6.01.2011

Walking in the Sun - Part II (Taiwan solar stocks & renewable power policy)

Walking in the Sun in around and around
Walking in the Sun in around and around
Walking in the Sun in around and around
Walking in the Sun in around Sun in around and around

Quoted from song lyrics – Walking in the Sun
Performed by Degauss


Most think the stock market will shine, but the sunny part will not be spotted in the solar sector. Nailing down when solar comeback will dawn seems elusive. Investors are gnawing at their nails wondering if the sector is headed into a bear. Some individual solar stocks, though, are already there. At the forthcoming investor meetings, solar stock firms will surely confront multiple questions with answers implied as how the pendulum of the industry will swing.    


TSE solar stocks ran out of gas since March 2011
Snapshots of listed solar stocks
In the upstream crystalline silicon (c-Si) ingot/wafer domain, a timely overlapping for its capacity hike with sliding material cost will benefit Gigastorage which has seen investment paying off comfortably. Solid background should buttress Wafer Works, a core holding of Walsin Lihwa group (ruled by Chiao family, 1605). Associates of Tatung Corp.(2371), Green Energy and San Chih, are able to move forward but with needed working capital for most part infused from banks. Danen, an outperformer by the yardstick of 1Q11 gross margin, will remain brisk as Gigastorage and Green Energy about capacity pickups.  
In the solar cell space, mandatory day-offs and partial moratorium had been in the news. Mosel Vitelic is still vexed by nasty financial crunch from DRAM subsidiary, with cash call ready to roar to improve its gearing ratios. E-Ton is now in compelling reorganization process after years of tinkering with diversification. Solartech Energy and Motech may emerge as outrunners, with the former propped up by cash injection from the petrochemical Formosa Plastic Group (FPG)-linked conglomerates and the latter backstopped by the tech juggernaut, TSMC. Gintech pushes back against issues about lagging behind for vertical-integration. Undaunted capEx attempt by Neo Solar will likely get it nowhere in such a heat-up environment, but merits attention on the premises that TSE cardinal raider, Hon Hai (2317), jostles into its board.
As an appealing money-making conductive paste maker, Giga Solar still deserves a buy on dips with little jitter about its margin due to well-established global position and stable sale partly soaked up by  its parent company, Gigastorage. Delta Electronic may wade through the industry volatile water by a self-assured manner, despite disdainful analyst comment for its current inverter workings.  
Market bullish forecast comes null and void
Gasping runaway gaps on technical charts since March this year sent solar stocks interconnected into oversold condition, tumbling to year-to-date nadirs near where they hit in 2008 subprime crisis. A few even plunged to new troughs below IPO prices, such as Danen Tech and Giga Solar, due to ruthless sell-off from institutionals. Nagging concerns were numerous, in a sharp contrast with excited mood in early 2011. Negative news about operations, including falling ASP amid oversupply, lower usage rate and wide-spread narration of extra staffer rest days or layoffs in big-names, left them piteously nomadic on TSE. Anemic sale in Apr. further induced nausea to the class, hinting of likelihood that the solar cluster will nap through 2Q11 with deep red inks.
Solar stock prices to make tentative move into the green
Cloudy prospects and degraded numerical data are getting on the sector’s nerve, offering no bullish sign for a necessary buy trigger on the nail. But it certainly will turn the corner  in the long haul. In near future it is ripe for a short-lived corrective rebound to build a side-wise bottom pattern. Albeit not prepping for a sustainable vengeance, the heavily-bruised nomads are susceptible to any unexpected energetic news to woo bargain punters. In light of a banner 2010, the sector generally will mete out handsome dividend to investors, outshining a ring of skimpy TDR rambling gambling men. The attractive yield rate might somewhat perform as cushion for the downfalls.      
Solar stocks balk at stock repurchase
It is interesting to note that none of them for the nonce maps out buy-back program to catch a falling knife as resolutely as NB firms fronted by Acer Inc. (2353) and Compal Electronic (2324), which have enlightened market spirit even shelling out not so much for initial rescue package. As reported, Acer Inc. scooped up 27 mn its own shares over NTD53, 1.03% of total common shares and achieving 50% for its targeted amount since it put the safety net in place from March 31 to May 31. To reflate stock prices will be activated again, if in need, to give Acer stock a jolt based on prior records, a more possible event in an improved operational climate polished by encouraging news about rising popularity of its tablet. Acer stock may glean incessant glare in future, due to that long-effective stock buy-back alchemy which often coexists with outbreak of negative news.
It is hardly surprising that solar stocks block cash spigots for the same sort of program, being inexorably fated to budget more for deployment that can not be neglectful of in the industry twist and turn. But whiff of the negligence nonetheless would stir speculation about their wills to demonstrate stock intrinsic value now at perils To put it in a nutshell, they are sheer micro-caps, (barring Mosel Vitelic and Delta Electronics), and utter growth aspirants who will break their necks to raise funds.
1Q11 results - Upstream on steroids and downstream on a diet
Photons in the sunlight hit solar cells but were not absorbed well by TSE solar zone which failed to recharge profitable devices in 1Q11, though in which a few of c-Si wafer firms decisively put in admirable earning growth. For the rest in the solar-related stock counters, earning numbers in 1Q11 notched only half to one-thirds of the glittery luster nabbed in 4Q10. The upstream poly c-Si wafer producers were then exceedingly hoped to deflate prices to narrow down the cost burden of downstream users.
The table 1 below shows existing lackluster traits of TSE pure and main (solar sale >50%) plays specialized in the green tech area, gauged by EPS track in recent 3 quarters and sale in April. A massive number is not named in the table, due to their far less solar genes. Up to now, anecdotal statistics suggest that 4 listed firms partially deal in CiGs substance; 7 in solar cell component; 7 in cell production system equipment and more than 20 holding solar affiliates. Most Taiwan listed c-Si wafer producers are pulling ingot/wafer from poly c-Si, the central material customarily imported with only one unlisted firm for the time being embarking on such doings in Taiwan - Taiwan Polysilicon Corp. (TPSI).    
Weedier ASP sank sale in April
When the solar category on TSE reported unconsolidated sale for Apr. (all listed firms must release monthly unconsolidated sale before No. 10 of a month, while consolidated before 18), a big dose of murk was added to the sector which remained so distraught that any talk of imminent revival was premature. An averaged over-20% MoM retreat, mainly seen in solar cell companions, marked their sales in the month.
The industry is largely expected to be knocked loose in months ahead, damaged by nosebleed ASP ranging from upstream crystalline silicon (c-Si) ingot/wafer, midstream solar cell, to the downstream parts comprising photovoltaic (PV) module (or panel) and electricity current inverter. Neck-to-neck rivalry in Asian regional nations, especially Taiwan and China, has nursed a glut of supply. Noteworthy is that demand also turned nominal in Apr., swayed by nasty, prolonged winter in Europe and noncommittal renewable energy power policy by Italy government. Nuts-and-bolts blueprint for corporate internal IRR algorithm fell through, leading to an extended lead time and set-up time before creating a buzz boosting sale.
ASP of poly c-Si wafer and solar cell was sequentially notched down lately, traversing near break-even lines. Prices were publicized that the former slipped below USD3 per unit, and the latter, USD1/Watt (W), with its downdraft marking a nerve-wracking 20% descent since early this year. A snowballing effect erupted that potential clients asked for cheaper prices. Needless to say, makers executed operations on a dull note to convert sunlight into electron hole pairs, trimming utilization rate down to the vicinity of 60-70%. The operational noose was further tightened by reported steadfast ASP of c-Si, staple of wafer. The vivid price disparity between sale price and material cost therefore arrested a rally for sale growth in Apr., a fairly clear narrative of an industry being hurt by notoriously ropy ASP  
Table 1 - EPS (NTD) and sale (Apr. 2011, unconsolidated) of main TSE solar stocks

