Six Keys to Profitable Growth in Solar

Cells & Production Software’s Role

Executive Brief Industry Directions Inc.

First Quarter 2008 www.industrydirections.com

Soaring worldwide demand for solar energy means nearly unlimited growth potential for
photovoltaic (PV) – and equally high risk. Newcomers and long-time players alike now
have the opportunity to sell more than they have the capacity to produce. This rapid
growth presents opportunities for profits; but it also challenges production capability and
quality management. Established ways of working are no longer adequate. To continue
and accelerate growth beyond the industry’s 25% standard, companies must adopt new
practices or fail.

Why the enormous risk for failure? New competition and new technologies in the solar
market as well as increased competition from other renewable energy sources will raise
the bar. Market growth and interest from a broader array of customers is also creating
pressure to lower price per kilowatt/hour (kWh) for solar output.

For solar cell manufacturers, moving from a specialty market into mass sales requires
more than just ramping up volumes. Companies must also lower costs, increase the
quality and predictability of their products and their shipments, and in many cases, shift
to new product technologies with different production requirements. Companies must
meet all of these challenges to create a foundation for sustainable, profitable growth.

Challenges Capturing Full Potential

Despite the very bright promise, most solar cell manufacturers face serious operations
obstacles that they must overcome to achieve the growth and profits available. Selling
should be the easy part. Producing the quantity of high-quality cells that the market will
buy at a good profit appears to be far more challenging.

Fast Ramp-Up: Many PV manufacturers are building new plants and increasing their
capacity. Some are switching to glass rather than silicon substrate technologies. To see
a healthy return on this massive capital investment in new plant assets, companies must
quickly get the new capacity up and running. With many competitors also expanding,
gaining market share requires not only fast plant start-up, but rapid time-to-volume. In
short, best practices must be in place immediately.
Solar Cell Production Imperatives for Profitable Growth
INDUSTRY BRIEF SERIES: Photovoltaic Cells

Yield: A key element of ramp-up is usually yield. Changes to processes can improve
yield over the long term, but make it challenging to achieve a stable process or a reliable
product. With silicon prices so high, companies certainly must focus on ensuring high
yield on those substrates. Even lower cost glass-based cells require success with
“building it right the first time” to show a profit, since their selling price tends to be
lower. Again, best practices must be replicated and enforced through all operations.

Quality: Today, most PV companies think of their major challenges in terms of growth.
Fast ramp-up to full volume and high yield are essential to that process. Once ramped up,
the major issue is likely to become ongoing quality. Running at capacity and lowering
costs both can present the risk of missing quality targets, which
can damage a company’s brand reputation. As the solar cell
market continues its impressive growth, more new competitors
Survival will enter and only those with consistently high product quality
– established through best practice business processes – will be
able to compete effectively.
Quality

Fast ramp-up, high yield and consistent quality: All of this adds
up to lower production costs per solar Watt produced, which is
High Yield
the key to continuing profits and competitive survival as
pricing pressure mounts (see Figure 1).

Fast Ramp-Up
Figure 1: Solar cell manufacturers face a
series of hurdles to grow as profitably as
possible as the market goes mainstream.
If these issues seem too large to tackle, think again. Solar
power is moving very rapidly from being a niche market to
going mainstream. Manufacturers who fail to meet these major
challenges have limited or no opportunity to succeed with
healthy market share, growth and profits.

Six Keys to Solar Manufacturing Success

To profitably grow to meet the new PV market opportunities, companies must ensure
every phase, stage and aspect of their production operation is sound. Every cell matters
to both revenue and profit, particularly since demand outstrips capacity. Six keys to
solar cell manufacturing will guide the winners into position:
1) Speed Time-to-Volume: Fast ramp-up of new plants, new lines and new
technologies can spell the difference between establishing a strong market position
and struggling to break in after the leaders are already established.
2) Replicate Best Practices: Whether the company is new or experienced, capturing
and replicating successful processes across all lines & plants is a cornerstone not
only for growth, but for ongoing quality, yield and profitability.
3) Lower Costs: Like any other market going from specialty to mainstream, pricing
pressure and competition mean that costs must drop for margins to stay healthy.

