicon cells and thin-film, with 93.2% of
2006 production volume being made up of silicon cells.

Figure 128: Type of solar cell and production ratio (2006)

Source: PV news, JPMorgan estimates.

255
Bhavin Shah Asia Pacific Equity Research
(852) 2800-8538 07 January 2008
bhavin.a.shah@jpmorgan.com

Monocrystalline silicon
Semiconductors are also made from monocrystalline silicon wafers, and the
respective manufacturing methods are the same in many respects. Very pure
monocrystalline silicon wafers are expensive, but the purity requirements are lower
for solar cell applications than for semiconductor applications, and lower-priced solar
grade (SoG) silicon can therefore be used.

Amorphous Silicon (a-Si)


Amorphous silicon is deposited by chemical vapor deposition (CVD) using silane
gas. The resulting solar cells are highly efficient even in very low levels of light, and
sensitive to the shorter wavelength light produced by artificial illumination. They are
therefore mainly used in electronic calculators and wristwatches. Makers have been
overcoming the tendency to deteriorate in sunlight, and in recent years they have
been marketed for outdoor use.

Polycrystalline silicon
Polycrystalline silicon is currently used in the mainstream type of solar cell, owing to
lower production costs than monocrystalline silicon. Polysilicon solar cells use
wafers sliced from ingots cast using silicon melted in a crucible. These ingots are not
formed from a single crystal, unlike monocrystalline silicon which is slowly built up
by revolving a seed crystal. The ingots can also be cast in a square shape, instead of
the cylinders of monocrystalline silicon.

Trends in polycrystalline silicon for solar cells


Polycrystalline silicon (polysilicon) is an important raw material for solar cells, and
is also used to make semiconductor wafers. Supply/demand conditions for
polysilicon have remained tight since 2004, owing to rapid expansion in the solar cell
market, combined with steady market growth in semiconductor applications,
especially for 300mm wafers. Over the past few years, the ability to secure stable
supplies of polysilicon has therefore been a decisive factor for market share and
competitiveness among solar cell makers. Is this situation likely to persist?

The top company in the global polysilicon market is Hemlock Semiconductor (US),
where we estimate a production capacity of roughly 10,000t/year as of end-2006. We
then estimate that Wacker Chemie (Germany) holds the second rank with an annual
capacity of approximately 6,500t, followed by Tokuyama in third with 5,300t, and
REC (Norway) in fourth with 5,250t. We estimate that the overall industry has an
annual production capacity of around 37,000t.

256
Bhavin Shah Asia Pacific Equity Research
(852) 2800-8538 07 January 2008
bhavin.a.shah@jpmorgan.com

Figure 129: Market share of polysilicon (based on production units in 2006)


Sumitomo Others
2.2% 4.0%
Mitsubishi Materials Hemlock

8.1% 27.0%

MEMC
12.7%

REC
14.2% Wacker
17.5%
Tokuyama
14%

Source: PV news, JPMorgan estimates.

Turning to the demand side, demand for semiconductor wafers appears to be around
23,000t for 2006, and demand for polysilicon used in solar cells around 17,000t,
making a total of around 40,000t. This demand figure is higher than the production
capacity figure we estimate above, but we surmise that part of the 23,000t of
polysilicon shipped for use in semiconductor wafers becomes scrap, which is then
reused for solar cell applications.

Solar cell makers were very keen to secure polysilicon supplies during 2006, to the
extent that a scramble for polysilicon ensued at times. The polysilicon makers have
responded with aggressive and sustained capital investment. We expect the world’s
biggest maker, Hemlock, to expand its production from 10,000t/year at present to
36,000t/year in 2010. We also expect Wacker Chemie to raise its production from
6,500t/year at present to 10,000t/year by end-2007. Table 142 displays the bullish
plans to expand production capacity at the other leading makers. We estimate that
these efforts will increase the aggregate production capacity for polysilicon at the
leading makers from 37,000t/year in 2006 by 150% or so to 92,000t/year in 2010.

Table 142: Production capacity plans of major polysilicon makers


Tons
2006 2007 2008 2009 2010
Hemlock 10,000 10,250 14,500 19,500 36,000
Wacker 6,500 10,000 10,000 10,000 14,500
Tokuyama 5,300 5,300 5,500 7,000 8,400
MEMC 4,600 6,200 8,500 8,500 8,500
REC 5,250 5,633 6,667 10,350 13,450
Mitsubishi 3,000 3,150 3,350 3,550 3,550
Sumitomo 800 955 1,155 1,225 1,250
Others 1,500 2,000 5,500 6,000 6,500
Total 36,950 43,488 55,172 66,125 92,150
Source: PV news, JPMorgan estimates.

Although they are not represented in Table 142, several companies have already
declared their intention to enter the polysilicon market. If they all proceed as planned
this could boost aggregate production capacity by several tens of thousands of tons
by 2010, but we regard this as an uncertain prospect. The following estimates of the
supply/demand balance of polysilicon are based solely on the production capacity
values shown in Table 142. We therefore recommend bearing in mind that new
entrants could boost the supply capacity of polysilicon beyond our estimates.

257
Bhavin Shah Asia Pacific Equity Research
(852) 2800-8538 07 January 2008
bhavin.a.shah@jpmorgan.com

Table 143: Expected newcomers in polysilicon making (Excerpt)


Company Country
M. Setek Japan
JSSI Germany
SolarValue Slovenia
Silicium Becancour US
Hoku Scientific US
AE Polysilicon US
SolarWorld USA US
Source: PV news, JPMorgan estimates.

The higher prices fetched by polysilicon used for semiconductor wafers usually
result in prioritization of supply for this application, with the remainder being
supplied for solar cell applications. However, some of the polysilicon shipped for use
in semiconductor wafers becomes scrap, which is then reused for solar cell
applications. We estimate that demand for silicon used in semiconductor wafers will
expand at an annual rate of 10% from the base of 23,000t/year in 2006. As such, we
also estimate that the production volume of polysilicon available for solar cell
applications will reach around 62,000t/year in 2010, including the polysilicon scrap
recycled from semiconductor applications. Moreover, we expect the production
volume of thin-film solar cells to gradually expand from 2007, further boosting the
overall supply capacity in raw materials.