TSE Code
Common Shares
(1 mn)
2010 EPS
1Q11 EPS
4Q10 EPS
1Q10 EPS
Sales (NTD1 mn)
%
MoM
%
YoY
Close
(May
31)
2011
High (NTD)
% Chg.
Ingot, Wafer












Gigastorage
2406
265
3.29
0.87
0.23
0.85
233
6.1
93
38.6
59.5
-35
Green Energy
3519
241
8.65
2.47
3.76
1.39
2.374
1.8
95
97.2
183.5
-47
San Chih Semi.
3579
96
9.02
2.31
3.27
2.08
69
8.7
8
92
158
-42
Danen Tech.
3686
201
3.16
1.25
0.90
0.78
595
2.6
150
47.2
68.9
-31
Sino American Si.
5483
382
10.5
2.93
3.24
1.00
1,857
-7.7
25
89.2
146
-39
Wafer Works
6182
273
2.45
0.82
0.56
0.34
583
5.3
67
42.7
58.5
-27
Solar Cell












Mosel vitelic
2342
676
-1.15
-0.46
-1.18
-0.59
371
31
-2
9.98
16.2
-38
E-ton Solar
3452
479
-11.5
-0.38
-1.02
-0.19
468
-58
-60 
27.4
53
-48
Gintech Energy
3514
322
13.43
1.32
3.08
3.27
1,705
-24
-26
68.6
97.8
-30
Solartech Ener.
3561
198
7.43
1.08
2.21
1.13
1,253
-25
  111
61.8
97
-36
Neo Solar
3576
312
11.55
0.97
2.61
1.27
1,601
-32 
18 
53
87
-39
Motech
6244
380
12.3
1.80
4.08
0.82
1,360
-47
-17
102.5
139.5
-27
Conductive Paste












Gigasolar Material
3691
33
34.51
11.97
9.94
NA
304
-9.9
94
586
805
-27
PV Module(Panel)












Ritek Corp.
2349
2,647
-0.51
-1.8
-0.34
0.01
1,179
-0.9
-15
8.2
9.47
-13
Tynsolar Corp.
3562
524
-2.77
-0.27
-2.01
-0.12
51
-73
-71
28.4
43.25
-34
a-Si Thin Film












Sintek Photronic
3049
881
-0.31
-0.09
0.06
-0.39
786
38
73
26
31.95
-19
Inverter












Delta Electronic
2308
2,401
6.69
1.30
1.41
1.24
2,690
-11
2.8
114
143.5
-21
Ablerex Electron.
3628
45
15.13
1.31
1.38
1.24
306
31
299
173
298
-42
iii-v Material












Epistar
2448
854
7.16
0.41
1.38
1.30
1,692
-0.3
2.84
95
116.5
-18
Visual Photonics
2455
177
2.37
0.85
0.56
0.68
193
-0.5
-4.7
78.3
84.8
-8
Precision Silicon
3016
90
0.84
0.21
0.13
0.07
94
2.4
7.7
32
38.3
-16
Bright LED
3031
196
1.65
0.22
-0.1
0.18
451
1.7
-10
29.45
39.5
-25
Higher Way
3268
30
0.21
-0.22
-0.55
-0.13
144
11.2
-23
18.95
29.7
-36
TSE Index









8,988
9,220
-3
Note 1: A solar panel (photovoltaic module or photovoltaic panel) is a packaged interconnected assembly of solar cells, also known as photovoltaic (PV) cells. The solar panel can be used as a component of a larger photovoltaic system to generate and supply electricity in commercial and residential applications. Base on definition of Wikipedia. 
Note 2: There are three different solar cell materials which are made from different forms of silicon: Mono or single crystalline silicon (c-Si); multi or poly c-Si, and amorphous (a-Si). c-Si makes up cost near 50% of a finished PV module. Solar cells made of silicon are cheaper than other materials.
Note 3: A gigawatt (GW) is equal to one bn watts or 1 GW = 1,000 megawatts (MW); one megawatt = 1 mn watts.
Note 4: Typical electricity conversion efficiencies of silicon based PV modules: a-Si, 3-6%; single c-Si, 10-13%; and poly c-Si, 12-15%.
Note 5: Solar cell using c-Si is well situated to remain as mainstay of the green energy at present due to higher conversion efficiency and longer lifespan. Thin film has advantages of low price and good faint-light capability, and holds a niche position in low power (<50W) and consumer electronics applications.
Table 2 - Gross margin (%) of main TSE solar stocks
Name
Giga- storage
Green Energy
Danen Tech.
Sino Ameri.
Wafer Works
E-Ton
Gintech Energy
Solartech Energy
Neo
Solar
Motech
Giga Solar
Delta Electrn.
Code
2406
3519
3686
5483
6182
3452
3514
3561
3576
6244
3691
2308
1Q11
2.40
20.44
22.55
21.18
6.44
-0.95
9.85
8.1
8.58
11.40
54.35
11.92
4Q10
-17.72
17.47
18.30
27.93
11.69
7.21
15.66
15.23
17.33
18.18
56.41
9.90
3Q10
-6.28
15.87
23.55
26.7
12.45
8.61
21.07
17.16
22.76
22.51
52.78
10.60
2Q10
-2.01
10.67
21.50
18.12
8.48
6.73
16.9
18.01
17.48
18.56
NA
11.82
1Q10
0.46
9.38
23.24
10.05
12.44
6.23
22.19
16.77
15.8
14.23
NA
13.97
4Q09
-1.54
7.39
NA
9.41
5.09
6.22
22.31
16.65
14.18
12.45
BA
17.62
Non-organic growth factor is closer to naught – Cut in FIT
Taiwan followed the noses of Germany, Spain and Italy which all nicked the feed-in tariffs (FIT) norm. A recession worry nagged for Taiwan solar square in Jan. this year, in reaction to government’s cooling-down for solar power FIT, nudged lower by 30% from NTD11.12/kwh to NTD7.33/kwh, given the fact that cost sank 20% in 2010 from 2009. PV installation cost over 500KW dropped a larger 27%. The new rule is not applicable to rooftop installation which is still entitled to current rate of NTD10.32.
Europe, thought as birthplace for the industry, has provided it a powerful push out of the nest in wake of scale-down of FIT. The net negative negates the effect brought by conceivable growth in China and developed countries including US and Japan, thereby conjuring up vision about an unneeded lull in global solar industry. Italy, 2nd biggest PV installation country in Europe only next to German, has revised its solar FIT which will roll into 2016 but will gradually fall into extinction in the ensuing years. Budget will be limited between €6–7 bn per annum to normalize market investment bias and deter noxious sentiment of speculation.
With estimated PV installation charging to 23GW in 2016, Italy in 2017 will power ahead, enjoying an economy of scale necessary to achieve grid parity. A key goal of the renewable energy is to reach the point at which electricity can be whipped up at cost equivalent to (or less) than by burning fossil fuels. Without it being cheaper in future to use renewable energy, government and industry will reject a nod to invest. It is highly-anticipated that the first renewable energy nominee to attain the grid parity will be solar power.
Analysts gang up on solar stocks
Solar stocks are now encapsulated like a landmine by analysts, who scrambled to mark a notch down for the sector’s rating to sell, not in the least of which is the drastically-minced target prices in their coverage, more profoundly in solar cell runners such as Motech and Gintech Energy. Taking note of a notch-up in inventory cast by full-utilization rate, guess of notable 30% decline for solar cell demand in Europe to 10GW next year, and unprecedented bottleneck of global solar industry, they have talked nineteen to the dozen, urging investors to protect nest eggs and not to nibble at solar stocks, ostensibly of all stripes.


