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SunPower Corporation is among the leading players in the United States’ PV market. As more residential homeowners and the commercial sector seek to embrace alternative sources of energy, the global market for solar electric systems has witnessed a massive growth in a very short time. Buoyed by subsidy programs, SunPower has managed to generate demand for solar cells. Nonetheless, competition is very stiff in his industry. The current essay endeavors to undertake a competitive analysis of SunPower Corporation. The firm’s key competitors shall also be identified. In addition, the essay will also attempt to evaluate the market shares of the key competitors, their key strategies, and growth prospects.
Solar Industry: Industry overview
There is an increased demand for solar energy globally. The United States has witnessed a considerable increase in solar energy deployment in recent years. For example, in 2007, the country’s solar energy capacity rose by a massive 17 % (EERE News, 2008). A report reveals that by 2025, about 10% of the country’s power needs would be reliant on solar power. Of this, over 8 % will be provided by solar photovoltaic cells. This is equivalent to almost 50,000 cells (EERE News, 2008). For the last eight years, solar power in the United States has grown at an average of 40%. It is becoming increasingly expensive to meet the cost of generating electricity using fossil fuels even as there has been a drastic drop in power generation using solar photovoltaic systems. Consequently, reports indicate that the cost of conventional power sources will equal that of solar power by 2015. Nonetheless, in order to attain the 10% goal, it is important for the photovoltaic firms to ensure that solar power becomes a “plug-and-play” technology (EERE News, 2008). This can only be done if the companies in question streamline installations.
SunPower Corporation is mainly concerned with the design, production, as well as the delivery of solar electric systems globally. The company ensures that is manufactures high performance solar electric systems to fulfill the unique needs of its utility-scale power plant, residential, and commercial customers. The company is also involved in the design and manufacture of roof tiles and crystalline silicon PV cells. SunPower Corporation mainly competes in the semiconductor manufacturing industry. Other industry where the corporation competes include solar power generation industry, sensor chip manufacturing industry, and chip design, assembly, as well as packaging services. The solar cells that SunPower US manufactures are nearly 50 percent more efficient in comparison with those manufactured by the firm’s competitors (PRNewswire (2011). As a result, they also tend to be comparatively cheaper not just for homeowners, but also for the commercial users. For example, within about 10 years, most homeowners using SunPower solar cells are expected to have recouped the cost of their installation and to have recovered from lower energy bills. The five-inch square SunPower’s solar cell, often dubbed A-300, has a higher energy conversion efficiency of 21 percent, in comparison with the energy conversion efficiency of between 12 and 15 percent that is the industry’s average (Henderson, Conkling & Roberts, 2009).
The design of SunPower’s solar cells has resulted in the manufacture of a cell with a sleek black surface. This has been achieved by the installation of metal wiring on the solar cells’ back, thereby ensuring that solar rooftops remain by far more attractive in comparison with the exposed-plumbing look that characterized past solar installations. Thanks to the company’s technological breakthrough, in 2010, SunPower was awarded a contract to supply PowerLight with solar cells. The contract was worth $330 million. In late 2005, SunPower floated a fantastic initial public offering and on the first day of trading, the company’s stock rose to $ 25.45, representing a 41 percent increase. By mid-November, the company’s shares were already trading at $38.14 (Alvarado, 2007).
The future looks very bright for the solar industry, with the sale of solar equipment anticipated to increase ten times to $ 10 billion by 2020, up from $ 1 billion in 2010. In spite of the good times ahead of the company, nonetheless, SunPower is also faced with a number of challenges as well. Globally, the company has to face stiff competition from giant firms such as Shell, Sharp, BP, and Sanyo. In addition, there is also a global shortage of silicon, the raw material for the manufacture of solar cells. This will without a doubt make it hard for the company to maintain a low price for its products (Henderson et al, 2009). Nonetheless, industry analysts contend that SunPower is an a better position to deal with these challenges better compared with its competitors mainly because its per watt use of silicon is 30 percent below the industry average.
United States’ market size for solar panel systems
Between 1998 and 2008, the US PV market attained a historical growth, at an average of 35 percent yearly growth (Henderson et al, 2009). Currently, this market is estimated to be worth $ 1.26 billion in sales. At the same time, industry analysts expect that the industry will realize an annual growth in sales of between 15 and 20 percent. Subsidy programs have helped companies such as SunPower a great deal in their quest to generate demand for solar cells. However, analysts contend that by 2012, the industry will e in a position to prop itself up, even in the absence of subsidies (Womack, 2007). In order to achieve this goal, SunPower will have to scale up production in the hope of lowering costs. In terms of market share, the main players in the United States PV market in order of their share of the market include First Solar (13 percent), Sharp (7 percent), SunTech (7 percent), Q-Cells (6 percent), Kyocera (5 percent), and SunPower (4 percent).
