Flexible production lines enable entrepreneur's solar power business to harvest glowing success

Management consultants often say shorter production processes generate higher profits because less needs to be invested in machines and hiring. Making profits from owning no assets is even better.

So Yingli's way, or the strategy of Yingli Green Energy Holding Company Limited, in which intensive investment is committed to the building up of factory assets, was for a long time seen as unnecessarily expensive and, indeed, shunned by most other makers of photovoltaic solar panels.

"That was a time when the industry was doubling its size every two years with good enough returns from just assembling semi-products," recalled Miao Liansheng, Yingli's founder, chairman of board and chief executive officer, in a recent interview with China Business Weekly.

But that was a time when Miao was busy preparing for the future.

What if key suppliers raised their prices?

What if the government subsidies for alternative energy sources such as solar in user countries were scaled down?

What if the financial market experienced turmoil?

And what if the industry standards were pushed higher with the progress of technology?

Over the past 18 months or so, all these concerns have become realities, Miao is now reaping due reward for his precautions and what once seemed to be an old-fashioned practice in a new industry.

The Yingli production line ranges from the making of polysilicon (a key material) to that of silicon ingots and wafers (key semi-products) and then to solar cells and PV modules (for user installation). Yingli has become one of the world's largest vertically integrated photovoltaic manufacturers.

With that production line, Miao said, "Not only are we less affected by the change in material prices, it also allows us to adapt to new standards more quickly."

Established brand

Yingli is one of the world's leading solar panel providers and an emerging but well-established brand name among markets in West Europe and North America. But despite the industry's green label and the company's trendy image (as the first renewable energy company and the first Chinese company in history to sponsor the 2010 FIFA World Cup tournament in South Africa), Yingli is essentially a manufacturing enterprise.

In manufacturing, as engineers often say, any breakthrough on the existing production line would require the adjustment of many operations and many components. And, as is often the case, there isn't a one-size-fits-all solution for all the machines. So the process of adaptation can be one of baffling details and tedious fine-tuning.

"That is why you have a wide gap between lab results and the results from commercial production," Miao explained.

"And solutions with superb lab results can die on the assembly line if the results in mass production are just too low and too unstable to make them worthwhile."

But Yingli, thanks to its extensive but actually more flexible production line, is expected to begin commercially manufacturing and distributing a new generation of products. That is coming to pass as some competitors, stuck with a shorter and more rigid production line, still struggling with the technology they have purchased but that has yet to meet the desired standards, industry analysts said.

A key innovation in Yingli today is the so-called high-efficiency N-type silicon solar cells, dubbed PANDA, a solution acquired from the Energy Research Center of the Netherlands (ECN).

After a year or so of adaptation, against a lab record of 21 percent in cell conversion efficiency rate, Yingli's engineers claim that, in commercial production, they are expecting to reach at least 18.5 percent for PANDA cells in the initial stages, compared with their old cells' current average conversion efficiency of 16.5 percent, and 15 percent in 2007.

Miao said, given some more time, PANDA will help Yingli achieve even higher conversion efficiency. "Our production line is rich in potentials," he said, adding competition would help Yingli prove its potentials.

Admittedly, Yingli's way is a major trade-off. Its massive buildup of fixed assets requires more money and manpower, sometimes a lot more, than that required to just make a quick profit.

As the company's production and sales skyrocketed, so did its costs. Nowadays, the company's staff size exceeds 6,000, according to chief financial officer Bryan Li.

In 2004, when Miao took the company into the solar business, it had no more than 600 employees. When it was listed on the New York Stock Exchange in 2007 it had a work force of 3,000.

Household name

In its hometown of Baoding, a city of one million, Yingli has grown into a household name. Vocational school graduates are yearning to join the company - to earn good pay (by local standards) and to be part of an up-and-coming industry, despite its semi-military style in shop floor discipline.

To make sure it can attract the best people, including management specialists from abroad, Yingli is also running a staff housing project. Although Miao still sticks to his practice of getting up at 6.30 every weekday morning to greet the incoming employees at the company gate, there are now simply too many people for him to say hello to. Staff work on three shifts a day and in three separate company compounds.

Even though Baoding is an inexpensive "small" city, the company has to maintain an increasing number of managerial elite with overseas experience and an even larger team of overseas sales representatives.

Chinese companies habitually do a few things when they grow large in difficult times. One is to freeze, if not cut down, staff pay. A second is to relocate to a cheaper place. The third is to try to make some quick money from sideline projects, such as real estate development.

Yingli has some houses. Miao also owns a number of farms. But, in comparison with its main business, they are but small toys. And the good thing is, said Bryan Li, Yingli's Shanghai-born CFO, the CEO has no interest in indulging in those little toys. "Miao has self-discipline. He knows how important it is because he was in the army," said Li

His army experience has also given him an art-of-war type vision about what steps to take today to meet what goals in the future.

There is no better way to make good use of Yingli's production line than trying to excel in its key operations, to make each of them strong and profitable. "I still have several big plans," Miao said. "PANDA is just the first to come along."

Source: China Daily