[pagebreak:Who Will Be the Next Big Company to Go Solar?]

When Applied Materials (NSDQ: AMAT) entered thesolarmarket in 2006, it made an understandable splash.

After all, it is the world’s largest semiconductor-equipment manufacturer, and many analysts have speculated that large chip companies could have a natural advantage in the market.

Now, news of semiconductor companies warming up to solar is becoming commonplace.

Earlier this week, National Semiconductor (NYSE: NSM) launched an inverter technology called SolarMagic, which it claims can convert the direct current created by solar panels into usable alternating current more efficiently (see National Semi Casts SolarMagic). The news came after SVCT Technologies, which provides research and development for chip companies, said it would expand its services into solar (see Green Light post).

Last month, Intel Corp. (NSDQ: ITNC) – the world’s largest semiconductor manufacturer – spun off a solar-cell startup called SpectraWatt, while IT company IBM (NYSE: IBM) announced it would develop thin-film solar through a joint venture with Tokyo Ohka Kogyo and Reuters reported that Semiconductor Manufacturing International Corp. (NYSE: SMI) in Shanghai planned to make polysilicon for solar cells (see Chip Giants Delve Deeper Into Solar and Companies Crowd Into CIGS Space).

And in May, memory supplier Qimonda (NYSE: QI) formed a joint venture to produce crystalline solar cells with Centrosolar Group.

The trend makes plenty of sense, analysts say.

Slower growth in the traditional microprocessor markets, as well as perceived similarities between semiconductors and solar technology that companies see as crossover opportunities for their intellectual property, has made the solar industry particularly alluring, Canaccord Adams analyst Jed Dorsheimer said.

Worldwide semiconductor revenue grew 4.3 percent to $273.9 billion in 2007, according to Gartner, which predicts growth of 4.6 percent to $286.5 billion this year (see this press release for 2006 numbers). That compares with solar-industry revenue growth of 50 percent to $30 billion in 2007, according to Photon Consulting, which forecasts 43 percent growth to $43 billion this year.

“We’ve been saying for a long time: This is the domain of the semiconductor guys,” said Ron Pernick, a principal with Clean Edge, in response to the Intel news earlier this month. “If Intel can take intelligence out of its semiconductor operations, spin it out and deliver on funding, who better to scale up manufacturing than one of the largest makers of chips on the planet?’’

It’s not just semiconductor companies, either. Other large corporations also are entering the market.

Perhaps most notably, search giant Google in November said it planned to help develop renewable energy (see Googling Greentech). And computer company Hewlett-Packard Co. (NYSE: HPQ) last month announced a contract to license technology to concentrating solar company Xtreme Energetics.

But there’s no guarantee that large conglomerates with experience in semiconductor and other industries will beat out solar companies already active in the market, analysts said.

[pagebreak:Analysts Weigh Out Advantages]

Michael Rogol, managing director of Photon Consulting, said it’s unclear whether being a big company is really an advantage.

“It’s easy to imagine a big company building a pretty sizeable solar business and getting a lot of attention for entering the solar space, but it’s hard to imagine a big company winning over a small company on cost and on flexibility,” he said.

Larger companies – with higher reporting requirements and more involved decision-making processes – tend to move more slowly in executing new ideas and have other businesses to consider apart from their solar businesses, he said.

“We now have officially zero examples of big companies succeeding in solar,” he said. “We have a lot of examples of big companies starting solar efforts and then not being able to be flexible enough to really make changes, along with the rest of the sector, in order to become leaders.”

Rogol pointed to Sharp Corp. as an example.

The Japanese company, which was the No. 1 solar-cell manufacturer until Germany-based Q-Cells overtook it last year, had “the home court advantage” for years when Japan was the largest solar market, then missed the shift to the German market and also wasn’t prepared for the silicon shortage of the past few years, he said.

“It didn’t understand what was coming and wasn’t able to act quickly enough and exert the advantage of leadership in the industry,” he said.

Regardless, it’s clear that the flow into solar isn’t likely to stop any time soon.

We asked several analysts to tell us which corporations they think are likely to take the plunge next. All three top choices, coincidentally, are located in Seoul, South Korea.

  1. Hyundai Corp.: This is an obvious choice, as it’s no secret that Hyundai Heavy Industries, the No. 1 ship building company, plans to seriously expand its solar production. While the company itself has released very little solar-related information, its partners have been more forthcoming. LDK Solar in February announced it had signed an eight-year deal to supply HHI with a total of 450 megawatts of solar wafers beginning this year and centreotherm photovoltaics in June said it had received an order for five manufacturing lines with the capacity to produce a total of 250 megawatts of crystalline solar cells annually. Korea.net also reported that the company formed a joint venture to produce polysilicon with KCC Corp. in March. HHI, which ordered a 10-megawatt Spire Corp. assembly line as part of its development activities in 2005, last year said it would begin producing 30 megawatts of cells in 2008.
  2. LG Corp: Best known for its electronics division, the corporation has been talking about the possibility of making solar cells since at least 2005 (see this BusinessWeek article and press release). The company, which sold its chip business to rival Hyundai Group in 1999 under pressure from the government, last year announced it would invest 1.6 billion won (about $1.5 million) to start a solar subsidiary called LG Solar, but said that detailed plans had not yet been decided (see World of Renewables and Climate Radar posts). LG Solar is listed on the corporate site, but the name isn’t clickable for more information.
  3. Samsung Electronics: The display company, which also owns Samsung Semiconductor, the world’s second-largest chip manufacturer, has repeatedly been the subject of rumors that it is entering the market, either through acquisitions or its own research and development. ET News reported last month that it plans to expand its R&D into solar panels after testing thin-film technology.

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