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The Intermediate People’s Court in Wuxi， east China’s Jiangsu Province declared on March 20 that the largest subsidiary of Suntech Power Holdings Co. Ltd.， one of the world’s biggest solar panel manufacturers， must undergo restructuring under bankruptcy proceedings.
Nine commercials banks filed a petition asking the court to declare the subsidiary， Wuxi Suntech Power Co. Ltd.， insolvent for failing to issue a plan to repay its debt worth 7.1 billion yuan （$1.13 billion）.
Suntech’s woes add fuel to the fire of an industry already plagued by oversupply and tariffs.
Suntech Power Holdings Co. Ltd. was founded in January 2001 by Australian Chinese Zhengrong Shi and grew to become a leading player in the industry. In 2005 the company was listed on the New York Stock Exchange. Suntech became the world’s largest solar panel manufacturer in 2011， with a production capacity of 2.4 gigawatts. It runs branches in a dozen countries across the world and employs 11，000 workers.
Reasons for bankruptcy
In 1991， Shi earned his Ph.D. from the University of New South Wales， where he studied under Professor Martin Green， known as the father of global solar energy. He became an Australian citizen in 1993 and returned to China in 2000. The photovoltaic industry was one of the industries the Chinese Government vowed to develop at the time， prompting Shi， with the backing of the Wuxi Municipal Government， to found Suntech.
In the next few years， Suntech continued to grow at a remarkable speed. In 2006， the company’s stock price climbed to $40， and Shi became the richest in China with a fortune of $2.3 billion. Shi often mentioned that Suntech would not have become the giant it was without the support of the Wuxi Municipal Government.
During the past decade， however， the development of photovoltaic and new energy industries grew rapidly， and by the end of 2011， China had more than 500 photovoltaic producers， owning 80 percent of the world’s production capacity. Hoping to cash in on the booming industry， real estate developers， dressmakers and even food producers were investing in photovoltaic companies.
The disorderly development supported by various local governments ultimately caused overcapacity and disorganized competition. To increase market share， many photovoltaic producers drastically lowered their prices， thereby eroding profits.
More serious problems soon emerged. Zhang Shuguang， a researcher with the Institute of Economics of the Chinese Academy of Social Sciences， says various local governments offered cheap land and loans with favorable terms to photovoltaic companies， ballooning oversupply in the market. Many companies saw their debtasset ratios rise fast， sparking a crisis in the photovoltaic industry. Furthermore， China’s photovoltaic products have been export-oriented and are highly dependent on the U.S. and European markets. Beginning in 2011， the United States and European Union launched anti-dumping and countervailing duty litigations against Chinese photovoltaic products， seriously hurting the industry and having contributed to the oversupply in China.
Since most investments are made with government-assisted loans， debt crisis breaks out after oversupply intensifies and corporate profitability declines. This is the main reason for bankruptcy of Wuxi Suntech.
On March 24， Suntech’s stock price closed at $0.422， and the U.S. investment firm Maxim even set a $0 target for Suntech’s stocks.
On March 13， Suntech announced it would close its factory in Goodyear， Arizona as of April 3.
Will Wuxi Suntech be taken over by the Wuxi Municipal Government during the restructuring period？ An anonymous staff member at Wuxi Suntech told Beijing Review that the company has no comment and would not agree to an interview， but “the company is working as usual.”
Wuxi Suntech now has two choices. First， the local government and the China Development Bank input capital to rescue the company， but Shi must offer unlimited liability guarantee with his personal assets； second， Suntech is delisted from the stock exchange and Wuxi Suntech becomes a state-owned enterprise. The two schemes are now both in negotiation.
Industry in trouble
Wuxi Suntech’s bankruptcy brings to light industry-wide difficulties. Problems such as oversupply and halted exports have sent some photovoltaic companies into a desperate struggle in recent years.
