Guest lecture Sven Klaus Starke
B|Orders in Motion: Industrial dynamics does not stop at borders
Conergy CEO Sven Klaus Starke visits Viadrina
The CEO of the Frankfurter branch of Conergy AG came to European-University Viadrina and lectured in the framework of Prof. Stadtmann’s course Angewandte Wirtschaftstheorie on the situation in the photovoltaic industry. He gave insights into the tremendous cost pressure within the industry which was triggered by a considerable price decline: „If prices for completed modules decline by more than 40 % in 2011 it cannot be made up for by raising productivity. Then there must be a consolidation in a wider context“, explains he the competitive situation in the industry and the consequences for his company. But what is in turn the reason for the enormous price decline? Starke makes considerable overcapacities on the market responsible for this development: If the supply is greater than the demand the price decreases!
„An interesting aspect is that typical processes that are repeated all the time exist in nearly every life cycle of an industry“, sums up Stadtmann in a short conclusion at the end of the lecture. Thus, the real net output ratio, for example, always decreases after specialized suppliers established themselves on the market in a more mature market phase. A company which is relatively well integrated has to let go parts of the value chain. Conergy, for example, stopped blocking, bricking and wafering processes at the facility in Frankfurt (Oder) and buys these preliminary products now directly from the market.
Also the choice of technology determines to a high degree the success of a company: While, for example, the company First Solar chose the thin film technology, Conergy focused on silicon-based technology (crystalline silicon semiconductors). As a process innovation, monocrystalline cell production process (produced under vacuum conditions, very pure and high-quality silicon panels), occurred which offered considerable advantages First Solar could not or did not want to follow this new trend.
A shakeout, i.e. a large amount of market withdrawals in due to insolvency or takeovers, is also typical for an industrial life cycle: These company deaths generally cannot be referred to a drop in demand. Also in the solar industry the demand still increases a lot. There are rather phenomena like establishment of a dominant design or a radical innovation that result in shakeouts.
Approached regarding the role of China Starke reported that China was able to put itself into a good strategic position due to a strong commitment in the context of the new 5-years plan and Deep Pockets (Orders in Motion!). The government subsidies give the Chinese industry indeed a certain advantage. While the USA have already reacted and established a competitive barrier in the form of a punitive tariff (Borders in Motion!) the different lobbies in Europe are still positioning themselves: The manufacturers of the photovoltaic installations tend to support an establishment of trade barriers (see, for example, the Pro-Sun-Initiative). However, for the downstream industries higher prices due to these trade barriers would be bad. Starke does not want to affiliate with the calls for trade barriers. „Free trade is important for the export-oriented German economy; Conergy is also internationally oriented and has to export. Above all, because the growth markets will be located in USA and Asia in the future.“