I haven’t written for a while about the embattled solar sector, but a press release about a new solar plan by Swedish furniture giant IKEA caught my attention and looks worth a mention as a possible new bright spot for this otherwise struggling industry. In fact, I was originally going to just ignore the announcement, which will see IKEA install solar panels at its China locations to supply 10-15 of the power needs for its stores and 100 percent of needs for its distribution centers. (company announcement) After all, such installations are insignificant in terms of sales for big solar panel makers, and are largely a public relations exercise for companies that want to show off their green credentials. But then I got to thinking and asked myself: What would happen if suddenly all major companies in China started taking similar initiatives, especially massive state-run firms, from banks to steelmakers and phone companies, which collectively make up one of the nation’s biggest energy consumers. In any other market this kind of massive adoption of a new, uneconomical form of energy like solar would never happen, as such energy is more expensive than traditional power sources and would also require companies to set up new divisions to operate their power generation. But this isn’t any other country. This is China, a place where major companies — both state-run and private — are always keen to follow the latest directives from Beijing to please central government leaders promoting their latest economic priorities. That said, I could easily see a large number of companies soon following with moves similar to IKEA’s, setting up a patchwork of solar power generation stations at their various major facilities throughout the country to curry favor with a central government that has already indicated it wants to help a promising but struggling homegrown sector that now makes more than half of the world’s solar cells. Those who follow the industry know that same sector has been struggling for more than a year now due to a global supply glut that has sent prices tumbling, sending all manufacturers into the red and some now tottering on the brink of insolvency. US anti-dumping tariffs against Chinese manufacturers and the potential for similar tariffs in Europe have further hurt the sector, with little relief in sight. China, which itself derives very little power from solar, has previously said it wants to significantly boost its solar power capacity but has yet to announce many major new projects to achieve that target. (previous post) Pressuring major companies to install their own solar capacity, especially heavy users like Baosteel (Shanghai: 600019), could help Beijing more quickly reach its objectives by not only promoting the solar sector, but also taking pressure over its over-burdened power grid. Accordingly, I wouldn’t be surprised to see more companies making similar announcements to IKEA’s in the months ahead, perhaps providing some much needed relief to panel makers, especially the stronger ones.
Bottom line: Major companies in China could soon embark on a solar spending spree to achieve Beijing’s objective of producing more solar energy, providing some relief to the embattled sector.
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The literature unit of online game giant Shanda Interactive seems determined to move forward with its plan for a New York IPO despite a weak investor climate, landing $15 million in new funds from venture investor Orbis as it forges ahead. This kind of late-stage investment is clearly designed to generate some buzz for an offering that looks slightly interesting to me, but may still have limited appeal for the average Wall Street investor worried about recent volatility in US-listed China stocks after a series of accounting scandals last year. This latest investment also seems aimed at setting a valuation for the unit, Shanda Cloudary, again as Shanda Interactive looks to raise as much cash as possible to help pay down its big debt from its own recent privatization. (
Smartphone powerhouse Apple (Nasdaq: AAPL) is finally waking up to the importance of the China market, forging a new tie-up with leading online video site Youku (NYSE: YOUK) in bid to incorporate more China-friendly features into its wildly popular iPhones. This latest deal follows the even bigger unconfirmed news last week that Apple was in talks to integrate software from leading Chinese search engine Baidu (Nasdaq: BIDU) into its next generation iPhone, in another major nod to the importance of a market that now accounts for a fifth of Apple’s global sales, second behind only the US. (
It’s been hard for me to differentiate between China’s top 3 US-listed hotel companies due to their similar focus, but I have to admit I’m intrigued by a new announcement from one of the three, 7 Days (NYSE: SVN), about its latest strategic decision to focus on the management business. In fact, 7 Days’ announcement shouldn’t come as a huge surprise to any industry people, as it’s largely following a trend that happened in the west a couple of decades ago and paved the way for the rise of global hotel giants like Marriott (NYSE: MAR), InterContinental (London: IHG) and Accor (Paris: AC). What all the foreign companies discovered was that it was much more profitable to simply manage hotels for other property owners rather than own the actual properties, as such a business model required much less capital investment and thus was much easier to expand. In addition, the model also offered much better profit margins than the traditional model of owning properties, allowing the big western names to not only expand more rapidly but also boost their margins in the process. Now 7 Days is very publicly telling the world that it intends to also focus on this business model that emphasizes management over ownership, as it seeks to differentiate itself from US-listed rivals Home Inns (Nasdaq: HMIN) and China Lodging (Nasdaq: HTHT), as well as Hong Kong listed rival Jin Jiang (HKEx: 2006). (
Global drug makers like Merck (NYSE: MRK) and Bristol-Myers (NYSE: BMY) have been piling into China’s drug market over the last few years in a bid to take advantage of huge new opportunities presented by the nation’s ongoing health care reform, even as growing signs emerge that risks also exist alongside the potential to make money. The latest of those risks was recently on display in the nation’s patent office, where an intellectual property law was modified to make it easier for Chinese companies to make generic versions of drugs that otherwise would still receive patent protection. (
The crowded field of couriers that deliver millions of packages each year from China’s booming e-tailers to online buyers is gearing up for a much needed consolidation, which will improve both safety and reliability for a key link in the process of moving merchandise from online stores to consumers. Recent months have seen a steady stream of reports on a wide range of problems with the courier sector, which has grown at a breakneck pace to service an e-commerce industry that generated 588 billion yuan ($92.23 billion) in sales last year, with the number expected to grow another 30 percent in 2012, according to the Commerce Ministry. Most of the sector’s current problems center on reliability, with cutthroat competition and little government oversight meaning that many smaller companies are tottering on the brink of bankruptcy as they struggle to efficiently deliver thousands of packages. Safety is also a concern, as many smaller couriers lack the resources to properly police the products they deliver. Facing this unruly market with the potential to undermine consumer confidence, many of the country’s top e-commerce firms have moved to forge their own delivery networks. Leading e-commerce companies Alibaba and Jingdong Mall, also called 360Buy, have both taken recent steps to build up their own courier services and ensure the reliability of third-party couriers they use. In one of the newest steps in that direction, reports emerged last week that Suning.com (Shenzhen: 002024), the website of one of China’s top electronics retailers, would launch a plan to make products purchased on its website available for pick-up at any of Suning’s 1,800 real-world shops throughout China. (
The Eurozone debt crisis is starting to offer some interesting M&A opportunities for cash-rich Chinese firms, as reflected by the decision by leading Spanish telco Telefonica (Madrid: TELF) to sell half of its stake in China Unicom (HKEx: 762; NYSE: CHU) to raise desperately needed cash. (