In October 2012， the United States decided to impose anti-dumping and countervailing duties on Chinese-made photovoltaic products. Wang Zhixin， media head of another famous Chinese photovoltaic producer Yingli Group， says his company won’t be deterred by the duties and will never abandon the U.S. market. In the future， the company will strengthen its innovation and adopt a diversified strategy to increase profits， he says. But by the end of February this year， Yingli’s performance was down. Because of its stronger capital chain， it avoided the same fate as Wuxi Suntech.
Shanghai Chaori Solar Energy Science and Technology Co. Ltd. also faced debt problems at the beginning of the year. Wang Bohua， Secretary General of the China Photovoltaic Industry Alliance， says in 2012 almost all of China’s photovoltaic companies， including Wuxi Suntech and Yingli， were losing money. Liang Tian， Director of Public Relations of Yingli， says Wuxi Suntech’s restructuring is a warning to companies in the industry to improve their strategic outlook and upgrade their technology—and to improve the sound development of the industry—or they could face the same fate.
According to Liang， oversupply in the photovoltaic industry is also a problem faced by Europe and the United States. Companies in China should work together to get through this difficult period， and the industry still has a bright future， he said.
The Chinese Government is also trying to shift focus away from foreign markets to the home market. According to the 12th Five-Year Plan （2011-15） on Solar Power Technology Development， by 2015 China’s total installed capacity of solar power should reach 21 gigawatts. In 2012， the figure was only 4.5 gigawatts.
State Grid Corp. of China has already begun to connect solar power from qualified photovoltaic projects， both corporate and individual ones， into grids for free. The purchase price of solar power is double that of thermal power.
Wang thinks the photovoltaic industry’s development will not stop just because some industrial leaders face difficulties， although it may experience a slowdown. Since oversupply and vicious price competition cannot be solved in the short term， it will take some time for the photovoltaic industry to recover.
To overcome difficulties， the photovoltaic industry must improve in three aspects， says Wang. First， the role of the market should be fully tapped to discard outdated production methods and avoid the intervention of local governments. Second， the Central Government should better regulate the development of the industry， restrict redundant construction and avoid rush investment and vicious price competition. Third， the government should strengthen support of independent innovation by enterprises and enhance the core competitiveness of the industry.
Nine commercials banks filed a petition asking the court to declare the subsidiary， Wuxi Suntech Power Co. Ltd.， insolvent for failing to issue a plan to repay its debt worth 7.1 billion yuan （$1.13 billion）.
Suntech’s woes add fuel to the fire of an industry already plagued by oversupply and tariffs.
Suntech Power Holdings Co. Ltd. was founded in January 2001 by Australian Chinese Zhengrong Shi and grew to become a leading player in the industry. In 2005 the company was listed on the New York Stock Exchange. Suntech became the world’s largest solar panel manufacturer in 2011， with a production capacity of 2.4 gigawatts. It runs branches in a dozen countries across the world and employs 11，000 workers.
Reasons for bankruptcy
In 1991， Shi earned his Ph.D. from the University of New South Wales， where he studied under Professor Martin Green， known as the father of global solar energy. He became an Australian citizen in 1993 and returned to China in 2000. The photovoltaic industry was one of the industries the Chinese Government vowed to develop at the time， prompting Shi， with the backing of the Wuxi Municipal Government， to found Suntech.
In the next few years， Suntech continued to grow at a remarkable speed. In 2006， the company’s stock price climbed to $40， and Shi became the richest in China with a fortune of $2.3 billion. Shi often mentioned that Suntech would not have become the giant it was without the support of the Wuxi Municipal Government.
During the past decade， however， the development of photovoltaic and new energy industries grew rapidly， and by the end of 2011， China had more than 500 photovoltaic producers， owning 80 percent of the world’s production capacity. Hoping to cash in on the booming industry， real estate developers， dressmakers and even food producers were investing in photovoltaic companies.
The disorderly development supported by various local governments ultimately caused overcapacity and disorganized competition. To increase market share， many photovoltaic producers drastically lowered their prices， thereby eroding profits.