Development of main TSE solar stocks
Crystalline silicon (c-Si) – Running into negative winds
Much is needed for Taiwan to spread the net into uppermost item, c-Si, to avoid a naked strategy in the industry. Taiwan Polysilicon (TPSI), an unlisted JV between LED Everlight Electronic (2393) and chemical Lee Chang Yung Chemical (LCY, 1704), is the only poly c-Si firm in services in Taiwan, and in 1Q11 kicked off operations at its 8k tons plant which will carry out more capacity to as high as 28k tons in future. Another Taiwanese c-Si vendor, Motech, deals with the fabrication via US affiliate, AE Polysilicon. A crop of poly c-Si novices to operate in Taiwan is in the pipeline. PowerTech Energy, a JV of Walsin Lihwa in Apr. has begun building of new fab to function in 2012, and LCD big cheese, AUO (2409), in early May acquired land for its subsidiary, ACC, to put up a c-Si fab serviceable in 2013. Though progress is in the workings, speed of Taiwan is still overshadowed by China, which has been up to its neck into digging out c-Si, with more than 60 firms jumping on bandwagon in 2008.
An adverse ripple effect was spilt over to them last week. Cited from EnergyTrend survey, poly c-Si price was hurt by a series of price-cut shock waves out of downstream chain, slipping to USD67/kg, sagging 7% WoW and signifying that the solar industry is near a washout point, as the pressure for price-cut gets underway in earnest for the pessimism to be reverberated all the way to northern end. The market had concluded that the c-Si faction had run out of time and was hanging on to an uptrend by its finger nails within few points of a reversal trigger. The price damper would worsen its fortune in 2H11, justifying a strenuous tipping point to make hay for c-Si maneuver, which respectively resulted into investment loss of NTD100 mn to Motech and NTD104 mn to LCY in 1Q11 when their c-Si lines steamed ahead even at a blistering pace.        
Crystalline silicon (c-Si) ingot/wafer – In for a pinched profit margin
Powered by additional capacity, sale in Apr. for poly c-Si wafer universe was gilded with shiny paints. But the brilliant illumination may be fraudulently conveyed in an atmosphere to be blurred by profit squeezed strain as demand will decelerate from users in solar cell sector.
Gigastorage, originally noted as a global top-10 media optical storage maker for CDR and DVD, looks as if picking the right time to up its c-Si wafer volume that is set to hit 300MW from 120MW by 2011, a main sale driver and standing at 57% of sale breakdown in Apr. The firm pleased investors with splendid knock-out reinventing itself by heading to c-Si wafer that commenced production in late 2010 and bore fruits in Apr. Its optical storage lineup constitutes 38%, and will carry no pull, over total sale in future. What is worth a notice is conspicuous reward reaping from its gainful cash cow of 62%-owned Giga Solar spun off in 2008. NTD240 mn worth of investment income garnered from Giga Solar helped erase loss in its optical storage division.
Assertion about a better shape in 2H11 takes root from an advantageous point where Gigastorage will land supply contract at a time that price of basic wafer element, c-Si, is geared to fall into a late-coming tailspin, converging with the commission of its new plant. Enjoying a snapback of gross margin in 1Q11 from 4Q10, the firm seems to strike the right note. A spurt in cash stockpile will serve it in good stead on back of NTD1.5 bn raised by right issues in 1Q11 and proposed NTD2 bn bank syndicated loans. A relatively slim storage of c-Si wafer will be extra blessing, possibly allowing it to have a healthier glow of sale growth than Giga Solar in 2H11. Gigastorage got off in a low-priced mode in making c-Si wafer, but is now equipped with better expertise transplanted from GT Solar (US).                   
Green Energy (a venture of Tatung) and Danen Tech (closely tied with Walsin Lihwa) radiated all-time high sparks in Apr. sale. In 1Q11, among the listed c-Si wafer stocks, the twins transcended its peers as gross margins were both nudged higher and north of 20%.
Green Energy, 31%-controlled by listed San Chih Semiconductor (also a Tatung solar wafer arm) raked in EPS of NTD2.67, lower than market views and mainly resulting from weakening CB valuation of NTD437 mn. Its profit stream will nestle in cozy, stable trend in future as it stands to redeem remaining 10% of CB floating. Capacity ramp from annual 300MW to 2GW to be completed in 2Q11 will widen its lead as Taiwan alpha in the c-Si wafer covey.
Contracting service, nearing 40% of total sale, has provided nutrition to its earnings atoms arranged in orderly arrays to withstand price cut stress. Established in 2005, the firm has outpaced previous championship, Sino American Silicon (SAS), in terms of sale for the year thus far, with the former logging sale of NTD6.5 bn, and the latter, NTD5.7 bn in 1Q11. The stock was earlier nominated by local fund managers to be soldered together in a bevy of 12 TSE newcomers into MSCI index retooled for stock weighting on May 17. But the final update of MSCI revealed all their predictions were not on the nose.
Green Energy recently was greenlighted by its board directors to fetch 5-year syndicated bank loans reined below USD84 mn. The borrowing move is nothing shy of surprise, on account of possible cash-strapped warts in its parent company, Tatung Corp. As surely as night follows day, Tatung melt down its paid-in capital from NTD55.5 to NTD23.3 effective Apr. 01 this year, to shun a nil for its TSE qualification with margin trading. The pruning helped its NAV per share crawl back over NTD10, one needed minimal threshold for that trading criteria, to NTD14.20 from NTD5.98. Meanwhile, Tatung’s chairman in Feb. this year created a nine day’s wonder, being suspected of embezzlement and other violations of TSE laws.
Tatung has been nettled by the nightmare caused by its ill-performed, 22%-owned LCD display panel major, Chunghwa Picture Tube (CPT, 2475). Since 2001, negative results panned out in 3 different fiscal years, sawing NAV per share of CPT to NTD7.15 (the stock ended at NTD3.84 on May 31). After noisy recap: down to NTD64.8 bn in 2010 from NTD109.7 bn in 2009 to nill a compulsory trading status downgrade on TSE, there is still no good news coming out of Nazareth for CPT which resembled the likes of AUO (2409) and Chimei-Innolux (3481) amid continuous, nauseating 1Q11 results.
Proposal of a combination of fund raising, right issues (200 mn shares) and CB floating (NTD8 bn), was on top agenda and approved at CPT May 30 investor meeting, at which it was dressed to the nines by emphasizing its efforts fixed at small-to-mid sized LCD panel applied in tablet, smartphone and touch panel. Rumors circulate that the reputed touch sensor rich guy, TPK (3673), will gain a seat on CPT board after Compal Electronic now piggybacking 6% stake in CPT. The strategic romance with TPK will absolutely help galvanize more surplus in CPT balance sheet.   
Danen Tech, the late entrant beginning trade on TSE in July 2010, bested Green Energy in 1Q11 in gross margin that leapt to 22.55%, up by 4.25 pct from 4Q10 and ranking No. 1 in the batch of c-Si wafer. The margin overtaking was mainly attributed to its distinguished stripe of in-house source of wafer slicing oil and dopant, rendering snug cost-saving effect and better growth/pull rate in wafer. Plus, Danen was reportedly sitting pretty by applying a solution allowing higher maximum light exposure of c-Si. It should be noted that most of its execs were rooted from LCD and semiconductor places. Hannstar (6116), a LCD panel firm, holds major stake of 4.86% in Danen Tech that is allied with Walsin Lihwa which also own 23% in DRAM vendor, Winbond (2344).
In a bid to catch up with Green Energy, Danen will strengthen capacity to 520MW in 2011, aided by its 3rd fab that will commence building in 3Q11. The capacity pile-up will be funded by a right issue already finalized in March this year to the tune of 36.80 mn new shares priced at NTD59 each.    
Sino American Silicon Products (SAS), fabricated 30 years ago, caught the market by surprise on April 14 news release to spin off its LED and semiconductor departments into 2 concerns wholly-owned by SAS which will retain its core c-Si wafer DNA. The decoupling, slicing its paid-in capital by NTD2.2 bn from NTD3.82 bn, will be exercised on Oct. 01 this year, then followed by a quick relisting on TSE emerging market system (EMS) board within one year. Costing it NTD8.4 bn to own the new subsidiaries, the restructuring was believed to be necessitated for SAS coasting to a neo-era when it converts itself into a holding firm with an operation gamut comprising 6 spheres.
The top-notch c-Si wafer maker registered NTD20 bn sale in 2010, the biggest in the column, raised skepticism about what was up in its sleeves for the seemingly needless divorce. If it can be said that it seeks debt write-downs and higher efficiency for its stock to head northward, it may also induce flux, definitely not niggling, about shareholders interest. In addition to its well-entrenched c-Si wafer (70% of total sale) and semi (<30%) activities, the firm holds an auspicious position in LED area underlay by its higher-profit sapphire wafer sale which rested over NTD100 mn last March and cooked up a portion neighboring 3% over total sales. Investors marked negative notations on its future operational chart to be dotted by puzzles about as-yet unknown nominations on board members of the 2 newly-established concerns.
The stock nosed into dirt on the date it unveiled the never-before attempt by its management that kept nagging about its long-neglected stock valued in the neighborhood around 10-12X PER, neither noble as compared with 20-30X enjoyed by semiconductor campus, nor with 30-60X by sapphire wafer crowd. While the split-off may be negligible compared with Yageo (2327) that longs for a delisting from TSE, share owners will be in a nervous state in future when SAS pulls trigger to trim stakes in the 2 subsidiaries below 60-70%. The nymph promising a rosy business land will likely scurry away, taking shine off the stock, as that non-operating income will be one-off gain.
In future, investors will be nickeled and dimed by its future launch of right issue or GDR with a tranche of 100 mn new issues. One of its goals is primed to deleverage balance sheet to become a risk-free firm in 2 years. Business hookups with HTC (global-caliber cell phone maker, 2498) and other listed tech monoliths will be favorable for it to seek buyers when cutting share in the 2 new concerns or undergoing public new equity sales. It may be under the noses of the public that those non-operation moves will be well treated by a special process led by the nose by those it believe have best interests for SAS. But the barrier for financially-solid SAS probably has nothing to with a shakeup of operation framework, neither debt clean-up.
To secure a particular niche for its future growth, it needs to become a hard-nosed realist by adding more notable tech specialists on director board. At present, it has many mouths to feed as retail investors hit 80.97% in its shareholder mix-up, followed by foreigners, 5.57%. Its recent development is nuisance and nonsense to small investors, which is very much so that its current ratio rocketed to 223% as of Dec. 2010, up from 121% a year ago; debt ratio slid to 39% from 53%. The latest year it suffered red ink was 1998 when losing a mere NTD0.20 per share. Bright sight of the stock is the fact that it is far from being a niggard, judged by its really neat dividend package - NTD5 cash dividend and 5% stock dividend, with the former probably most productive since 1990s.
Wafer Works, chaired by a Chiao family member in Walsin Lihwa group, in 1Q11 turned in EPS of NTD0.82, making it the only listed wafer maker eking out a back-to-back quarterly gain, albeit the reading was the lowest in the pit. The market has long regarded it with a solar wafer image partly characterized by active footprints in China. It has a 20%-plus stake in HK-based Chinese single c-Si firm, Solargiga Energy (HKEX 00757, TSE 9157TT), a dual-listing firm also rambling on TSE in the form of TDR presented in Dec. 2009. Solargiga is reported as a spearhead in the single c-Si wafer sector in China, with the most enormous output riggings set to produce 1.2GW by 2011. Upbeat news about its 2010 turnaround into black with gross margin at 22.3% fostered a powerful 26% upleg for Solargiga on HKEX last March, but received uninspiring welcome on TSE.