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Solar Cell Production Imperatives for Profitable Growth
INDUSTRY BRIEF SERIES: Photovoltaic Cells

There are many ways that manufacturing contributes; ranging from low material
usage to high equipment efficiency to ensuring employees’ time is productive.
High quality, predictable best practice processes and clear paths of communication
all contribute.
4) Ensure High Quality and Yield: High quality is a foundation for good return on
assets (ROA) and customer service. Companies must monitor quality from
incoming wafers and materials through every phase of the production process from
diffusion to firing and out to the shipping dock. Further, each critical process must
have minimal variation so the output will reliably meet specifications.
5) Certify Compliance: No matter the customer, solar companies must prove that
each product meets quality regulations and/or specifications. Even if the production
process itself is great, a company that can’t immediately document that the product
meets requirements may suffer shipment or payment delays and loss of profits.
6) Improve Continuously: It’s critical that companies in a market with such rapidly
advancing technology and competition as solar remember that best practices are not
static, but evolve. PV manufacturers must train employees to improve processes at
all times. Successful manufacturing companies institute, document and reward
continuous improvement practices at every level of employee.

The Value of Production Software

When solar was a relatively small, high-margin specialty market, the challenges were
manageable. Skilled people ran the factory floor and their experience constituted the
major intelligence to support the operation. However, this strategy breaks down when
companies are growing and expanding operations to sell to mainstream, price-sensitive
buyers. Simply stated: human resource driven manufacturing is not a scalable strategy.

Growth creates a rapidly changing and exponentially more complex environment.

Repeatable processes based on best practices are necessary. Training and empowering
managers in new plants and lines becomes a critical path element of success. New
managers won’t have the same level of experience, and even “old hands” in the business
may find their intuition inadequate in the face of constant change.

Employees must make sound decisions and take immediate action. A systematic,
process-driven environment which is simultaneously committed to productivity and
quality needs timely, accurate and relevant data to support informed and timely decision-
making. Particularly critical are timely views of performance to standardized metrics.

Solar cell manufacturers are in a position where the need for plantwide information
systems is pressing. The common term for these plantwide applications is
Manufacturing Execution System (MES). Today’s production software may include
more and be available at a lower price than even a few years ago.

©Industry Directions Inc., 2008 3

Solar Cell Production Imperatives for Profitable Growth
INDUSTRY BRIEF SERIES: Photovoltaic Cells

Industry Directions research

70% shows that across a range of
manufacturing industries, those
60%
% of respondents increasing
by 1% or more annually using MES are more likely to
50% have improved financial
40%
performance than their peers
not using MES (see Figure 2).
30%
This includes net operating
20% profit, earnings before interest,
10%
taxes, depreciation and
amortization, and return on
0%
assets or return on net assets.
Net operating profit EBITDA ROA/RONA
These core metrics by which
Use MES No MES companies gauge business
Source: Metrics that Matter © 2006 MESA International and Industry Directions Inc. success are particularly
challenging for manufacturers
Figure 2: A larger portion of manufacturers using MES achieved a 1% annual to achieve because of their
improvement on key financial metrics than their peers not using MES.
high asset bases. PV
executives must focus on these goals as they grow in an evolving market.

What is Production Software or MES?

What is MES and why does it have such a positive impact on companies’ performance?
The definition from the Manufacturing Enterprise Solutions Association, or MESA, is:
“A Manufacturing Execution System (MES) is a dynamic information system that
drives effective execution of manufacturing operations. Using current and accurate
data, MES guides, triggers, and reports on plant activities as events occur…from point
of order release into manufacturing to point of product delivery into finished goods.”