More serious problems soon emerged. Zhang Shuguang， a researcher with the Institute of Economics of the Chinese Academy of Social Sciences， says various local governments offered cheap land and loans with favorable terms to photovoltaic companies， ballooning oversupply in the market. Many companies saw their debtasset ratios rise fast， sparking a crisis in the photovoltaic industry. Furthermore， China’s photovoltaic products have been export-oriented and are highly dependent on the U.S. and European markets. Beginning in 2011， the United States and European Union launched anti-dumping and countervailing duty litigations against Chinese photovoltaic products， seriously hurting the industry and having contributed to the oversupply in China.
Since most investments are made with government-assisted loans， debt crisis breaks out after oversupply intensifies and corporate profitability declines. This is the main reason for bankruptcy of Wuxi Suntech.
On March 24， Suntech’s stock price closed at $0.422， and the U.S. investment firm Maxim even set a $0 target for Suntech’s stocks.
On March 13， Suntech announced it would close its factory in Goodyear， Arizona as of April 3.
Will Wuxi Suntech be taken over by the Wuxi Municipal Government during the restructuring period？ An anonymous staff member at Wuxi Suntech told Beijing Review that the company has no comment and would not agree to an interview， but “the company is working as usual.”
Wuxi Suntech now has two choices. First， the local government and the China Development Bank input capital to rescue the company， but Shi must offer unlimited liability guarantee with his personal assets； second， Suntech is delisted from the stock exchange and Wuxi Suntech becomes a state-owned enterprise. The two schemes are now both in negotiation.
Industry in trouble
Wuxi Suntech’s bankruptcy brings to light industry-wide difficulties. Problems such as oversupply and halted exports have sent some photovoltaic companies into a desperate struggle in recent years.
In October 2012， the United States decided to impose anti-dumping and countervailing duties on Chinese-made photovoltaic products. Wang Zhixin， media head of another famous Chinese photovoltaic producer Yingli Group， says his company won’t be deterred by the duties and will never abandon the U.S. market. In the future， the company will strengthen its innovation and adopt a diversified strategy to increase profits， he says. But by the end of February this year， Yingli’s performance was down. Because of its stronger capital chain， it avoided the same fate as Wuxi Suntech.
Shanghai Chaori Solar Energy Science and Technology Co. Ltd. also faced debt problems at the beginning of the year. Wang Bohua， Secretary General of the China Photovoltaic Industry Alliance， says in 2012 almost all of China’s photovoltaic companies， including Wuxi Suntech and Yingli， were losing money. Liang Tian， Director of Public Relations of Yingli， says Wuxi Suntech’s restructuring is a warning to companies in the industry to improve their strategic outlook and upgrade their technology—and to improve the sound development of the industry—or they could face the same fate.
According to Liang， oversupply in the photovoltaic industry is also a problem faced by Europe and the United States. Companies in China should work together to get through this difficult period， and the industry still has a bright future， he said.
The Chinese Government is also trying to shift focus away from foreign markets to the home market. According to the 12th Five-Year Plan （2011-15） on Solar Power Technology Development， by 2015 China’s total installed capacity of solar power should reach 21 gigawatts. In 2012， the figure was only 4.5 gigawatts.
State Grid Corp. of China has already begun to connect solar power from qualified photovoltaic projects， both corporate and individual ones， into grids for free. The purchase price of solar power is double that of thermal power.
Wang thinks the photovoltaic industry’s development will not stop just because some industrial leaders face difficulties， although it may experience a slowdown. Since oversupply and vicious price competition cannot be solved in the short term， it will take some time for the photovoltaic industry to recover.
To overcome difficulties， the photovoltaic industry must improve in three aspects， says Wang. First， the role of the market should be fully tapped to discard outdated production methods and avoid the intervention of local governments. Second， the Central Government should better regulate the development of the industry， restrict redundant construction and avoid rush investment and vicious price competition. Third， the government should strengthen support of independent innovation by enterprises and enhance the core competitiveness of the industry.