Table 144: Polysilicon production forecasts for solar cell (excluding thin film)
Tons
2006 2007E 2008E 2009E 2010E
Poly Silicon Production Volume 36,950 43,488 55,172 66,125 92,150
Consumption for Silicon Wafer 23,000 25,300 27,830 30,613 33,674
Production Volume for Solar 13,950 18,188 27,342 35,512 58,476
Poly Silicon Recycled from Wafer 2,300 2,530 2,783 3,061 3,367
Total for Solar (ton) 16,250 20,718 30,125 38,573 61,843
Source: JPMorgan estimates.

As mentioned earlier, a mid-range projection of solar cell demand in 2010 is in the


region of 6,500MW/year. Meanwhile, the lower and upper limits of the projected
range are 4,300MW/year and 8,600MW/year, respectively.

When combining the supply volume of polysilicon for solar cells and thin-film solar
cells, and converting into a cell basis allowing for energy conversion efficiency rates,
we estimate a supply capacity in 2010 equivalent to 8,100MW. The assumption we
used for conversion efficiency is that the average conversion efficiency value of
11g/W in 2006 will improve by 0.5g/W each year.

Based on the foregoing, our projections of the polysilicon supply/demand balance for
solar cell applications up to 2010 are illustrated in Figure 130. Given also the
possibility that market entrants further boost supply capacity by 2010, we see a
theoretical possibility of the supply of polysilicon for solar cell applications
exceeding demand by 2010.

Nevertheless, the leading makers of solar cells have responded to the current severe
shortage of polysilicon by forming long-term agreements with the leading
polysilicon makers, and these contracts look likely to last the next five years or so, or
until around 2012. As such, even if the supply capacity of silicon for solar cells
exceeds demand, we believe that effects would not emerge until the expiry of the
major suppliers’ long-term contracts around 2012.

258
Bhavin Shah Asia Pacific Equity Research
(852) 2800-8538 07 January 2008
bhavin.a.shah@jpmorgan.com

Furthermore, we think that the new entrants to the polysilicon market lacking long-
term supply contracts face the risk of business volatility increasing. The long-term
contracts formed between the leading polysilicon makers and solar cell makers
would insulate them from the affect of price fluctuations if supply/demand conditions
loosen. However, these contracts would at the same time amplify the effect of looser
supply/demand on the spot market inhabited by the newer polysilicon makers.

Figure 130: Supply demand balance simulation of poly silicon for solar cell
Ton

10,000 Total Supply


Demand (Upsede)
9,000
Demand (BaseCase)
8,000 Demand (Down Side)
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
2006 2007 2008 2009 2010

Source: JPMorgan estimates.

Table 145: Supply demand balance simulation of poly silicon for solar cell
2006 2007E 2008E 2009E 2010E
Poly Silicon Supply (ton) 16,250 20,718 30,125 38,573 61,843
Poly Silicon Supply (Cell Eqv.) (MW) 1,477 1,973 3,013 4,060 6,871
Translation Efficiency(g/MW) 11 10.5 10 9.5 9
Solar Module Production Volume (MW) 1,211.40 1,618.00 2,470.30 3,329.50 5,634.60
Cell-Module Yield 82% 82% 82% 82% 82%
Thin Film Production Volume MW) 196 463 1,115 1,894 2,496
Total Supply (MW) 1,407 2,081 3,585 5,223 8,131
Solar Module Demand MW)
Downside 1,870 2,302 2,900 3,540 4,302
Base Case 1,870 2,446 3,341 4,631 6,458
Upside 1,870 2,705 3,898 5,694 8,664
(Total Supply - Base Case) -463 -365 244 593 1,673
Source: JPMorgan estimates.

Scrap semi-wafers are not sustainable


Solar cell manufacturers desperately seek substitutes for the standard solar silicon
wafers. 6” and 8” scrap wafers from the semiconductor industry are the most sought-
after items. However, according to our channel checks, 320-360k pieces of 8” scrap
wafers are required to produce 1MW of annual solar cell output. This figure is
similar to the annual capacity of an 8” semi-wafer fab. Therefore, the maximum
worldwide annual solar cell output using scrap wafers is only 35MW, equivalent to
2% of worldwide solar cell production in 2005. In addition, it requires additional
processes to make use of scrap semi-wafers and the output quality is still an issue.
We believe the market has overestimated the potential of using scrap wafers as raw
materials for solar cell production.

259
Bhavin Shah Asia Pacific Equity Research
(852) 2800-8538 07 January 2008
bhavin.a.shah@jpmorgan.com

Passing on the increase in material prices to customers is difficult


The surging polysilicon price raised the material cost for the whole solar power
supply chain, while the solar module prices have stabilized in the past three months.
The spot price of an 8” ingot rose significantly from US$130/kg in early 2005 to
>US$250/kg as of now, a 54% increase. The ASPs of solar wafers, cells and modules
have reached US$2.1-2.3/W, US$3-3.2/W, and US$4-4.2/W, respectively, while the
industry believes that the acceptable module prices should be capped at US$4/Wp
due to limitations of government subsidies. China is the only exception. The module
price could reach US$4.2/W because of the Chinese government’s policy.

Wafer producers expect another 10% price hike in wafers in 2006, while the
cell/module producers’ face severe pricing pressure from explosive competition from
new entrants and limited government support.

Potential of thin-film solar cells


Attention is focusing on thin-film solar cells as a means of escaping the limitations of
polysilicon supply capacity and high costs. The production of thin-film solar cells in
2006 at 196MW made up 8% of overall solar cell production, up substantially from
5.8% in 2005 and 5.3% in 2004. The types of thin-film solar cells include amorphous
silicon (a-Si), cadmium telluride (CdTe), Copper indium gallium selenide (CIGS)
compounds, and dye-sensitized cells.