Though widely touted as a solar wafer principal by TSE gurus, Wafer Works is actually busy with works in growing silicon wafer sold to Taiwan semiconductor firms which chip in for a 60.8% sale of Wafer Works. The rest of its sale is 38% underpinned by trading of solar wafer sourced from Solargiga Energy. While that hugeness of China market might be still lucrative, a crowded-out effect is also in play there at the moment. Wafer Works, along with Motech which nails 25-30% of sale from China to forge its consolidated sale, will risk their necks once the potential neck of the woods turns uncertain.
Solar Cell – Time for a market share reshuffling is nigh
Among solar cell stocks, the most salient point doped in Apr. sale row is their MoM pct slump in the range between 20-50%, with gross margin likely pressed further the longer production lines sit idle. The tank of solar cell is apparently sandwiched in a stalemate caused by urgent call for a price cut from PV module part, and cool signal sent out from upstream c-Si area.
Despite nervousness was over for Mosel Vitelic’s installment of solar cell plant which was postponed in early 2009 due to breach of contract from builders, the plant, estimated to lift total output scope to 160MW this month, will fail to feather its own nest at present when a quick payback is nigh impossible. Mosel, with 56% of sale contributors from solar cell and 44% form IC foundry service, is facing double whammy – cancellation of its TSE status eligible for margin trade, and funk of loss rerun from 9%-owned DRAM associate, Promos Technologies (5387). A deteriorated nature of TSE trade status will usually make a big noise among retail investors who will shun a stock galled by removal of a financial leverage effect. Prices of the 2 stocks were seared severely lately amid steep downleg.
To such debt-ridden subsidiary, the idea for Elpida (Japan) to help embellish Promos balance sheet by acquisition is equivalent to that of looking for a needle in a bundle of hay, if Taiwan government and banks hesitate to extend credit lines to Promos which as of 1Q11 posted NAV per share at pathetic NTD1.82. Promos on May 23 announced an asset disposal by selling its struggling DRAM plant in Chongchin city, China to Beijing-based China Aviation Avionics Equipment for an estimated NTD454 mn, nearing a tiny 10% from its original investment. The cash injection might be of little use to turn the page on its current cash flow now perching at NTD1 bn, and far outsized by its debt load around NTD70 bn.
Mosel in 1Q11 earned NTD18 mn in operating income which was eroded by loss recognition of NTD314 mn arising from Promos. Gearing up for more outturn in Taiwan 12” wafer plant, Mosel seems to have looked down its nose at solar cell lines which are reportedly running at a tepid 60% usage pace to curb potential loss in 2Q11, whereas its IC foundry service will operate at a humming 90% rate, a nicety to partly help stave off likely loss in future. Cash call targeting at NTD1 bn by undergoing right issues, in need for shareholder nod in near future, will be a hard nut to crack for Mosel as doubts might still hang over Promos prospects.
E-Ton, incepted in 2001, was not negligent by analysts study reflecting a nonstop loss in recent years. Clumsy operations of its affiliate, Silicon Valley-based Adema Technologies (US) did a large number to E-ton which burned out NTD5 bn in past 2 years after the US c-Si maker flopped as it clung to out-dated 5” poly c-Si wafer type. In Jan. this year, Hon Hai (2317) was nosed out in the race to nail E-ton, defeated by NB contractor, Inventec (2356) which acquired nearly 50% stake in E-Ton via private placement with a price tag of NTD5.06 bn, higher than NTD4.04 bn initiated by Hon Hai. Stripping out the factor of price difference, it was also a natural step for E-Ton to grasp the nettle since Inventec team was mostly transferred from E-Ton now helmed by Inventec. Behaving like a sparrow than a snail, Inventec set a high bar of 1.8GW solar cell capacity before 2014. On the other hand, deciding to be armed with a hammer rather than a nail, Hon Hai invited a nemesis and was said to sue E-Ton, given its agreement with E-Ton reached earlier than Inventec. In hindsight, that is a scenario of “all for the want of a horseshoe nail" staged by E-Ton.
With NAV per share tumbling from NTD72 in 2006 to NTD26.67 in 1Q11, board of director revamp of E-Ton is poised to bode well for its corporate needle moving toward full, thanks to financial nourishment from Inventec. In their restless dreams, original hosts of E-Ton had chosen to walk along the lonely narrow streets of cobblestone. Coming as much of a surprise to market, Inventec on May 23 was reported to remake E-Ton inept management de novo by streamlining workforce by nearly one-thirds or around 600 headcounts. The shocker partly heralds a recession of the industry is in the makings and the worst light is yet to shine on solar industry. E-Ton in early 2006 blazed astonishingly to a zenith of NTD1,205 on TSE, but now its portrait is repainted amid a real tug of nostalgia heartstrings refreshed by never-failing number about TSE boom-and-bust saga. 
Solartech Energy, Gintech Energy and Neo Solar were installed in 2005 as a whole as rising stars in the arena. Sale of Solartech Energy was laminated in Apr. after a 13-month-long record-setting groove. Closely-correlated with FPG, Solartech nailed down funding and execs mainly from pan-FPG (including HTC, 2498) network. With SAS as its major shareholder (12%), it is as tough as nails not to create its own c-Si wafer plant. Within next 5 years, its operation focus will be nailed on the island to defy a defining trend for fighting tooth-and-nail in China market, a strategy making it distinct among Taiwan techies which continued their breakneck investment clip there.
Also needled by reports about 2-day unpaid leaves in a week for its workers, Gintech Energy, global 9th largest solar cell player furnished with 827MW in 2010, was said to roll out declined nominal cell power. Foreign analysts appeared to hit the nail on the head for describing the stock as most negligible in the counter, with target price hacked to NTD55, still miles away from current terrain of NTD68.60 on May 31. Gintech reportedly faces dire necessity to stick its neck out for quicker and firmer vertical integration as anchored by Motech. Yet, those bearish rationales may sound counterintuitive, in that it had plowed NTD220 mn in Oct. 2010 into Utech Solar for 10% interest in the newly-set cell wafer JV with Taiwan Fertilizer (1722). Outlook of the JV was brightened further by collaboration with Mitsubishi which on Apr. 27 took on a 10% stake for the JV designed to start bulky production in July this year. Output at the warm-up phase will land in a level of 300MW and reach a rated maximum configured with 1GW.     
Neo Solar, seemingly on the neck or nothing principle, is boldly confident about profit profile along with its upwardly stride toward Taiwan No. 1 solar cell chief. If retracing the loss reserved for ECB valuation, its EPS in 1Q11 would otherwise come to NTD1.30 from NTD0.98, translating into a ROE of 11% and topping its contenders as narrated by the firm. To dethrone others, namely, Motech (aiming for annual capacity of 1.5GW in mid-2011) and Gintech Energy (1.5GW in Aug. 2011), the late arrival debuted on TSE in Jan. 2009 will turbocharge output to 1.8GW by the year-end, up 120% from 2010 as it plans.
Meanwhile, it will fork over NTD2.75 bn to expand into c-Si wafer section to supply 30% for its own need. Expenditure will be partly defrayed by issuance of GDR with the lot up to USD250 – USD300 mn. The funding exercise will very likely mean enhanced chances for Hon Hai, eager to look for another sunrise staring steadily across the solar cell landscape, to take up some offering from Neo Solar which, in a sense, is widely-dispersed in terms of shareholder assembly. Hon Hai, the native-born tech goliath nursed by cottage industry of connector in its original outings, appeared as sharp as a needle in M&A hunting in recent years.
Investors were on pins and needles with Apr. sale results from Motech, the most highly integrated solar cell captain in Taiwan. By sale variable, Motech last year pulled in NTD29.5 bn, the largest among solar cell group and followed by Gintech Energy (NTD28.1 bn). In lockstep with its brethrens, it tapped the brake in speeding up sale growth in Apr., churning out a lowest monthly tally since Sept. 2009. That unsettled investor nerve due to its leadership role. It honed competitiveness by tapping synergy with 53%-owned AE Polysilicon (US) to nab cell wafer material, c-Si, from a plant coming on line last year with annual capacity of 1,800 tons. It moved the needle in solar IC design field via semiconductor node from TSMC which stashed 20% stake of Motech in Dec. 2009 at a cost of NTD6.2 bn. Motech had recruited TSMC exec as its current CEO in March last year.
Motech differentiated itself from Taiwan rivals recently, backed by First Solar (US) certification for its thin film PV inverter, PVMate serials. The appraisal approval allowed the product’s mode to be compatible with First Solar’s FS-coded PV modules which employ US and Europe specs. Nonetheless, Motech was derated by one foreign house for its target price down to NTD77 (May 31 close, NTD102.50), a low unfortunately below the TSMC acquisition settlement price of NTD82.70 with Motech. Motech, number 7 worldwide in 2010 cell capacity rated with 945MW, was also an onetime TSE skyrocket in Apr. 2006 when it ascended to a peak of NTD985. Over the long haul, its footholds in China and TSMC support should give it a boost in sale and further diversification.
Conductive paste – Still has its days in the Sun
The only listed operator in silver and aluminum conductive paste used in semiconductor, Giga Solar, in Apr. diffused less upbeat luster with sale collection lower MoM. Giga Solar is classified in global top-5 ranking and under the Gigastorage flag which redid itself into c-Si wafer alongside with other optical storage firms such as Ritek (2349) and CMC (2323). Giga Solar nets newfound confidence in absorbing orders from China market, and is girding for positively scorching sale growth by 20% in 2Q11. The high-priced micro-cap also opined to create pleasant uniformity of gross margin over 50% for 2011. The TSE novice, debuted last Nov., nullified a worst case of 2011, but that nugget of optimistic earnings was somewhat offset by anxiety on the whole solar throng. Unanimous selling nudged its stock to a post-IPO low of NTD565 on May 24 as compared with a peak of NTD905 set on Dec. 05 last year during its honeymoon rally.
PV inverter – Unnecessary downgrade for Delta Electronic
In one of their recently aggressive notions to downgrade solar stocks, foreign analysts nixed a neat and tidy profit picture for venerated Delta Electronic which received a nay for its entrance into PV inverter field where the global LED and UPS superior was viewed less nimble versus its multi-junctions with other tech operations. Sale tied with its PV inverter started with a 5% portion of total sale in 2008 to 9% in 1Q11, but operating income nevertheless contributed a narrowing from 6% to 1%. Its PV inverter associate, Delsoalr (traded on TSE EMS board), is also described being stalled in a bumpy path doomed to nip Delta profit. Notwithstanding the Delta assurance about a slight nuance caused by its PV inverter against overall profit, Delta, presently TSE highest foreigner holding of 76.5%, was also named in an underperform list with target price slashed "noticeably” to NTD106 from NTD110.
It is pretty much a nonevent for plucky analysts to join the fray, echoing a non-binding market norm to chop price in any share with solar nature, even not so essential as in the case of Delta which sees its bread-and-butter work thriving not merely by the inverter. Truly to say, its gross margin in 1Q11 bucked a downtrend seen in solar cell group, rising by 2.02 pct to 11.92%. In future, the blue-chip should continue its steady-as-she-goes fashion on TSE. Upshot for the reckless downgrade will only produce needless white noise in analysts NB, or iPad, screens, making much ado about nothing. Delta reportedly will be back on normal track in June in aftermath of Japan quake that exerted a nerveless 5% sale ruin to Delta. From analysts standpoints, a change may leave portfolio no longer nakedly exposed to the risk of solar picks, or more attractive if termed by valuation.