While the software products categorized as MES may vary somewhat, the suite of
functions that integrate for a plantwide view may also come from the MESA original
MES model. Companies will need some or all of the following 11 functions to operate
production with all six keys to success in place:
• Product Tracking & Genealogy
• Resource Allocation & Status
• Process Management
• Dispatching Production Units
• Performance Analysis
• Quality Management
• Labor Management
• Maintenance Management
• Operations/Detailed Scheduling
• Data Collection/Acquisition
• Document Control

©Industry Directions Inc., 2008 4

Solar Cell Production Imperatives for Profitable Growth
INDUSTRY BRIEF SERIES: Photovoltaic Cells

PRODUCTION IMPERATIVE PLANTWIDE SYSTEM SUPPORTS How Plant Software Delivers

1) Fast Ramp-Up / Sets off alarms for exceptions, and
Value
Time-to-Volume documents processes, procedures and Why is this integrated
settings for good production runs. production software so
2) Replicate Best Practices Models best practices as expected, and
guides operators through process; can even important to growing solar
prevent proceeding with errors. companies? Use of an MES can
3) Lower Costs Keeps track of materials, tools, processes bolster all six of the imperatives
and skilled employees, triggering activities to
use them efficiently. of solar cell manufacturing (see
4) Ensure Quality & Yield Monitors non-conformances and trends, Figure 3). At every stage of a
helps pinpoint root causes, allows and
enforces effective corrective and plant — from design and start-
preventative actions. up to maximizing output —
5) Certify Compliance Records activities as they occur, including
sign-offs and other compliance; improves
MES contributes to
accuracy and efficiency of documentation. predictability and profitability.
6) Improve Continuously Records results and trends in context for
confident analysis of practices, then
distributes and enforces new processes. Further, real-time information
Figure 3: Solar cell manufacturers will find that production software on every process, material and
or manufacturing execution system (MES) will support them solar cell in production allows
in achieving each of the six keys to production success.
the plant to participate fully in
enterprise planning and reality checks. MES can also provide exception-based alerts to
handle out of control processes and deviations resulting in higher yield.

Production software can enhance productivity. One way it does that is by ensuring
everyone knows what to do and how to do it properly – it can illustrate and even enforce
best practices. It provides full traceability with minimal human intervention or
paperwork. Information at a glance on inventory, equipment and processes can also
speed an array of tasks in the production facility.

MES supports effective process improvement. MES products that include or integrate
with quality management can clearly close the loop between quality objectives and
execution. Work instructions, operator guidance and quality data all lead to more
predictable processes and higher process capability (CpK). Another important aspect of
plantwide information is the ability to inform maintenance technicians of trends and
issues, and to check on the results of any work technicians perform.

Perhaps most compelling, having timely data easily available for the entire plant boosts
continuous improvement programs. Data from MES is available for analysis of quality,
efficiency, ramp-up, and changes. The improvements identified are more likely to be
sustained. Documenting and enforcing best practices — along with the results of
operations — is another strong element in improvement success.

Production Software Characteristics for Solar

As mentioned previously, there are many MES or production management software
products available. Each company must conduct a thorough review of options, based on
specific needs and feedback from a variety of managers and likely users. As a baseline

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Solar Cell Production Imperatives for Profitable Growth
INDUSTRY BRIEF SERIES: Photovoltaic Cells

to winnow down the list to just a few, however,

we offer the following thoughts about what is
likely to be most important for any PV
Industry
Experience
manufacturer (also in Figure 4).

Adaptability: Functionality – As our assessment of the

Extensible, Modifiable
importance of yield and quality suggests,
Scalability: quality management is a key functionality for
Small to Large, Sites, Languages solar. The emphasis on best practices and
consistency lead to a need for production
Functionality:Basic MES plus: Quality,
Guidance, Enforcement, Metrics, PLM ties
guidance and best practice enforcement. To
clearly see the impact of continuous
Figure 4: Since the fewest solutions are likely to have
solar industry implementations, the fastest way to narrow
improvement programs, a sound system for PV
the list of potential software providers is to start there and will also include operations-level performance
work down the pyramid to find an appropriate solution. management, with real-time views of quality,
yield, and other areas to pinpoint not just past,
but current and potential problems. The likelihood of ongoing product technology
changes also suggests the need for a strong two-way tie to product lifecycle management
(PLM) software will be critical. This is all in addition to the base track and trace,
production dispatching, process management that most MES products will offer.

