Solar firm weathers storm with sound principles

Workers install photovoltaic products in Lianyungang, Jiangsu province. After two years of a chilly market caused by overcapacity and trade disputes with the EU and US, global demand in the industry is rising once more. Geng Yuhe / for China Daily

There is a kind of company that will never be the rock star of an industry. Unlike the luminaries that rise and fall precipitously, these quiet fortunes start from humble beginnings and progress slowly and steadily. Rarely do they make headlines, but they are able to dodge risks and survive the worst crises.

Changzhou-based Trina Solar Ltd is one such company.

Among the four biggest photovoltaic product manufacturers, Trina, along with the rest of the PV industry in China, is on a road to recovery: In the third quarter, the company saw its first net profit in several years.

After a two-year cold spell caused by overcapacity and a trade war with the EU and US, global demand in the industry is rising once more.

As for Trina, its production lines are running at full speed. In fact, so many orders have come in that it has had to outsource some business to other manufacturers, according to the company's executives.

This is in stark contrast with a year ago, when solar panel prices plunged, and virtually every PV company suffered huge losses.

Wuxi Suntech Power Co, once the shining star of China's PV sector, expanded aggressively before the bottom fell out, then failed to cover its debts and had to enter into bankruptcy proceedings this March.

Other manufacturers faced similar trajectories: The tide rose, promising ceaseless growth, enthusiastic investors and local governments with money to spend it was hard to resist the temptation of adding investment. Then came the 2008 financial crisis, and everything changed. Overcapacity and bad debts became bywords of the industry.

When the tide ebbs, it is time to see who is swimming naked on the beach.

"The problem with China's PV industry is that few companies have core competitiveness, which is what keeps you from being copied by other people," said Steven White, associate professor at Department of Innovation, Entrepreneurship and Strategy of Tsinghua University.

"Overcapacity occurs when too many people are making the same thing," White said. "But during the boom, companies were tempted to expand their capacity."

Trina was among the few that resisted that temptation.

Gao Jifan, Trina's CEO, told China Daily that at the end of 2007, board members of the company, some from the US, sensed a looming crisis as mortgage giants Fannie Mae and Freddie Mac began melting down. They felt that the economy could dip soon and that investment should be particularly cautious.

As a result, a $1 billion polysilicon project in Shanghai was canceled even while many other PV firms were competing to invest heavily in similar projects.

Gao attributed Trina's caution to the company's inherent management culture.

"From the very beginning, we have never aimed to be the largest in the industry. Instead, we pursue 'sustainable development", he said.

The dovish stance that kept Trina from becoming a shining star in the sunny days also helped it to be better-positioned when it rained: Giants that expanded recklessly are now dealing with heavy debts, a major factor weighing on them besides plummeting prices.

But thanks to a lighter financial burden and better cost control, Trina lost less money in the chilliest times.

Bucking prevailing opinions, Gao believes that rapid expansion before the crisis was not what caused the ensuing catastrophe. The reason, he believes, comes down to corporate management.

"It is not because the expansion was too fast but because the fast expansion was not accompanied by good management. It is like houses that are not properly maintained after they are built," he said.

According to Gao, before the crisis, the industry was dazzled by the bright prospects of the solar industry, as investors, most without much experience in the sector, flocked in. They spent huge amounts on land and facilities. But much of it was left idle after it was bought.

Gao, however, never hid his contempt for these "speculators" and believes he became a sentry for the industry.

In 1997, when few in China had even heard the word "photovoltaic", Gao started his company. He had always believed that demand for solar power would grow.

But even as leader of the company, Gao said he never single-handedly makes all the major decisions. Those are all fully discussed at the management level before any action is taken. The diversity of the board and management team - every regional company of the NYSE-listed firm is managed by local talent - ensures that Trina is well-informed on opportunities and risks of local markets.

"I've always said that solid management was the fundamental guarantee of our success. As early as 2006, when we went public, we realized it was essential to build a global talent pool," Gao said.

This means that Trina has expended great effort to find the right talent for different areas, whether it is production, sales, quality control or environment protection.

In addition, "we manufacturers should not always talk about 'grand concepts'. Specific work should be done, and no part (of the company) can afford to have problems," Gao said.

In fact, the company's corporate management is so formularized that some employees complain it sometimes can be too rigid. "It is more like an American company," said one former employee who refused to be identified.

Trina might not seem like an exciting place to some employees, but its financials are solid. In the third quarter of this year, sales revenue surged 24.4 percent over the second quarter to hit $548 million.

And it is reassuring to see how the company's revenue sources have changed. A year ago, the German market made up 42.1 percent of Trina's revenue, while China contributed only 5 percent.

Now, China has emerged as the largest market, contributing 39 percent of the company's revenue while Germany has retreated to 16 percent.