The suppliers in the solar industry include Polysilicon producers. The key players in the United States’ solar energy industry include First Solar, SunPower, Q-Cells, SunTech Power, and Solar World, among others. Potential entrants into the United States solar energy industry include consumer brands with Equity in Energy. They include Panasonic and Duracell. On the other hand, substitute products would include other power sources such as coal, nuclear, and wind, among others.
First Solar has the largest market share in the United States’ PV market, at 13 percent. The company mainly specializes in PolyChrystalline and ThinFilm technology in the manufacture of less expensive solar panels. In addition, the company also prides itself as the manufacturer of less expensive solar panels, thanks in part to its use of CdTe (cadmium telluride) as a semiconductor. This ensures that the company’s panels remains cheaper compared with those produced using crystalline silicon (Lynler, 2011). In terms of market performance, in fiscal year 2010, the company earned $ 7.68 for every share. This amounted to $ 664.2 million in share earnings.
On the other hand, in the second quarter of 2011, the company witnessed a 60 percent reduction in profits to $ 61.1 million, down from the $ 159 million realized at the same period in 2010. The drastic drop in First Solar’s profits is mainly attributed to uncertainly for renewable energy subsidies in Europe, drastic drop in solar modules prices, and higher costs (Henderson et al, 2009). In 2010, Forbes magazine has ranked First Solar position 26 in terms of the fastest-growing technology organizations in the United States (Ray, 2010). The company’s value proposition is the CdTe technology that ensures high efficiency and lowest costs. For example, by July 2011, First Solar had attained 17.3 percent efficiency.
The company is the second largest in the United States’ solar industry with a market share of 7 percent. Just like First Solar Company, Suntech CHN relies on PolyChrystalline and ThinFilm technology in the manufacture of solar panels. In terms of value proposition, Suntech CHN relies on the high quality and low cost of its products to enhance its brand equity (Henderson et al, 2009). The company’s strategy is to ensure that shareholders get value for the money invested. Suntech has an efficiency of 15 percent. Almost 90 percent of the company’s revenues emanates from exports, mainly to Spain and Germany. However, the company anticipates that by 2015, the Chinese market will account for 20 percent of its exports. Already, Suntech management is trying to convince the Chinese government to provide the photovoltaic cell industry with incentives.
This is the third largest solar panel manufacturing company in the United States. The company already has a market share of 7 percent. The company relies on PolyChrystalline and ThinFilm technology for the manufacture of its solar panels. Its value proposition includes a big brand. Sharp JPN’s strategy is to get value for money invested. Sharp Solar has over 40 years of experience in research and development of cell and module production, as well as spanned wafer. In addition, the company has been pursuing concentrator technology, R & in thin films, as well as solar integrated products. Analysts contend that Sharp Solar’s modules are reliable. Multicrystalline solar cells22 forms the basis of Sharp solar modules, and the efficiencies ranges between 14 and 15 percent (PV Cells and Arrays, n. d.).This translates into approximately 13 percent efficiency when we factor in the standard module efficiency losses. In the past, much of the company’s revenues have been generated from basic modules. However, in recent months, the company has introduced a wide range of innovative products of low volume, such as the triangular modules. These have been designed to fit in translucent solar window glass and tight corners. In addition, Sharp is also experimenting with contact solar cells. These are similar to those manufactured by SunPower.
The company has a market share of 6 percent. It also uses PolyChrystalline and ThinFilm technology in the manufacture of solar panels. Its value proposition includes the High German quality, as well as high efficiency. Q-Cells mainly manufactured multicrystalline solar cells and monocrystalline sells. The former have an efficiency of between 14.5 and 15.5 percent, while the latter have an efficiency of between 16 and 17 percent (PV Cells and Arrays, n. d.). Instead of adopting the 5” or 6” squares format cells which is the industry’s standard, Q-Cells has adopted the 8” square cells so as to lower processing cost per watt.
With a 5 percent market share, Yingly CHN utilizes PolyChrystalline technology in the manufacture of solar cells (Henderson et al, 2009). The company’s value proposition is its lowest price. At the same time, the company pursues a low cost strategy.
SunPower is faced with the challenge of guarding or increasing its market share in the US solar industry where it has to fight it out with First Solar, Sharp, and Suntech, among other companies. Globally, the main challengers include BP, Shell, Sanyo, and Sharp. SunPower should also consider using cadmium telluride as a semiconductor in the manufacture of less expensive solar panels. This is the strategy that First Solar has adopted, perhaps explaining why the company is still the market leader. SunPower is also highly innovative, producing solar cells of high quality. The firm’s management needs to prevail on the government to provide the photovoltaic cell industry with more incentives to ensure that the various players remain competitive in the local, national, and global market.