25 January 2007


Interview with Lu Yonghua; CEO Jiangsu Linyang Solarfun Energy

Could you please introduce yourself and tell us some more about your personal background?
My name is Lu Yonghua and I was born and raised in Qidong city, which is in Jiangsu province, China. I have over 20 years experience in various management roles in several technology companies in China. From 1988 to 1996, I was the general manager of Qidong Changtong Computer Group Company. In 1997, I founded Linyang Electronics, which has successfully grown into one of the largest electricity meter manufactures in China. In the summer of 2004, I ventured out and founded Jiangsu Linyang Solarfun Energy. My vision was to build a company that would help expand the use of clean energy for a sustainable future.

Please introduce your company, tell us briefly about its history, main activities and key products.
Solarfun was founded in August 2004 in Qiong, Jiangsu province in China. We manufacture and sell a variety of PV cells and modules and, for certain customers, we also provide system integration services where we customize our PV products and link them with end-use devices that require solar power. Over a relatively short period, we have established a strong market position and listed our stock on the NASDAQ market in December 2006. We manufacture products of the highest quality and have obtained TUV Safety II and IEC 61215 international certification. Additionally, we have built solid business relationships with many key distributors and installation companies around the world. In May 2006, we ordered equipment for a new 15MW automatic BIPV production line that we expect to become operational by early 2007. Most recently, we sold approximately 140MW of photovoltaic modules to UB Garanty Project in Spain, with delivery over the next three years.

What are the ambitions of your company for the coming 3 years in terms of markets and volumes?
We will focus on building a worldwide distribution channel for the Solarfun brand, especially in key markets such as Europe, the US and the Asia-Pacific region. At the same time, we will continue to drive our R&D, aiming to maintain a consistent level of high performance while keeping our costs competitively low. In short, our primary goal is to create a strong Solarfun brand and high quality products. In terms of production volume, we expect to achieve an aggregate annual manufacturing capacity of 360MW for cells and 300MW and modules by the end of 2008.

What is your opinion about the current PV market situation in your country?
China’s new Renewable Energy Law came into effect in the early part of 2006, so we expect clean energy products, including PV products, to be promoted for use at an accelerated pace. Therefore, I am very optimistic about the domestic demand for PV products. In China, I believe the off-grid sector and rural electrification may become the first movers to benefit from this trend. Of course, in common with other markets around the world, sheer demand will, to a large extent, be effectively driven by the government’s incentive policies. This includes PV tariffs that will be determined by the Chinese government on a cost-plus basis.

If you were looking for international cooperation, which kinds of business partners would you be specially interested in?
Currently, we are partners with ISC Konstanz in Germany and a number of prestigious Chinese universities and research institutions. As part of our continuous pursuit of optimized production performance and manufacturing processes, we are looking for any kind of collaboration which would help us enhance our R&D capabilities, improve conversion efficiency or build next-generation technology reserves. Additionally, we are especially interested in cooperating with leading silicon manufactures to secure future supplies.

Which issues or developments are you specially interested in?
We are particularly interested in the development of PV energy applications in the downstream market. In my 10+ year time in Linyang Electronics, one of the largest manufactures of electricity measuring instruments in China, I developed an extensive network of contacts in the power industry in China. I think this will help us quickly penetrate China’s downstream market as we show our ability to provide customers with a full-range of PV system products. In 2006, we successfully won a contract from Shanghai Chongming for a 1MW project, which was the first and biggest on-grid PV power station in Shanghai.

What will help your company grow even faster?
I think there are two crucial factors that could underpin our future growth: First, technological development in product efficiency and quality, and second, a talented and experienced staff with high motivation. So far, I am very happy to say that these two factors have given us a tremendous advantage in enhancing our execution strengths, which, in the long run, will help us stand out from increasingly stiff competition.

What market development has surprised you the most in recent years?
I have been most surprised by the interesting combination of the fast development in on-grid demand that has been triggered by the government’s favourable policies on the one hand; and on the other hand, the accelerating price decline of PV products.

What do you see as the major challenges in the PV market?
Personally, I still believe that the major challenge lies in the bottleneck of silicon supply, at least in the near future. That is why Solarfun continues to focus on entering into long-term silicon supply contracts with major suppliers.

What do you consider as the biggest failures or mistakes made in the solar industry?

What are your expectations for the global PV market in the next 5 years?
We are anticipating much more fierce competition on price. As a result, we are putting more emphasis on lean, flexible production and high-yield products with consistent performance levels. Also, I expect to see increasing industry consolidation with low average price margins in the coming 3 to 5 years.

What do you consider to be winning companies and technologies for the future?
In my opinion, those that have a strong brand, disciplined execution, and workable innovation will finally win in the end through their quick adaptation to the market and wise focus on their core competencies.

Thank you for the interview.

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