The drawbacks of thin-film solar cells include an energy conversion efficiency of


only around 10%, compared to rates generally in excess of 15% for solar cells based
on silicon wafers. Furthermore, the production equipment costs of thin-film solar
cells are high. Nevertheless, we see a real possibility of thin-film solar cells
becoming strongly competitive, if their conversion efficiency is improved and their
manufacturing equipment costs are brought down via mass production. On the other
hand, we have doubts whether thin-film solar cells would maintain an advantage over
silicon wafer-based cells if the supply of polysilicon becomes abundant, or if
polysilicon costs fall as a result of mass production using new methods, such as the
metallurgic process, the vapor to liquid deposition process or the zinc reduction
process.

260
Bhavin Shah Asia Pacific Equity Research
(852) 2800-8538 07 January 2008
bhavin.a.shah@jpmorgan.com

Figure 131: Thin-film solar cell production (actual and forecast)


MV

3,000
2,500
2,000
1,500
1,000
500
0
CY2006 2007E 2008E 2009E 2010E
CdTe CIGS a-Si Emerging

Source: PV news.

Among the various types of thin-film solar cell, amorphous silicon (a-Si) cells are
relatively established in track record and technology. The amorphous silicon film is
deposited on the substrate as a result of breaking down raw material monosilane gas
in plasma with a diluent gas. The thickness of the light absorption layer is only a few
micrometers, meaning that a cell requires only around one hundredth of the silicon
raw material used by a polysilicon solar cell. This is the biggest advantage of a thin-
film solar cell. The efficiency rate for energy conversion is only around 10% because
it is only sensitive to the spectrum of light between ultraviolet and visible light,
resulting in a substantial transmission loss for the sun’s rays. Experiments are being
conducted to improve the conversion efficiency of thin-film solar cells by using two
or even three light absorption layers. The production processes involved in making
amorphous silicon solar cells are plasma-enhanced chemical vapor deposition (PE-
CVD), laser cutting, sputtering, edge polishing, soldering, sealing and finishing. In
particular, the equipment required for PE-CVD is expensive, and this is hampering
development.

Among the various types of thin-film solar cells, we believe that CIS/CIGS cells
exhibit the best prospects in addition to amorphous silicon cells. CIS/CIGS solar
cells employ light absorption layers made of compound semiconductors based on
copper (Cu), indium (In) and selenide (Se). In addition to these three core elements,
gallium (Ga) or sulfur (S) is also added to the light absorption layer to control the
band gap. CIS/CIGS solar cells have a higher light absorption coefficient than
silicon–based cells, so that a thickness of around 2µm provides sufficient light
absorption. CIS/CIGS cells thus do not rely upon the availability of silicon, and only
need small volumes of raw materials. We believe there is ample scope for cost
reduction, given the simple structure and manufacturing processes, and the
possibility of integrated production from raw materials to the finished product.
Furthermore, the conversion efficiency of CIS/CIGS cells is high compared to other
types of thin-film solar cell. Some observers have voiced concerns over supplies of
indium being insufficient, but only around 8–10 tons of indium are required to
manufacture 1GW of CIS/CIGS solar cells, and we therefore do not expect problems
unless the production volume of CIS/CIGS cells expands very rapidly.

261
Bhavin Shah Asia Pacific Equity Research
(852) 2800-8538 07 January 2008
bhavin.a.shah@jpmorgan.com

Solar power supply chain


Figure 132: Solar power supply chain

System &
Polysilicon Ingot Wafer Cell Module
Installation

Source: Kyocera, Motech, Sharp, SunPower.

1. Polysilicon: A silicon raw material which is melted and re-casted to remove


impurities.
2. Ingot: The cast silicon, which is stabilized in its polycrystalline form. These
casts are called ingots and are cut into blocks.
3. Wafer: The ingots are sliced into wafers. P-type and n-type silicon wafers are
produced depending on the sliced silicon.
4. Solar cell: Also known as PV (photovoltaic) cell. Electrodes are attached to the
wafers for conducting electricity.
5. Solar module: Used to increase the power output. Many solar cells are connected
together to form modules, which are further assembled into larger units called
arrays. This modular nature of PV enables designers to build PV systems with
various power outputs for different types of applications.
6. System and installation: An installation involves components apart from the
basic module. Components include electrical connections, mounting hardware,
power-conditioning equipment and batteries that store solar energy. Installations
are up to 25% cheaper if installed before construction.

262
Bhavin Shah Asia Pacific Equity Research
(852) 2800-8538 07 January 2008
bhavin.a.shah@jpmorgan.com

Table 146: Solar cell major players


Main Players
Silicon material Hemlock (US), Wacker (DE), Tokuyama (4043), MEMC (US/IT), REC (US), Mitsubishi Materials (5711), Sumitomo Titanium
(5726),M. Setek (unlisted ), JSSI (DE), Solar Value (Slovenia), Silicium Becancour (CA), Hoku Science (US), AE Polysilicon (US),
SolarWorld USA (US), JFE Steel (5411), NS Solar Material (unlisted), Japan Solar Silicon (unlisted), KINOTECH (unlisted).
Silicon wafer manufacturers SUMCO (3436), M. Setek (unlisted ), Kitagawa Seiki (6327), Scanwafer (NO), PV Crystalox (DE).
Manufacturing equipment Ishii Hyoki (6336, Entrusted with wafer processing, equipment sales), Ulvac (6728, Thin-film CVD system, sputtering
/technology equipment),Applied Materials (US, Thin-film CVD system, spattering equipment, wire saw), Mitsubishi Heavy Industries (7011,
Thin-film CVDsystem), Iwasaki Electric(6924, Solar Simulation Systems), S.E.S. (6290, Wafer cleaning system),

Tokyo Rope Mfg.(5981, Wire for cutting silicon ), Kiswire (Korea, Wire for cutting silicon ), Shinko Wire (5660, Wire for cutting
silicon ), Toyo Advanced Technologies(unlisted, Wire saw), Meyer Burger (Swiss, Wire saw), Nippei Toyama (6130, Wafer
production equipment, wire saw), Toyama Kikai(unlisted, Automated cell wiring and alignment machine), Union-Materials (unlisted,
Spherical silicon production technology), Tokki(9813, Organic thin-film solar cell production equipment),

