LDK Moves downward in Solar Power Industry Chain    

China's LDK Solar Co., Ltd. (NYSE: LDK) and Germany's Q-Cells SE announced on April 8th the formation of a joint venture focusing on large photovoltaic (PV) systems and market development in Europe and China.
   This marks a major move by LDK to tap the downstream sector of the solar power business chain, analysts said. Q-Cells SE engages in the production of solar cells, the downstream products of solar wafers.
    The joint venture will utilize 100% solar wafers from LDK Solar and 100% solar cells from Q-Cells. The joint venture is already in discussions with potential buyers of the first turn-key project, which will be in Europe, and is in the planning stages for future joint projects in the emerging Chinese market. The tie-up could bring more opportunities to both companies given their complementary core business models and regional market expertise.
   Before this, LDK has successfully moved upward in the business chain. As a solar wafer manufacturer, LDK needs large amount of polysilicon as raw material. To cut costs, the company has built its own polysilicon projects. The projects, now in partial production, will start full operation since 2010 to meet all LDK's need. The company said its production costs for polysilicon is around US$30 a kilogram.
   Now, tapping the field of solar power generation means that LDK is shifting its business model, by extending the business chain to upstream polysilicon and downstream PV systems, from an original wafer specialist.
   Based in Jiangxi province, LDK is Asia's largest polysilicon wafers producer. The company's revenue soared 214% to US$1.6 billion in 2008. Gross profit for its production business was US$173 million last year, with a gross profit margin of 10.5%. LDK's wafer capacity was 1.46GW at the end of 2008.
   The global financial crisis has weakened the demand for solar cells in the global market since the second half of 2008. The rise in LDK's sales reflects its capability in weathering the risk, analysts said.
   The company has secured 14 long-term orders for silicon wafers in 2008, company sources said. By 2010, the company has further solar wafer orders totaling 14 000 megawatts.