Scalability – Implementing plantwide software is a serious undertaking. Just from the

functional description above, it’s clear that many individuals will need to share their best
knowledge to set it up appropriately. However, the initial project effort and price should
not be overwhelming for a mid-sized solar company. Just as important, the software
should be capable grow with the production. This is likely to mean multi-site, with the
ability to share best practices between sites and gauge performance across the company.
Another area where the software needs to scale is to handle multiple languages.

Adaptability – Clearly, PV is an industry that’s in rapid transition, and like other high
technology industries, it is likely to remain that way indefinitely. Companies must be
very careful to select software that can keep up with that pace of change. Best practices
are a moving target, as are actual production and product specifications. Look for a
modern and extensible architecture that allows tailoring without writing custom code,
and changes that can be made by your company, even if you choose to have the vendor
or a consulting partner make them.

Industry capabilities – The best solution is always one that is proven in the specific
industry application. In the case of production software for solar, this encompasses
modeling and tracking everything from substrate texture and diffusion through every
process to printing, firing and testing, plus receiving and shipping. At this point, you
may not find many solution providers with expertise in the solar cell industry. Seek out
the few who do have it before resorting to a software company that you will have to
educate and help to develop the capabilities you need.

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Solar Cell Production Imperatives for Profitable Growth
INDUSTRY BRIEF SERIES: Photovoltaic Cells

Solar Production Scale and Profit

Rapid market growth for photovoltaic cells presents excellent opportunity but also an
array of risks for each company in the market. Those capable of rapidly expanding their
capacity and capabilities will be in a good position to profit.

However, large-scale production operations cannot run reliably without sound

information systems support. The highly technical nature of PV manufacturing along
with the speed of technology development means people need additional support now,
more than ever before. Single plant and multi-plant MES systems are proven in other
similar manufacturing environments such as Semiconductor and Electronic Assembly.
They support not only sound production, but good, profitable business.

Specifically, companies must leverage sound technology to achieve fast ramp-up and
time-to-volume on new plants or lines. They must also be able to document and
replicate best practices. As the market goes mainstream, companies must lower costs,
and ensure quality and yield as volume increases. They must also certify compliance to
various customer and country requirements. Above all, solar cell manufacturers need to
improve continuously.

Leaders today may be extinguished tomorrow if they don’t use every opportunity to
excel and improve. The pace is quickening for solar, and the profits will ultimately land
with the companies able to prove their ability to innovate while remaining reliable. Only
those with highly capable PV production plants will lead the industry in the long term.

©Industry Directions Inc., 2008 7

Solar Cell Production Imperatives for Profitable Growth
INDUSTRY BRIEF SERIES: Photovoltaic Cells

About Industry Directions

Industry Directions is an independent market research firm that delivers expertise on
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participation in manufacturing-supported value networks and gain strategic advantage.
To learn more, visit: www.industrydirections.com.

About Camstar
Camstar’s Manufacturing and Quality Execution Systems help businesses rapidly boost
the performance of their distributed manufacturing operations by delivering complete
visibility, process enforcement and continuous improvement. Our customers have
achieved flexibility for rapid growth and change, the highest quality products, and
leaner, more efficient operations. Camstar’s comprehensive industry-specific solutions
combine out-of-the-box functionality with maximum flexibility to meet each site’s
requirements. Standardizing on Camstar’s solutions allows manufacturers to implement
corporate standards while enabling each site to maintain the required level of autonomy.
For more information, please visit www.camstar.com .

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©Industry Directions Inc., 2008 8