Toyo Tanso (5310, Crucible), Tokai Carbon (5301, Crucible), Ibiden (4062,Crucible), Noritake (5331, Silicon fusing furnace ),
Nippon Techno-Carbon (unlisted, Crucible), SGL (DE, Crucible), LCL (unlisted,Crucible), Ferrotec (6890, Single-crystal Si lifting
system), Fujipream (4237, spherical Si), NPC (6255, Cell, Cell Tester), ShibauraMechatronics (6590, Thin-film system), Fujimi
Incorporated (5384, Wafer polishing).
Materials for cell and module Asahi Glass (5201, Cover glass, TCO circuit board ), Sumitomo Metal Mining (5713, ITO sputtering targets ), ThreeBond
(unlisted,Sealants), Dai Nippon Printing (7912, Filler sheet for solar cell module), Mitsui Chemicals Fabro (unlisted, EVA sheet for
encapsulating material), Bridgestone (5108, Glue film), Du Pont (unlisted, PVF film), Hitachi Metals(5486, Electrode clad material).
Peripheral equipment manufacture Daihen (6622, Inverter), Laplace System (unlisted, Energy production measurement system), GS Yuasa (6674, Electrical storage
device).
Solar cell(silicon wafer) Sharp (6753), Q-Cells (DE), Kyocera (6971), Suntech (China), Sanyo Elec (6764), Mitsubishi Electric (6503), Motech
(Taiwan),Schott Solar (DE), BP Solar (UK), Deutsche Cell/SHELL (DE), SunPower (US), Isofoton (ES), First Solar (US), CEEG
Nanjing(China), ERSOL (DE), Photowatt (FR), USSC (US), Shell Solar (US), Hitachi (6501).
Solar cell (spherical Si) Clean Venture 21 (unlisted), Fujipream (4237), Kyocera (6971), Kyosemi (unlisted).
Solar cell (a-Si) Kaneka (4118), Mitsubishi Heavy Industries (7011), Sharp (6753), TDK (6762), Fuji Electric Systems (unlisted), Energy Conversion
Devices (US), Shenzhen Topray (China), ERSOL (DE), Schott Solar (DE).
Solar cell (CdTe) First Solar (US), Antec (DE).
Solar cell (CIS/CIGS) Wurth (DE), HelioVolt (US), Miasole (US), NanoSolar (US), Global Solar (DE), Showa Shell Sekiyu (5002), Honda Motor (7267).
Source: JPMorgan.

263
Bhavin Shah Asia Pacific Equity Research
(852) 2800-8538 07 January 2008
bhavin.a.shah@jpmorgan.com

Table 147: Key solar industry players


Company Polysilicon Ingot Wafer Cell Module System
Hemlock

Tokuyama

MEMC

Wacker

Mitsubishi (Material & Polysilicon)

REC

PV Crystalox Solar

SolarWorld

Schott Solar

SUMCO

Sharp

Kyocera

BP Solar

Mitsubishi Electric

Sanyo

Q-Cells

Motech

SunPower

Suntech

Solon

Evergreen Solar (String Ribbon)

Conergy

Sekisui Chem
Source: Companies, JPMorgan.

264
Bhavin Shah Asia Pacific Equity Research
(852) 2800-8538 07 January 2008
bhavin.a.shah@jpmorgan.com

E-Ton Solar Tech Co Ltd


Company Description: E-Ton Solar Tech Co Ltd develops and manufactures single-and- multi crystalline Country: Taiwan
solar cells.
Ticker: 3452.TWO
Analyst: Carrie Liu
Rating: Underweight
Price (LC): 307.5
Mkt Cap (US$MM): 586
Founded: 2001, Listed: 2006 Fiscal Year End: December
Key Management: Wu Shih-Chang, Reynold Hsu, Tsai Chin-Yao No. of Employees: 317

Business Alliances/Partnerships (NT$ in billions) FY04 FY05 FY06 FY07E


M.Setek—10-year solar wafer supply agreement Revenues 0.4 1.2 3.4 5.9
LDK—4-year solar wafer supply agreement Net Profit 0.1 0.3 0.7 0.9
EPS (NT$) 3.2 8.8 18.9 15.04
ROE (%) 41.1 46.5 38.1 27.8
Capital Spending -0.1 -0.2 -0.7 1.3
Research & Development 0.0 0.0 0.0 0.1
Contract Manufacturers/Production Source 100% In-house, 100% In-house

Geographical Mix (2007) Product Mix (2007)


Other
2%
China Others
6% 2%
Japan
8%

Taiw an
11%
Europe
73%
Solar cell
98%

Key Suppliers Key Customers


M.Setek LDK
E-Ton Solar NA

Source: Company, Datastream, JPMorgan estimates.

MORGAN MARKETS PAGE BIG PICTURE


COMPANY WEBSITE Solar
INDEX

633
Bhavin Shah Asia Pacific Equity Research
(852) 2800-8538 07 January 2008
bhavin.a.shah@jpmorgan.com

Evergreen Solar
Company Description: Evergreen Solar Inc. develops, manufactures, and markets solar power Country: United States
cells, panels, and systems that provide environmentally clean electric power throughout the world. Ticker: ESLR
The company’s solar power products draw electricity from solar cells, which are semiconductor Analyst: Christopher Blansett
devices that convert the sun's energy into electricity. Rating: Neutral
Price (LC): 13.7
Mkt Cap (US$MM): 1,325
Founded: 1994, Listed: 2000 Fiscal Year End: December
Key Management: Richard M Feldt, Michael El-Hillow, Terry Bailey, Jack I Hanoka, Mark a Farber No. of Employees: 330

Business Alliances/Partnerships (US$ in millions) 2004 2005 2006 2007E


NA Revenues 23.5 44.0 103.1 68.2
Net Profit -19.4 -17.3 -26.7 -21.1
EPS (US$) -0.7 -0.3 -0.4 -0.26
ROE (%) -76.2 -26.9 -29.6
Capital Spending 10.9 57.7 107.7
Research & Development 4.9 11.5 19.1 21.3
Contract Manufacturers/Production Source NA

Geographical Mix (2007) Product Mix (2007)

United States Solar Pow er


100% Cells
100%

Source: Company, Datastream, JPMorgan estimates.