TSE big-noises bet big on solar industry
From every nook and corner in Taiwan tech fields, Taiwan is sort of basking in the sun, and is going to up the antes at the industry. One needful backbone is a nicety of LCD panel and semiconductor skill that the island has long rejoiced at and can be applied into production of solar related items. As in every tech category in which it competes worldwide, ninety-nine percent of its success comes from innovation, global presence and alliance, neatly-controlled quality of SOP, and of course, perspiration.
Industrials - Walsin Lihwa flashes more rejuvenation attempts
To recast the natural bounty into their nifty earning stream, some listed mammoths have set sights on the solar cell spectrum by offshore JV and internal divisions. Traditional industrial big noises including Taiwan Cement (1101), FPG group, Walsin Lihwa (1605) and Tatung (2371) had grabbed headlines in their moves. Taiwan Cement last Oct. was reported to frame a 100MW solar cell plant in southern Taiwan but not yet put it into actions. FPG group muscled its way onto the industry partly by a listed c-Si wafer firm Formosa Sumco Technology (3532) which however sells its products to FPG listed DRAM makers. HTC, a pan-FPG unit, was also involved in fund-raising program of Solartech last year. Approach by FPG members in solar industry has been renowned by yielding solar cell-related chemicals in internal divisions. Tatung has undertaken its never-ending efforts by cross holding in Green Energy (31%-held by San Chih) and San Chih (44% by Tatung)
Walsin Lihwa, diversifying from its original lifeline of electrical wire and cable, has been quite bustling, in a nutshell, aiming to be a solar holding firm with eyes nailed on c-Si and solar cell wafer, both abroad and domestically. It has seen a naked truth that face-off in the PV module camp is too cutthroat. Not only running  listed Wafer Works, the firm also buddies up with Danen Tech in the circle of cell wafer. In its new branch-out in Taiwan, its newly-formed JV with SAS and UMC (2303), PowerTech Energy, broke ground in central Taiwan in Apr. this year, cobbling up a NTD20 bn poly c-Si factory amid ambition to rank itself in the global top-10 list. Set to come on line in 2012 to become the 2nd c-Si maker on the island, the fab, capitalized at USD122 mn, will provide 6K tons in first stage and 18K tons by 2015 adopting Siemens know-how.
Its alliance with Germany counterparts is nothing short of progress. Last Nov. it invested €40 mn to take 49% stake in Solarion (Germany) to construct a plant running CiGs system, welding light-weight thin film solar cell marked with annual output of 20MW. Spreading out bets in a wide array of countries, it forayed into China c-Si market by investment in Tianhong Silicon Materials located in Shanxi province. The old-school industrial rooster has directly poured NTD3 bn for its global solar footprints that added by US market.   
Electronic – AUO is a great ball of fire in solar field
In the part of TSE techies, grand dream of breaking into the solar league have gotten thicker, but with diverse outcomes in recent years. Not surprisingly, they have tried to showcase similar ability to administer significant output in the newborn battlefield after their primary markets increasingly reached maturity. LCD/LED, EMS/ODM and semiconductor counters, pillars of Taiwan’s dramatic rise into an economic powerhouse years ago, were most willy-nilly frenetic and full of glitz for the race since 2008.
The display panel sibling mostly roamed in the lower-cost, well-developed thin-film realm using a-Si, with Chimei-Innolux (3481) out of the gate in most impressive way by squandering NTD2 bn for wafer outturn which is now almost near to an end. A galaxy of them got it in the neck when they competed head-on, such as Kenmos Technology (8109) last Oct. declaring a pull-out and reinstated its nerve center in LED backlit module. Sintek Photronic (3049) has boosted its output in display panel touch sensor to 90% of total sale, making less in the a-Si PV module. Their flame-out reflects Taiwan solar energy industry is dominated by c-Si platoon, as is also the case in other countries.
Unlike Chimei, the also-loss-suffering LCD panel giant, AUO (2409), has shown no sign of slowdown since 2008 to stay ahead of other TSE tech big-caps. Through its subsidiary, AUO Crystal Corp. (ACC), it has widened exploration into the burgeoning industry. ACC in Oct. 2010 teamed up with Sunpower (US) to equally own a solar cell JV, capitalized at USD700 mn, in Malacca, Malaysia. Outlined with an annual capacity of 1.4GW, the JV will become operational in 20113.
As for its campaign in Taiwan, ACC in Feb. this year started building for a NTD25 bn poly c-Si wafer plant ready for a ribbon cutting in 4Q11. It spent another NTD7.8 bn on Apr. 11 to assemble a single c-Si wafer plant, marking the first Taiwan player involved in the most efficient electricity conversion cell, and bound for volume production in early 2012 with initial output sized at 250MW. Both of the new lifeblood was nourished by tech support from its Japan affiliate, M. Setek.
In search for hedge against lack of silicon as coming about after Japan quake, ACC in early May purchased 19 hectare land in the same science park where Walsin Lihwa set its new c-Si fab. The land parcel is also plotted as Walsin Lihwa's move to fabricate a poly c-Si plant in 2 phases to be wrapped up in 2013. Total capEx comes into a larger amount of NTD40 bn as compared with Walsin Lihwa. While AUO’s spring could make the industry whirring into rapid action, doubts might loom on the horizon for AUO construction affordability after its earning from LCD core operation run into circuit break these 2 years. The northbound shift could be in a better route overnight, if a financial makeover driven by Chinese firms, nowadays nodded to snap up Taiwan LCD stakes, is in play to beef up AUO cash flow.
Besides rave reviews about strife between Hon Hai and Inventec to grab E-Ton, the media frenzy over solar cell practices among Taiwan IC foundry icons, UMC (2303) and TSMC (2330) looks never tame, both long regarded as nosy neighbors to each other at closely-nearby operational orbits. TSMC is a late entrant as compared with AUO, and navigates the market by ownership increase (for 20%-owned Motech) and strategic alliance with Khosia (US) to form a CiGs JV, Stion, at which TSMC invested USD50 mn. UMC enlarges its solar portfolios by subsidiaries making inroads into c-Si and a-Si solar cell areas by using tandem layer devices. The 2 global IC foundry czars, different from AUO in strategy, can in return amp up their semiconductor services by expanding into PV module region where requires a semiconducting methodBut P&L contribution from their PV modules should award them no surprising runup in bottom lines in near term.     


