signetlogo.jpgA team of semiconductor industry veterans today announced the launch of Signet Solar, a solar photovoltaic (PV) module manufacturer that hopes to disrupt the fast growing solar industry by significantly reducing the manufacturing costs of solar panels.

The company will target large projects such as solar farms, commercial installations, building-integrated photovoltaics, and remote habitation.

The company is headquartered in Palo Alto, Calif., although its R&D operations and first manufacturing plant will be based in Dresden, Germany — in order to access the German and European markets, and to take advantage of Germany’s large talent pool in solar and optical engineering.

The company plans to enter production in Dresden by mid-2008 with a fully-integrated thin film silicon solar PV module production line from Applied Materials. The plant’s initial capacity will be 20 megawatts (MW) of solar modules per year, with plans to expand the capacity to 60 MW by the end of 2009.

The company is planning to build additional manufacturing plants elsewhere in the world including Asia, although it declined to provide exact locations or a timeline. However, the company did tell VentureBeat it’s aiming to build its annual manufacturing capacity to over one gigawatt within ten years.

Signet Solar’s choice of Applied Materials is significant. Most existing solar module makers design and build their own proprietary manufacturing systems. Applied Materials’ entry into the market removes a major barrier to entry for newcomers such as Signet who can now purchase world-class PV manufacturing equipment at a lower cost than building their own.

Solar Market Booming, but Crowded

Navigant ChartThe market for PV modules, which go into making solar panels installed on homes, commercial buildings and solar power power plants, has grown at a compound annual rate of 35 percent over the last 30 years (click on thumbnail at left to view chart), according to a report published April 12 by market researcher Navigant Consulting (access the PDF file of the report here). Growth has accelerated in recent years. Navigant says global 2006 shipments reached nearly two gigawatts, and are expected to grow to 14.3 GW by 2010.

Signet will go head-to-head against larger, better funded publicly traded PV module manufacturers such as Sharp Solar, Kyocera, SunPower, FirstSolar, Suntech, and dozens of others. The field is becoming more crowded by the day. On Friday, two new Chinese solar cell module makers filed for U.S. IPOs.

The Race for Grid Parity

Although the solar market has grown dramatically over the last few years, much of this growth has been driven by government subsidies in places such as Germany, Japan, Spain and California. Without government subsidies, photovoltaic power is not yet a cost-effective alternative to traditional coal-powered electric plants.

Solar cell manufacturers are waging a battle against time and each other to drive costs lower to compete against other electric generation sources, and so they can open up their products to new markets and applications.

The holy grail of the solar industry is what’s called “grid parity,” a term that refers to the day when consumers can generate their own solar electric power at the same cost as purchasing it from their local utility. Signet tells VentureBeat the average worldwide cost of electricity is currently around 10-12 cents per kilowatt hour (kw/h), whereas unsubsidized solar currently runs around 25-30 cents per kw/h.

To succeed without government subsidies, the solar industry must achieve grid parity.

Most solar manufacturers have product roadmaps to achieve grid parity within the next few years. Once achieved and exceeded, large scale solar plants are likely to spring up around the world.

Signet Solar says the price of its modules will reach grid parity by 2010 at a manufacturing cost that will provide it 35 percent gross margins.

Much of Signet Solar’s manufacturing efficiencies will stem from its use of Applied Materials’ fab equipment. Applied Materials, long the world’s largest maker of semiconductor manufacturing equipment, entered the solar fabrication market in 2006 with an aggressive solar strategy. Signet chief executive Dr. Rajeeva Lahri says his company wouldn’t be able to enter the market so quickly and at such low cost without Applied Materials.

Most existing solar module manufacturers are using custom-designed equipment, and they all face enormous capital equipment investments to continually improve their productivity and efficiencies. Lahri believes that by relying on the Applied Materials platform, he will always have the access to latest generation technology.

Signet will also compete against a growing number of recent startups leveraging the same solar cell fabrication equipment from Applied Materials. In March, Applied Materials announced two customer deals, one with Moser Baer India Limited in India, and the other with T-Solar Global S.A. of Spain. Last month, Applied Materials announced that it would also supply production lines to Sunfilm, a startup based in Munich, Germany.

Lahri says Signet can distinguish itself through its proprietary expertise in manufacturing and product design, much in the same way customers of Applied Materials’ traditional semiconductor manufacturing equipment differentiated their offerings for the last two decades.

The Applied Materials equipment produces large solar modules, which, at 5.7 square meters in surface area, are three to four times larger than conventional modules from competitors. The larger form factor reduces manufacturing and installation costs.

Importantly, Applied Materials’ thin film manufacturing process utilizes only one percent of the silicon required by many competitors, says Lahri. The lower silicon requirements will provide the Applied Materials fabs an important advantage over other manufacturers who require more silicon in the manufacture of their modules.

Silicon prices have skyrocketed over the past few years, mainly because of the growing demand from the solar module makers. For Signet and others who rely upon the Applied Materials fabs, the future pricing of silicon becomes less important.

The company declined to disclose exact funding levels, but Lahri says it already completed a first tranche of a Series A funding round for between $5 million and $10 million from private angel investors he declined to name. Lahri says the company plans to complete the series A in the July timeframe with total funding “in the teens.” He says that tranche will likely include existing investors, vcs, and strategic partners.

Will the IPO Window Close on Signet Solar?

Although Signet Solar’s strategy appears well conceived, the company still faces significant risks.

Over the last two years, many of Signet’s competitors, such as Suntech, SunPower, FirstSolar and others have funded their expansion by tapping the favorable valuations of the public equity market. Yet they all had revenue at the time of their IPO and most were either profitable or near profitable. Signet Solar probably won’t be invited to the IPO party until 2009 at the earliest.

With Signet’s late start to market, it remains to be seen how quickly the company can scale its manufacturing without significant additional capital. If the IPO window closes before its IPO, then Signet may be denied the funding it requires to complete its business plan.

The company also faces the risk that its better funded competitors making a switch to Applied Materials’ solar fabs, or to other competitive innovations likely coming from other semiconductor manufacturing equipment vendors. Once everyone is using equivalent best of breed technology, the market quickly deteriorates to commodity status in which all module vendors face declining margins and zero pricing power.

SolarBuzz, a solar industry research group, said there are initial signs competitive pressures may soon cause solar module prices to decline. This is good for consumers, but only good for producers as long as they can continue to reduce manufacturing costs.

An additional, though potentially less threatening risk, is that manufacturers of raw silicon flood the market with too much silicon. Most of the top silicon suppliers have announced plans to increase capacity. This build-out may well be met with a bust within two or three years if oversupply causes raw silicon prices to plummet. The declining prices would then disproportionately benefit Signet’s competitors by lowering their manufacturing costs. Many of these competitors believe they can reach grid parity even if the current historically high silicon prices persist.

Mark Coker is a contributing writer for VentureBeat. He’s founder of Dovetail Public Relations, a Silicon Valley technology marketing firm. He has no clients among the companies mentioned in the story, nor among their competitors. At the time of this writing, he owned shares in Suntech and SunPower, mentioned in this story. More on Mark at

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