Key Customers
Key Suppliers NA
NA Evergreen Solar

MORGAN MARKETS PAGE BIG PICTURE


COMPANY WEBSITE Solar
INDEX

634
Bhavin Shah Asia Pacific Equity Research
(852) 2800-8538 07 January 2008
bhavin.a.shah@jpmorgan.com

Motech Industries Inc.


Company Description: Motech Industries Inc. manufactures and markets solar cells as well as testing and Country: Taiwan
measuring instruments. Ticker: 6244.TWO
Analyst: Carrie Liu
Rating: Underweight
Price (LC): 282.0
Mkt Cap (US$MM): 1,794
Founded: 1981, Listed: 2003 Fiscal Year End: December
Key Management: Cheng Fu-Tien, Jeery Su, Simon Tsuo No. of Employees: 914

Business Alliances/Partnerships (NT$ in billions) FY04 FY05 FY06 FY07E


Renesola—Three-year solar wafer supply Revenues 2.5 4.3 8.1 15.6
Agreement
AE Polysilicon—Five-year polysilicon supply Net Profit 0.6 1.2 2.3 2.6
Agreement
REC—Five-year solar wafer supply Agreement EPS (NT$) 2.0 7.27 13.24 13.45
ROE (%) 58.1 60.3 56.0 26.0
Capital Spending -0.5 -0.4 -1.8 0.9
Research & Development 0.0 0.0 0.0 0.1
Contract Manufacturers/Production Source 100% in-house, 100% in-house

Geographical Mix (2007) Product Mix (2007)


Others other
23% 1%
Solar Pow er
Europe Sy stem
40% 3%

USA
11%

China Solar cell


26% 96%

Key Suppliers Key Customers


Scanwafer Deutsche Solar
Motech Industries Aleo Atersa
Renesola LDK Siliken Tenesol
Solar Glass

Source: Company, Datastream, JPMorgan estimates.

MORGAN MARKETS PAGE BIG PICTURE


COMPANY WEBSITE Solar
INDEX

635
Bhavin Shah Asia Pacific Equity Research
(852) 2800-8538 07 January 2008
bhavin.a.shah@jpmorgan.com

SunPower Corporation
Company Description: SunPower Corporation designs and manufactures silicon solar cells. The Country: United States
cells generate electricity from sunlight. Ticker: SPWR
Analyst: Christopher Blansett
Rating: Overweight
Price (LC): 117.4
Mkt Cap (US$MM): 9,503
Founded: 2002, Listed: 2005 Fiscal Year End: December
Key Management: Thurman J Rodgers, Thomas H Werner, Richard Swanson, Emmanuel T Hernandez, No. of Employees: 1,752
Panemangalore Pai, Brad Davis

Business Alliances/Partnerships (US$ in millions) 2004 2005 2006 2007E


NA Revenues 10.9 78.7 236.5 766.6
Net Profit -28.9 -15.8 26.5 17.3
EPS (US$) -0.7 0.4 0.2
ROE (%) 7.1
Capital Spending 26.9 71.6 108.3 199.0
Research & Development 13.5 6.5 9.7
Contract Manufacturers/Production Source NA

Geographical Mix (2007) Product Mix (2007)

United States
Germany 32%
49%

Asia
Solar Cell
Others 7% 100%
12%

Source: Company, Datastream, JPMorgan estimates.

Key Customers
Key Suppliers NA
NA SunPower Corporation

MORGAN MARKETS PAGE BIG PICTURE


COMPANY WEBSITE Solar
INDEX

636
Bhavin Shah Asia Pacific Equity Research
(852) 2800-8538 07 January 2008
bhavin.a.shah@jpmorgan.com

Suntech Power Holdings Co.,Ltd


Company Description: Suntech is involved in the design, development and manufacture of photovoltaic Country: China
cells/modules, BIPV, and thin-film technology. It is the fourth largest solar cell maker globally with 6.3% global STP
market share in 2006. Its products are used for both on-grid and off-grid generation of solar power for commercial
Ticker:
and residential applications. Analyst: Carrie Liu
Rating: Neutral
Price (LC): 38.9
Mkt Cap (US$MM): 5,867
Founded: 2001, Listed: 2005 Fiscal Year End: December
Key Management: Shi Zhengrong No. of Employees: 3,284

Business Alliances/Partnerships (US$ in millions) FY05 FY06 FY07 FY08E


NA Revenues 226 598.8 1,390 2,305
Net Profit 30.5 103.6 182 324
EPS (US$) 0.3 0.7 1.2 2.1
ROE (%) 14.2 19.3 22.9 28.8
Capital Spending 27.9 79.6 141 242
Research & Development 3.4 8.4 17.3
Contract Manufacturers/Production Source NA

Geographical Mix (2006) US


Product Mix (2006)
3%
Rest of World PV sy stem PV cells
Rest of Europe 3% integrations 21%
0%
7% Germany
Spain 43%
21%

Japan
1%
South Africa PV modules
China
0% 79%
22%

Key Customers
Key Suppliers Conergy AG Atersa
Deutsche Solar AG LDK
Suntech IBC Solar AG SolarWorld AG
MEMC Shanghai Comtec Ibesolar Energia S.A
REC Sunlight Group
Hoku Materials

Source: Company, Datastream, JPMorgan estimates.

MORGAN MARKETS PAGE BIG PICTURE


COMPANY WEBSITE Solar
INDEX

637
Bhavin Shah Asia Pacific Equity Research
(852) 2800-8538 07 January 2008
bhavin.a.shah@jpmorgan.com

Analyst Certification:
The research analyst(s) denoted by an “AC” on the cover of this report certifies (or, where multiple research analysts are primarily
responsible for this report, the research analyst denoted by an “AC” on the cover or within the document individually certifies, with
respect to each security or issuer that the research analyst covers in this research) that: (1) all of the views expressed in this report
accurately reflect his or her personal views about any and all of the subject securities or issuers; and (2) no part of any of the research
analyst’s compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the
research analyst(s) in this report.
Important Disclosures

Price Charts for Compendium Reports: Price charts are available for all companies under coverage for at least one year through the
search function on JPMorgan's website https://mm.jpmorgan.com/disclosures/company or by calling this toll free number (1-800-477-
0406).