Industry outlook – Nasty bumps in 2H11
Global supply exceeds demand in 2011
According to Solarbuzz, global solar cell output reached 20.5GW in 2010, up a hefty amount from 9.86GW in 2009, while thin film output grasped 13.5% of the total to 2.76GW, up 62.8% YoY.. On the demand side, global PV installation jumped markedly from 2.82GW in 2007 to 18.2GW in 2010. The 3 leading countries (Germany, Japan and US) ate up nearly 89% of the pie of solar cell.
It is estimated that novel capEx schemes for thin film cell, a nova aided by relentless R&D of big-names like First Solar, will be numbered at 65 in the period from 1Q11 to 1Q12 to nurse a 70% gain, propelling total capacity to 4.8GW. Meanwhile, speedy global capacity accretion, as partly shown by Taiwan runners, will amplify solar cell capacity to 55GW in 2011, tripling the estimated pent-up demand. A glut of supply is widely reckoned unavoidable, associated with a forced shut-down such as that incurred by REC (Norway) last year.
Going forward, the market is biting nails over potential demand, as noted by naysayers from left and right. There are some key issues in the offing: 1) additional capacity from heavyweight techies, 2) proceeding inventory adjustment in Europe, 3) gradual nullification of FIT policy, 4) degree of rekindled buying interest in typically peak season (3Q-4Q), 5) nuke energy policy by developed nations, and 6) linger paucity of raw ingredients (c-Si) after Japan quake.
Over the long haul, the aforementioned negativities should be partly neutralized by positive factors including simmering demand from Japan and Europe, firmer decision by US renewable energy attitude, and China’s neatly-designed rein in carbon emission in its 12th 5-year economic plans which lay out increased solar power generation capacity to hit 10GW in 2015. To the sanguine, there is an immediate prospect of arrival of light-at-the-end-of-the-tunnel scenario in 2H11, due to possible inventory replenishment. And to some extent, a bane caused by margin undercut is a boon for the industry that may usher in sooner-than-expected grid parity.
Asia pushes northward in global solar market share
Invincibility for China and Taiwan producers in global solar cell turf might be durable in future, after scoring 59% (Taiwan, 23%) of global share in 2010, up from 49% in 2009. Expected to achieve 29% in 2011, Taiwan is the 2nd largest in the world pertaining to the output. Nurtured by self-sustaining nature, China has beat Taiwan in the field where Taiwan entered in an earlier start led by SAS, Motech and E-Ton. For the cage fight with China in the whole renewable energy arena, Taiwan can hardly get the edge. Nine times out of ten, Taiwan will choose reasons that China enjoys a massive mother lode of raw material, offers cheaper labor cost, lacks stringent regulations and has less geographic restrictions for wind energy development.
In Taiwan, arranged extra leave in solar firms will be a follow-up from sequentially lowering utilization rate. Most makers kept the rate near or over 100% in 1Q11, but have struggled to manage a barely-surviving 60% rate for the time being. In years to come, a regrouping for participants appears around the corners with gross margin bracing for a vicious precipitation, albeit not necessarily in a nippy tempo to nosedive into the proximity below 5% as seen in NB pool.
Solar industry can not be noted as bubble
Nothing can proceed in a straight line, a well perceived wisdom in any industry. The same holds true for the solar sector. In actuality, government energy policy and its accompanying FIT were pivotal than anything else for last year’s boom. Optimists may now bite their nails reviewing gutsy vision of a clean Utopia, trying to avoid a nasty period between 2H08 and 1H09 when the industry was under fire in a lean time reminiscent of 2001 dot-com bubble. Even worse, doomsayers interpret the industry now as the Hindenburg ready to burst.
The industry is absolutely not like fingernails on a chalkboard, neither can it be viewed as a similar case of shooting Niagara in a barrel, nor as fireworks only to fizzle with fading luster. History every now and then suggests that an industrial bubble, if needed to be named so, will be inevitably replaced by a bang due to the already-made outfit and basic plumbing cranked out in the preceding failure. In 1800s, US tracked UK to wrestle with railway bubble inflated by a track laying frenzy which afterwards laid the groundwork for a succeeding boom in railway network. And the frothy dot-com one also duplicated that comeback in industrial cyclical router. If without the dot-com euphoria, there will be no ensuing glory day in online sale, cloud-computing, and internet social network combining people altogether
The Sun will surely rise again on the sector after the nail-biting downward vortex is over. The solar industry is practically still in its nascent phase and a safe bet for the island which is devoid of new mass of tech formations. Champs in LCD, getting nailed by poor results these 2 years, and IC foundry, nervous about its global presence, seem to have stood at China doorsteps asking for a handout in a more pitiful way. Time for the solar energy to creep closer to grid parity level will be eventually in sights after future repeated tug-of-war between supply and demand dynamics. Finally, the newly-fledging solar industry is a field of dreams because, at the very least, it creates jobs availability on the island, and hopefully fills the void left by those LCD and IC foundry naggers.


