Terrestrial solar prospects get Emcore excited
Compound semiconductor maker Emcore is making good progress towards deployment of terrestrial solar systems based on GaAs cells and plans to add manufacturing capacity to meet rising demand next year.
"On the terrestrial solar front, we are excited about our prospects," said Emcore CEO Reuben Richards. "We have bids out on approximately 40 MW of [planned projects], with contracts to be awarded in 2006 and installation beginning in 2007."
Because of a current shortage of polysilicon material for solar cell applications, and that material's relative lack of scalability compared with GaAs-based solutions for large commercial projects, Emcore has recently been able to penetrate the terrestrial solar market for the first time (see related story).
In a conference call to discuss the company's latest financial quarter, Richards told investors that Emcore stood to make revenue of somewhere between $30 million and $60 million in the coming year through sales of both solar cells and modules.
The solar contracts include both military and commercial solar installations, and Richards says that at least half of the 40 MW on which it has bids awaiting approval should get the go-ahead very soon.
Even if Emcore does not win all of the contracts to supply solar systems, it will likely be the key supplier of solar cells for those projects, said Richards. Ultimately, however, he sees Emcore's "sweet-spot" in the terrestrial solar business at the module level.
Prospects in the terrestrial solar area have impressed John Lau, an analyst at Jefferies. With Emcore's stock price now sitting at over $12, Lau has increased his price target for the company to $16.
"We believe a strong outlook for the company's new terrestrial solar cell businesses should be a significant catalyst for the stock," Lau wrote in his summary of Emcore's update. "The company is bidding on four opportunities in the south-west US for solar cell projects, and has limited competition."
"Furthermore, emerging markets such as India and China should shape up as large markets for GaAs-based cells as opposed to polysilicon-based cells," concluded the analyst.
Richards believes that GaAs-based solar systems currently promise to operate at around $3 per Watt output. But with expected improvements to the cells raising efficiency to 50 per cent in the pipeline, that figure could drop to just $1.50 per Watt, prompting further market penetration.
Now preparing for what is expected to be a significant ramp-up in production of the devices, Richards said that Emcore will look to add manufacturing capacity some time in 2007 in the form of MOCVD reactors.
Although its solar power segment saw a slight drop in sales in the most recent quarter, Emcore benefited from a sharp upturn in high-margin revenue from its electronic materials division through sales of epiwafers for advanced RFIC manufacture and a strong fiber-optic market.
It posted total sales of $41.2 million, up 35% year-on-year and up 3% on the previous quarter. Revenue from the fiber-optic sector accounted for $25.9 million of that total.