Explanation of Equity Research Ratings and Analyst(s) Coverage Universe:


JPMorgan uses the following rating system: Overweight [Over the next six to twelve months, we expect this stock will outperform the
average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Neutral [Over the next six to twelve
months, we expect this stock will perform in line with the average total return of the stocks in the analyst’s (or the analyst’s team’s)
coverage universe.] Underweight [Over the next six to twelve months, we expect this stock will underperform the average total return of
the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] The analyst or analyst’s team’s coverage universe is the sector
and/or country shown on the cover of each publication. See below for the specific stocks in the certifying analyst(s) coverage universe.
Coverage Universe: Bhavin Shah: Chartered Semiconductor (Singapore) (CSMF.SI), Chartered Semiconductor (US)
(CHRT), TSMC (2330.TW), UMC (2303.TW)
JPMorgan Equity Research Ratings Distribution, as of December 31, 2007
Overweight Neutral Underweight
(buy) (hold) (sell)
JPM Global Equity Research Coverage 45% 41% 14%
IB clients* 50% 51% 38%
JPMSI Equity Research Coverage 41% 47% 12%
IB clients* 71% 64% 49%
*Percentage of investment banking clients in each rating category.
For purposes only of NASD/NYSE ratings distribution rules, our Overweight rating falls into a buy rating category; our Neutral rating falls into a hold
rating category; and our Underweight rating falls into a sell rating category.
Valuation and Risks: Please see the most recent company-specific research report for an analysis of valuation methodology and risks on
any securities recommended herein. Research is available at http://www.morganmarkets.com , or you can contact the analyst named on
the front of this note or your JPMorgan representative.
Analysts’ Compensation: The equity research analysts responsible for the preparation of this report receive compensation based upon
various factors, including the quality and accuracy of research, client feedback, competitive factors, and overall firm revenues, which
include revenues from, among other business units, Institutional Equities and Investment Banking.
Other Disclosures

Options related research: If the information contained herein regards options related research, such information is available only to persons who
have received the proper option risk disclosure documents. For a copy of the Option Clearing Corporation’s Characteristics and Risks of
Standardized Options, please contact your JPMorgan Representative or visit the OCC’s website at
http://www.optionsclearing.com/publications/risks/riskstoc.pdf.
Legal Entities Disclosures
U.S.: JPMSI is a member of NYSE, FINRA and SIPC. J.P. Morgan Futures Inc. is a member of the NFA. JPMorgan Chase Bank, N.A. is a
member of FDIC and is authorized and regulated in the UK by the Financial Services Authority. U.K.: J.P. Morgan Securities Ltd. (JPMSL) is a
member of the London Stock Exchange and is authorised and regulated by the Financial Services Authority. Registered in England & Wales No.
2711006. Registered Office 125 London Wall, London EC2Y 5AJ. South Africa: J.P. Morgan Equities Limited is a member of the Johannesburg
Securities Exchange and is regulated by the FSB. Hong Kong: J.P. Morgan Securities (Asia Pacific) Limited (CE number AAJ321) is regulated
by the Hong Kong Monetary Authority and the Securities and Futures Commission in Hong Kong. Korea: J.P. Morgan Securities (Far East) Ltd,
Seoul branch, is regulated by the Korea Financial Supervisory Service. Australia: J.P. Morgan Australia Limited (ABN 52 002 888 011/AFS
Licence No: 238188) is regulated by ASIC and J.P. Morgan Securities Australia Limited (ABN 61 003 245 234/AFS Licence No: 238066) is a
Market Participant with the ASX and regulated by ASIC. Taiwan: J.P.Morgan Securities (Taiwan) Limited is a participant of the Taiwan Stock
Exchange (company-type) and regulated by the Taiwan Securities and Futures Bureau. India: J.P. Morgan India Private Limited is a member of
the National Stock Exchange of India Limited and The Stock Exchange, Mumbai and is regulated by the Securities and Exchange Board of India.
Thailand: JPMorgan Securities (Thailand) Limited is a member of the Stock Exchange of Thailand and is regulated by the Ministry of Finance