Taiwan renewable energy policy – Looking for nuke-free homeland
Taiwan government, led by KMT party, recently said while construction of No. 4 nuke power plant will press on, but No. 1, 2, and 3 plants will be phased out on schedule as its nuke-energy policy has been revised in the wake of Japan Fukushima nuke power plant crisis. The No. 4 plant will not begin commercial operations unless safety is vouched, and there will be no new nuke plant after No. 4 is built up. The ruling KMT party candidate for President reelection in March 2012 and the incumbent President, Mr. Ma Ying-jeou, assured that Taiwan has never considered constructing No. 5, and will bolster development of renewable energy industry. Probably afraid of becoming a frightened lame duck, he is a Johnny-come-lately as compared with the opposition party (DPP) President candidate, Miss. Tsai Ing-wen, who in late March spelled out a platform aimed at a nuke-free island by 2025 if she elected as President.
Tsai stressed that Taiwan must learn from Germany reaction to the nuke disaster in Japan quake, as Germany, immune from earthquake danger and hypersensitive to peril of the kind even at the calmest of times, has decided to wipe out nuke mills duration by 2022 as reported lately. Green movement in Germany has gained improved political weight, but not in Taiwan. Tsai also stated that all 6 of Taiwan reactors are built near major fault lines. Taiwan has 3 working nuke power plants - 2 in northern coast near Taipei city coming on stream in 1979 and 1981, and one in southern Taiwan near Kenting. It is building No. 4 in Kungliao, northeastern Taiwan, also near Taipei. Plus, WSJ points out that the world has 14 nuke power plants on earthquake-prone regions, all found in Japan and Taiwan
The latest KMT reversal may likely come after its intention to tweak a currently worsening political edge for that election. Before the vow of Tsai, KMT pledged a nuke-safe country not necessary for a termination of nuke energy, due to its claims of insufficient natural resources and clean policy cramping down carbon emission. Not only concerned about domestic nuke safety, the KMT widened the topic scope by putting safeguard in place regarding cross-Taiwan Straits nuke power plants. To counter the KMT firm and serene attitude, a protest in late April took place and the DPP also proposed a public referendum to abort construction of the No. 4.
Chief of Evergreen group, with 2 global big-names listed on TSE (Evergreen Marine 2603. and Eva Airs, 2618), months ago expressed favors of dismantling of all Taiwan nuke power plants and advancement of hydraulic and wind power. But his suggestion was sharply rebuffed by officials trading rhetorical blows that existing nuke plants brought in 40 bn kwh in 2010. To meet the same output, over 10,000 wind-power generating units costing over NTD1 trillion must be necessitated. Renewable energies can only be placed as a supplementary source. In addition, nuke power costs only NTD0.66 kwh, compared with costly NTD4.89 for fuel oil-fired power. Higher cost will be billed if without cheap nuke power, as remarked by Taiwan electricity power monopoly, Taipower, which previously raised questions about substitute power, stable power supply and needed space by wind power generators.
If considering additional cost fueled by treatment of spent fuels waste, nuke energy should not be so dirt cheap, not to mention intangible cost over needed safety radius around the plants. The energy provides 20% over total electricity consumption over the island which however is equipped with a 28% spare electricity reserve. Meanwhile, demand will very likely dwindle further amid the backdrop that more Taiwan factories have relocated to China. There has been no electricity rationing in the past 10 years, and that is the truth, the whole truth, and nothing but the real truth. Unfortunately, it may serve as hidden truth that if without nuke power plant, there will be no supply of jet fighter nobility of F16 and Mirage 2000 to protect the island, over which they can emit nice and stellar nebulosity in the sky, showing a gorgeous fly that every nerve and instinct is clamoring for under normal circumstances. Nature – not that it does not want to react – is always a virtual and persistent neglect when countries pursue a goal of competitiveness perfection backed by the so-called safe, clean, cheap and green nuke energy 
The nuke-free policy is still pretty up to intensified debate in the lead-up to next presidential election. But it is easier for a camel to go through the eye of a needle, than for them to have peaceful negotiation after election, agreeing upon a U-turn of nuke power policy on the island with plants reevaluated as built on solid rock formations. It is all about politics and those business chances ignited from the controversial NTD310 bn worth of No. 4 plant setup once suspended for a while in 2000 as DPP ruled Taiwan for the first time.
In that context of nuke-free theatrics, it seems there is no role of antagonist or protagonist at present. They just covet neighbor’s support votes or solicit swing voters in next Presidential election. In future, things will be certain that each party will go on the soapbox to lecture the public on the evils of nuke power energy. To local solar energy-related makers, the Sun will not shed any abundant light by the effect of nuke-free thinking, because the 2 critical political parties will resume squabble about nuke-free determination after election, and because they have been nuts about political gridlocks instead of solar cell electricity grid parity in past 10 years. That political slogan has nothing to do with now-or-never ambition, yet is simply another drama of political farce.


