Suntech Power Holdings and National Semiconductor will collaborate to develop a smartsolarpanel that includes the SolarMagic chipset from National.

The collaboration between Silicon Valley's founding industry (chips) and one of its newest areas of focus (solar) grows closer by the day. The SolarMagic chipset essentially boosts performance by correcting for problems created by debris, shading, orientation and other issues. With chipsets like this or microinverters, solar panels can operate more independently from one another. As time goes on, technologies like this will allow blocks of cells and individual cells to operate more independently. Electronics also provide a gateway for better monitoring and performance measurement.

Part of the appeal is that it's easier to eke out real-world gains from a solar panel with electronics than the old fashioned way of tinkering with the design of the solar cell and panels. Crystalline silicon solar panels can likely only achieve 25 percent efficiency. That is, only 25 percent of the light that strikes them gets turned into electricity. SunPower is already at 23 percent. In real life, the efficiencies are naturally lower. As a result, microinverter and solar electronics companies like Enphase Energy remain one of the strongest sub-segments for VC investors in solar.

Solar electronics companies also don't need to build factories. They either own them, like National, or can go to foundries like TSMC to manufacture their parts. Chip design can be costly, but it's still not as expensive as building a factory.

Suntech is also working with Tigo Energy and Azuray Technologies. Azuray builds Maximum Power Point Tracking DC-to-DC converter electronics that, like other solutions of this type, can provide up to 25 percent greater energy harvest from under-performing solar PV panels. The product also includes power-line communications and safety shut-off features. Azuray, which will also work with Renhe Photovoltaic technologies, came out of stealth earlier today. Read the whole story here.

National came out with the first version of SolarMagic a few years ago. The first version was somewhat bulky and looked like a piece of industrial equipment. The size diminished the overall attractiveness of attaching it to a solar panel. The company managed to shrink it through the magic of Moore's Law to fit into a solar panel. (The company showed us an early sample back in April -- it was about the size of a DVD drive from a notebook.) At Solar Power International, the trade show taking place next week, National will show SolarMagic working with products from Gesolar, Huber+Suhner, Onamba (the largest junction box manufacturer in Japan), and at Shoals Technologies Group.

Suntech and National signed a memorandum of understanding in May 2009 to explore the deal. Today's announcement shows that progress continues to move forward.