697
Bhavin Shah Asia Pacific Equity Research
(852) 2800-8538 07 January 2008
bhavin.a.shah@jpmorgan.com

and the Securities and Exchange Commission. Indonesia: PT J.P. Morgan Securities Indonesia is a member of the Jakarta Stock Exchange and
Surabaya Stock Exchange and is regulated by the BAPEPAM. Philippines: J.P. Morgan Securities Philippines Inc. is a member of the Philippine
Stock Exchange and is regulated by the Securities and Exchange Commission. Brazil: Banco J.P. Morgan S.A. is regulated by the Comissao de
Valores Mobiliarios (CVM) and by the Central Bank of Brazil. Mexico: J.P. Morgan Casa de Bolsa, S.A. de C.V., J.P. Morgan Grupo Financiero
is a member of the Mexican Stock Exchange and authorized to act as a broker dealer by the National Banking and Securities Exchange
Commission. Singapore: This material is issued and distributed in Singapore by J.P. Morgan Securities Singapore Private Limited (JPMSS)
[mica (p) 030/09/2007 and Co. Reg. No.: 199405335R] which is a member of the Singapore Exchange Securities Trading Limited and is
regulated by the Monetary Authority of Singapore (MAS) and/or JPMorgan Chase Bank, N.A., Singapore branch (JPMCB Singapore) which is
regulated by the MAS. Malaysia: This material is issued and distributed in Malaysia by JPMorgan Securities (Malaysia) Sdn Bhd (18146-x)
which is a Participating Organization of Bursa Malaysia Securities Bhd and is licensed as a dealer by the Securities Commission in Malaysia.
Pakistan: J. P. Morgan Pakistan Broking (Pvt.) Ltd is a member of the Karachi Stock Exchange and regulated by the Securities and Exchange
Commission of Pakistan.
Country and Region Specific Disclosures
U.K. and European Economic Area (EEA): Issued and approved for distribution in the U.K. and the EEA by JPMSL. Investment research
issued by JPMSL has been prepared in accordance with JPMSL’s Policies for Managing Conflicts of Interest in Connection with Investment
Research which outline the effective organisational and administrative arrangements set up within JPMSL for the prevention and avoidance of
conflicts of interest with respect to research recommendations, including information barriers, and can be found at
http://www.jpmorgan.com/pdfdoc/research/ConflictManagementPolicy.pdf. This report has been issued in the U.K. only to persons of a kind
described in Article 19 (5), 38, 47 and 49 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (all such persons
being referred to as "relevant persons"). This document must not be acted on or relied on by persons who are not relevant persons. Any investment
or investment activity to which this document relates is only available to relevant persons and will be engaged in only with relevant persons. In
other EEA countries, the report has been issued to persons regarded as professional investors (or equivalent) in their home jurisdiction
Germany: This material is distributed in Germany by J.P. Morgan Securities Ltd. Frankfurt Branch and JPMorgan Chase Bank, N.A., Frankfurt
Branch who are regulated by the Bundesanstalt für Finanzdienstleistungsaufsicht. Australia: This material is issued and distributed by JPMSAL
in Australia to “wholesale clients” only. JPMSAL does not issue or distribute this material to “retail clients.” The recipient of this material must
not distribute it to any third party or outside Australia without the prior written consent of JPMSAL. For the purposes of this paragraph the terms
“wholesale client” and “retail client” have the meanings given to them in section 761G of the Corporations Act 2001. Hong Kong: The 1%
ownership disclosure as of the previous month end satisfies the requirements under Paragraph 16.5(a) of the Hong Kong Code of Conduct for
persons licensed by or registered with the Securities and Futures Commission. (For research published within the first ten days of the month, the
disclosure may be based on the month end data from two months’ prior.) J.P. Morgan Broking (Hong Kong) Limited is the liquidity provider for
derivative warrants issued by J.P. Morgan International Derivatives Ltd and listed on The Stock Exchange of Hong Kong Limited. An updated list
can be found on HKEx website: http://www.hkex.com.hk/prod/dw/Lp.htm. Japan: There is a risk that a loss may occur due to a change in the
price of the shares in the case of share trading, and that a loss may occur due to the exchange rate in the case of foreign share trading. In the case
of share trading, JPMorgan Securities Japan Co., Ltd., will be receiving a brokerage fee and consumption tax (shouhizei) calculated by
multiplying the executed price by the commission rate which was individually agreed between JPMorgan Securities Japan Co., Ltd., and the
customer in advance. Financial Instruments Firms: JPMorgan Securities Japan Co., Ltd., Kanto Local Finance Bureau (kinsho) No. [82]
Participating Association / Japan Securities Dealers Association, The Financial Futures Association of Japan. Korea: This report may have been
edited or contributed to from time to time by affiliates of J.P. Morgan Securities (Far East) Ltd, Seoul branch. Singapore: JPMSI and/or its
affiliates may have a holding in any of the securities discussed in this report; for securities where the holding is 1% or greater, the specific holding
is disclosed in the Legal Disclosures section above. India: For private circulation only not for sale. Pakistan: For private circulation only not
for sale. New Zealand: This material is issued and distributed by JPMSAL in New Zealand only to persons whose principal business is the
investment of money or who, in the course of and for the purposes of their business, habitually invest money. JPMSAL does not issue or distribute
this material to members of "the public" as determined in accordance with section 3 of the Securities Act 1978. The recipient of this material must
not distribute it to any third party or outside New Zealand without the prior written consent of JPMSAL.
General: Additional information is available upon request. Information has been obtained from sources believed to be reliable but JPMorgan
Chase & Co. or its affiliates and/or subsidiaries (collectively JPMorgan) do not warrant its completeness or accuracy except with respect to any
disclosures relative to JPMSI and/or its affiliates and the analyst’s involvement with the issuer that is the subject of the research. All pricing is as
of the close of market for the securities discussed, unless otherwise stated. Opinions and estimates constitute our judgment as of the date of this
material and are subject to change without notice. Past performance is not indicative of future results. This material is not intended as an offer or
solicitation for the purchase or sale of any financial instrument. The opinions and recommendations herein do not take into account individual
client circumstances, objectives, or needs and are not intended as recommendations of particular securities, financial instruments or strategies to
particular clients. The recipient of this report must make its own independent decisions regarding any securities or financial instruments
mentioned herein. JPMSI distributes in the U.S. research published by non-U.S. affiliates and accepts responsibility for its contents. Periodic
updates may be provided on companies/industries based on company specific developments or announcements, market conditions or any other
publicly available information. Clients should contact analysts and execute transactions through a JPMorgan subsidiary or affiliate in their home
jurisdiction unless governing law permits otherwise.
“Other Disclosures” last revised January 2, 2008.

Copyright 2008 JPMorgan Chase & Co. All rights reserved. This report or any portion hereof may not be reprinted, sold or
redistributed without the written consent of JPMorgan.