Taiwan stock market – Bulls are still fit to fight at present
Investors may be weary in response to nervous zig-zags in May, as the market for majority of the month waffled below 9,000. Bulls on the surface held up well despite 0.1 and 0.2 pct cuts by MSCI in its EMF and Asia ex-Japan indices on May 17. It is estimated that a timid current of NTD4 – 5 bn, about 20% of TSE daily volume, will be pumped out of the island by foreigners thereafter. Taiwan weighting in EMF index nevertheless remained intact as No. 3 next to S. Korea and China. The double lowering, leaving market with unintended surprise, contrasted significantly with earlier positive belief spurred partly by evidence about better health of listed firms which totally will dole out cheerful cash dividend of NTD893 bn this year, only second to historic high of NTD950 bn in 2008.
MSCI appeared to have good reasons to press button for such nixing. Some tech forerunners in 1Q11 such as LCD (AUO and Chimei-Innolux) posted heavy losses. Big-brands in IC chip (MediaTek, 2454) coupled with NB (Acer Inc., 2353 and Compal Electronic, 2324) irked investors by languished sale growth. The drip of nervousness over their outlooks has turned into a flood. One major parameter was discharged from a troublesome pop in local currency, NTD, which vaulted 11% against greenback, versus a slower 4.5% pace of China RMB, since last Sept. To make matters worse, NTD appreciated 23.4% over S. Korea Won (KRW) since late 2007. The continued upleg of NTD, ending at the disturbing 28.77 against USD on May 31, will pose a big threat to local exporters against major rivals, China and S. Korea.
No wonder is a public outcry from the sullen tech behemoth, TSMC (2330), about the impact of stronger NTD slackening its 1Q11 growth, amid a backdrop that its capEx reached NTD150 bn for 2011. LCD makers were hit hardest by NTD in an exporting battle with Samsung, which lost ground before 2008, but is now gaining more global clout by weakening KRW. Adding woe to LCD sector is overly amounted pressure from China contestants in the already-saturated industry, and this beastly bummer partly reflected ill showings of LCD stock prices which mostly were more-than-halved since Jan. 2010, a case worse than solar stocks. LCD plight appears like a flashback to 2000 when hectic semiconductor expansion in China cast shadow over TSMC which at last proved its higher operating mettle to augment leadership.        
The fact that Taiwan tech industry has been in closer synch with Intel and Microsoft rather than the new rich, - Apple, Google and Facebook, failed to broadly assist local OEM/ODM and own-brand NB operators to capitalize on the blooming tablet and smartphone fields. The failing disposition coincided with lagging R&D in tablet-related OS and creaky profit engine deeply reliant on contracting services. Yet, acting as a contractor for Apple hot-selling tablet is an ace in the hole for Taiwan NB maker, Quanta (2382), which glittered at 13-month high of NTD65.1 in May. For those laggards to ride on the new tech theme, they have little reason to get complacency, especially ahead of the upcoming shareholder conference season that will relay some clues for TSE roadmap. Hon Hai (2317) and TSMC (2330) will respectively unfold the meetings on June 08 and 09.     
A musical chairs game by sector will be still in play
Technically speaking, the simultaneous southbound break (May 19) of the 3-weeks-long neckline of 8,850 and an uptrend line since a mid-March low of 8,070 had completed an overhang over 8,850 to cap a lid of risk-chasing appetite, partly justified by TSE outstanding margin loans still stuck in bearish rut. The retail investor sentiment indicator dived to this year low of NTD292 bn in May from the 2011 peak of NTD323 bn. But bulls have shown much interest to pick up stocks at price lows, shown by lower-shadows of daily candlesticks erasing losses below 8,700 last week. The sturdy gain by 167 points on May 31, likely catapulted by month-end window dressing effect, pushed the index to 8,988 to close out May trading, down by nominal 19 points MoM.
The market will stage rotational technical rebounds out of oversold clones such as NB, LCD, solar stocks and constructions, countering profit-taking-driven pull-back from industrial bellwethers, most of which have mustered sizable sheen this year. Resistance over 9,000 is still solid, with gleam to be taken off over the stock distribution ground. A prolonged roundtrip around 9,000 accompanied with erratic price tendency and declined volume will surely unnerve bulls in the long run, but odds for a sudden crash below 8,700 are ruled out this month as listed firms unleash a flurry of cash dividend payout and undergo investor meetings. How listed leviathans address the problems including sizzling NTD and still-buoyant material cost at investor meetings will offer more sobering glimpse into 2H11 outlook. Monetary policy by US after a probable end of QE2 in late June is another watchful harbinger.
As the summer is arriving, it is time to put on your sunglass walking in the Sun.
Good luck and good trades !
Link to walking in the Sun - http://www.youtube.com/watch?v=hDDvMfP3g30&NR=1  

PS. The picture attached is the one that I painted 2 years ago. The blue sky is easy to deal with. Color of the strand overlapping with that of the sea is not, and time consuming, but I like that part. Hope you like it too.

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