The slump in Applied Materials’ SunFab solar line continued Wednesday with sales and orders tumbling in the second quarter and the red ink increasing.
With the business now at perilous levels, Applied Chief Mike Splinter said sharp cuts were on the way, even after an $83 million second-quarter write down of SunFab equipment the company doesn’t think it can sell.
“We are taking decisive steps to redesign the business with a lower outlook,” Splinter told analysts on a conference call.
Applied to scale back operations at SunFab as sales and orders slump.
The move will push Applied’s entire solar energy business into the red for the year and delay its first profitable quarter until 2011. Applied had hoped for profits by late 2010.
The move is a blow for the beleaguered operations. Applied has maintained that SunFab has a lucrative future making large solar panels for utility-scale solar farms. (Costs make it less competitive in the residential and commercial rooftop markets.)
It claims panels can reach 10 percent efficiency this year – an important step in competing with crystalline cells.
However, the challenges continue to mount. In April, key SunFab customer SunFilm filed for bankruptcy in Germany. Meanwhile, the fabs continue to be expensive to build and need to operate at full capacity with high yields to justify the spending.
Splinter tried to put a brave face on the set back. He said the company is in business discussions with large utilities in India and China, where large-scale facilities might make sense.
Applied has accumulated a significant amount of data about production yields and plant efficiencies and knows the formula for success, he said. The key is gigantic fabs, where upfront costs can be spread over a large output.
But success seems more distant. The company admitted the backlog of orders for SunFab equipment fell to $400 – roughly two thirds of what it was a couple quarters ago. On top of that, sales for the entire energy and environmental business fell 54 percent in the recent quarter to $166 million, primarily because of a thin-film shortfall. The operating loss for the division was $145 million, including the inventory write down.
“Applied sounded more like it is going to wind down or reduce this business,” said Neeham & Co. senior analyst Edwin Mok, who listened to the conference call. “They are scaling back.”
In contrast, sales of equipment used to make crystalline silicon solar cells boomed in the quarter. Orders reached record heights with manufacturers racing to add capacity, says Chief Financial Officer George Davis. “We’re seeing very strong demand, mostly from China,”
Unfortunately it is not for thin film.