698
Bhavin Shah Asia Pacific Equity Research
(852) 2800-8538 07 January 2008
bhavin.a.shah@jpmorgan.com

JPMorgan Global Tech Hardware Contact List


Last Name Phone Email Region
Blansett Christopher (1-415) 315 6708 christopher.r.blansett@jpmchase.com United States
Borbolla Liz (1-212) 622-6608 elizabeth.borbolla@jpmorgan.com United States
Chang Kevin (886-2) 2725-9879 kevin.kw.chang@jpmorgan.com Asia
Chou Cynthia (886-2) 2725-9898 cynthia.hy.chou@jpmorgan.com Asia
Coster Paul (1-212) 622-6425 paul.coster@jpmorgan.com United States
Danely Chris (1-415) 315-6774 chris.b.danely@jpmorgan.com United States
Deahna Jay (1-949) 224-4304 jay.deahna@jpmorgan.com United States
Deshpande Sandeep (44-20) 7325 0456 sandeep.s.deshpande@jpmorgan.com Europe
Dinges Tom (1-415) 315-6761 tom.dinges@jpmorgan.com United States
Doctor Sameer (1-212)-622-6653 sameer.k.doctor@jpmorgan.com United States
Dyas Luke (44-20) 77428016 luke.j.dyas@jpmorgan.com United States
Funada Miho (81-3) 5545-8630 miho.funada@jpmorgan.com Japan
Gelblum Ehud (1-212) 622-6457 ehud.gelblum@jpmorgan.com United States
Gopinath Arjun (44 20) 7325 0564 arjun.x.gopinath@jpmorgan.com Europe
Guo Charles (852) 2800-8532 charles.x.guo@jpmorgan.com Asia
Gupta Akash (1-415) 315-6731 akash.gupta@jpmorgan.com United States
Gursky Jason (1-415) 315-6705 jason.m.gursky@jpmorgan.com United States
Hall Rod (44-20) 7325 7437 rod .b.hall@jpmorgan.com Europe
Hasan Mehdi (1-415) 315-6766 mehdi.x.hasan@jpmorgan.com United States
Hariharan Gokul (886-2) 2725 9869 gokul.hariharan@jpmorgan.com Asia
Hayami Masashi (81-3) 6736-8606 masashi.x.hayami@jpmorgan.com Japan
Huang Anthony (886-2) 2725-9694 anthony.hw.huang@jpmorgan.com Asia
Hwang Sungrok (82-2) 758-5710 Steve.sr.hwang@jpmorgan.com Asia
Izumi Yoshiharu (81-3) 5545-8637 yoshiharu.izumi@jpmorgan.com Japan
Jasani Nishit (91-22) 6639-3008 nishit.x.jasani@jpmorgan.com Asia
Kahn Ian (1-212)-622-6728 ian.j.kahn@jpmorgan.com United States
Kwock Alvin (886-2) 2725-9866 alvin.yl.kwock@jpmorgan.com Asia
Lin Liang-Chun (886-2) 2725 9863 liang.c.lin@jpmorgan.com Asia
Liu Carrie (886-2)-2725-9861 carrie.cf.liu@jpmorgan.com Asia
Luscri Anthony (1-415) 315-6702 Anthony.s.luscri@jpmorgan.com United States
McPate John (44-20) 7325-6394 john.mcpate@jpmorgan.com EMEA
Meyer Lee (1- 212) 622-2528 lee.m.meyer@jpmchase.com United States
Moriyama Hisashi (81-3) 6736-8601 hisashi.moriyama@jpmorgan.com Japan
Moskowitz Mark (1-415) 315-6704 mark.a.moskowitz@jpmorgan.com United States
Nam Amy (1- 212)-622-5415 amy.m.nam@jpmorgan.com United States
Namgoong Sung (65) 6882-2374 sung.namgoong@jpmorgan.com Asia
O'brien Steve (1- 212)-622-6554 steven.obrien@jpmorgan.com United States
Park JJ (82-2) 758-5717 jj.park@jpmorgan.com Asia
Rom Vlad (1-212) 622-5131 Vlad.x.rom@jpmorgan.com United States
Sato Shoji (81-3) 5545-8661 shoji.sato@jpmorgan.com Japan
Shah Bhavin (852) 2800-8538 bhavin.a.shah@jpmorgan.com Asia
Shope Bill (1-212) 622-6607 bill.c.shope@jpmorgan.com United States
Shu Roland (886-2) 2725-9872 roland.cc.shu@jpmorgan.com Asia
Singla Manoj (91-22) 6639-3017 manoj.singla@jpmorgan.com Asia
(44-20) 7325-1191
Watkins Kim (1-415) 315-6724 kimberly.a.watkins@jpmorgan.com United States
Webster Shawn (1-415) 315-6723 shawn.r.webster@jpmorgan.com United States
Yoon Jinhy (1-415) 315-6719 jinhy.x.yoon@jpmchase.com United States

699
Bhavin Shah Asia Pacific Equity Research
(852) 2800-8538 07 January 2008
bhavin.a.shah@jpmorgan.com

JPMorgan Global Tech Hardware Team


Equity Research
Global Sector Components, Contract Manufacturing Computing SMID Cap IT Semiconductors Telecom Equipment – Wireline and Telecom Equipment – Wireless
& Consumer Electronics Hardware Data Networking
Bhavin Shah Thomas Dinges, CFA, Coordinator Bill Shope, CFA Coordinator Chris Danely, Coordinator Ehud Gelblum, Coordinator Bhavin Shah, Coordinator
Global Coordinator Americas Americas Americas Americas Americas Americas
Gokul Hariharan United States Tom Dinges, CFA United States Bill Shope, CFA Mark United States Jay Deahna United States Ehud Gelblum United States Ehud Gelblum
Jason Gursky Liz Borbolla Moskowitz Christopher Blansett Kim Watkins, CFA Kim Watkins, CFA
Akash Gupta, CFA Vlad Rom Anthony Jinhy Yoon Steve O'Brien Steve O'Brien
Paul Coster, CFA Luscri Ian J. Kahn, CFA Ian J. Kahn, CFA
Amy Nam Chris Danely
Shawn Webster
Mehdi Hasan

EMEA EMEA EMEA EMEA EMEA


Sandeep Deshpande Rod Hall Rod Hall
Arjun Gopinath

Asia Pacific Asia Pacific Asia Pacific Asia Pacific Asia Pacific Asia Pacific
Sector Sales/ Japan Shoji Sato Taiwan Alvin Kwock India Pan Asia Bhavin Shah Japan Yoshiharu Izumi Pan Asia Bhavin Shah
Specialists Yoshiharu Izumi Gokul Hariharan Manoj Singla Shoji Sato
EMEA - John McPate Masashi Hayami Anthony Huang South Korea JJ Park Taiwan Kevin Chang
Luke Dyas Kevin Chang Sungrok Hwang
US- Peter J McGough South Korea JJ Park Sung Namgoong HK/China Charles Guo
Matthew D Lota Sungrok Hwang HK/China Charles Guo
Asia - Lee Meyer Sung Namgoong Taiwan Roland Shu Japan Yoshiharu Izumi
Japan Yoshiharu Izumi Cynthia Chou Akira Kishimoto
Taiwan Gokul Hariharan Akira Kishimoto Alvin Kwock Shoji Sato
Carrie Liu Shoji Sato Gokul Hariharan Naomi Miwa
Anthony Huang
Liang-Chun Lin South Korea JJ Park
David Liu

Japan Yoshiharu Izumi


Miho Funada
Akira Kishimoto
Hisashi Moriyama

You might also like