PROJECT EASY GREEN

The saga of Evergreen Solar (NasdaqCM: ESLR) continues to deliver bad news.

The company canceled tomorrow's scheduled conference call and issued a press release with its Q1 financial results.

• Revenues for the first quarter of 2011 were $35.3 million, down 60.4 percent compared to fourth quarter of 2010 revenues of $89.3 million.
• Shipments for the first quarter of 2011 were approximately 17.8 megawatts, compared to fourth quarter of 2010 shipments of 46.6 megawatts.
• Average selling price for the first quarter of 2011 was $1.86 per watt, down approximately 2 percent from $1.90 per watt recorded in the fourth quarter of 2010.
• Gross margin for the first quarter of 2011 was -62.5 percent compared to -84 percent in the fourth quarter of 2010 (an improvement).
• Operating loss for the first quarter of 2011 was $46.2 million, compared to $399.1 million for the fourth quarter of 2010. Operating loss in the fourth quarter of 2010 was impacted by an inventory write-down and impairment of long-lived assets totaling $377.5 million in connection with the company's decision to close its Devens manufacturing facility.
• Net loss for the first quarter of 2011 was $33.4 million compared to $411.0 million in the fourth quarter of 2010.
• Cash and cash equivalents, including restricted cash, as of April 2, 2011 were approximately $38.5 million and were approximately $33 million at April 30, 2011.

The press release continues: "As previously disclosed, the Company's near-term liquidity has been negatively impacted as a result of its low year-to-date sales volume and potentially slower sales for the remainder of this year combined with expected increased pricing pressure. Furthermore, cash to be realized through the reduction in accounts receivable and inventory from the recently closed Devens facility will be less than previously expected and will take longer than expected to realize. Accordingly, the Company believes it will need to secure additional sources of cash sooner than expected and has retained financial and legal advisors to actively evaluate restructuring alternatives." 

Evergreen has had warnings from Nasdaq over delisting, painful debt restructuring plans and numerous successive money-losing quarters. The firm lost $54 million through the first nine months of 2010. The firm recently closed down the Devens plant in Massachusetts. That represented a loss of 800 manufacturing jobs, a substantial portion of the company's workforce.

It was a black eye for the state and the decision-making process that provided $58 million in state aid to the firm.  Admittedly, the state's intentions were pure: Massachusetts wanted to foster the growth of green manufacturing jobs.

Last quarter, Evergreen was looking to exchange $200 million of the company's notes maturing in 2013 for new notes due seven years later, but investors agreed to exchange only 23 percent ($45.4 million) of the targeted amount. Evergreen canceled another offer for $165 million of a different series of bonds due in 2015 because a minimum of $50 million was not tendered before the Feb. 11 deadline. 

The firm has an innovative "string-ribbon" silicon technology that significantly reduces the amount of silicon used in a solar panel. It's a formidable technology — but it has been deployed in Massachusetts, a state with formidably high labor, energy and material costs. It's just about impossible to compete against China's silicon solar dragons like LDK, Yingli, JK Solar, and Suntech from a module factory in New England.

This news needs to be viewed through the lens of Evergreen's once high-flying history. 

Ten years ago, Evergreen Solar had a successful IPO. Venture investors like Nth Power did very well in that liquidity event.

The solar industry in 2000 was tiny compared to the current market, totaling somewhere in the 175-megawatt range, a figure that pales in comparison to the approximately 16 gigawatts that shipped in 2010.  At the time, Evergreen's string ribbon technology seemed to offer an innovative, lower-cost alternative to conventional crystalline silicon growth with the potential to lower the amount of silicon per watt. 

But a decade of scaling-up and innovation across the solar value chain would appear to have left the once-lauded Evergreen behind.

The Evergreen saga is illustrative of the falling costs in this market, the questionable value and differentiation of an innovative process that doesn't come along with innovative pricing — and a grave warning to any solar module company with stubbornly high cost structures.

Applied Materials (Nasdaq: AMAT) is making a big move — the semiconductor equipment giant is acquiring Varian Semiconductor Equipment Associates (Nasdaq: VSEA) for $4.9 billion.  The price is a 55 percent premium to yesterday's closing price. 

Varian is the leading supplier of ion implantation equipment used by chip makers and has recently been applying this technology to crystalline silicon wafers for photovoltaic panels. Varian will operate as a business unit of Applied's Silicon Systems Group and will continue to be based in Gloucester, Mass. Varian's main business is semiconductor manufacturing but the company has recently made a foray into solar wafer manufacturing with the promise of raising efficiency and bringing a Moore's Law model to the solar industry.

Varian believes it can bring a Moore's Law-like momentum to solar with its ion-implantation equipment, long used in the semiconductor industry.

We've covered Varian's ion implantation and its application to solar before. Varian supplies ion implantation equipment to most of the major semiconductor manufacturers in the United States, Europe and Asia. Revenue in the firm's most recent quarter was $227.7 million.

Suniva is the first PV manufacturer to successfully leverage ion implantation in the mass production of solar cells. By using this technology, Suniva claims the ability to compete with high-efficiency PV manufacturers such as Sunpower (Nasdaq: SPWRA), as well as with low-cost, lower-efficiency Asian manufacturers. The firm looks to balance the trade-off between cost and efficiency.

According to Jim Mullin, the Vice President and General Manager of Varian's solar group, 90 percent of crystalline silicon cells are the same product made on the same equipment. Varian is looking at a way to fundamentally change the c-Si cell itself. Mullin suggests that the silicon solar cell "is essentiality just a diode" with a semiconductor junction — and the quality of that junction determines the quality of the cell.

Varian has partnered with more than seven Chinese PV manufacturers to insert patterned ion implantation into volume manufacturing by mid-year.

Just as with Suniva, Varian's process will let China's PV module manufacturers reach increased cell efficiency at lower production cost by replacing diffusion doping processes with ion implantation. The new approach eliminates multiple production steps, improves cell uniformity, and can allow tighter module binning.

Suniva has reached 19 percent cell efficiencies with a roadmap to 22 percent using ion implantation, as well as other tricks. Varian claims that patterned implantation provides a roadmap to efficiencies of 22 percent at reduced costs per watt. SunPower, the solar PV efficiency leader, makes production solar cells in the 23 percent range, reaching 24 percent in the lab.

“The strong market interest in [ion implantation] from so many Chinese PV manufacturers further validates the value of implant for manufacturing high-efficiency, low-cost solar cells,” said Varian’s CEO Gary Dickerson.

According to Mullin, solar cell production is not complex — it's basically a six-step process. The current diffusion process is a "blanket process" and the dopant for p-type cells, phosphorous, diffuses into both sides of the cell, although it's only needed on one side. The solar industry either has to mask one side or remove the dopant on the other side. 

Contrast this to the one-sided implant process.

Diffusion is also a high-temperature process which creates a glass layer that has to be removed after the process is complete. Implantation is not a high-temperature process, so there's no need to remove glass.

Advanced Semiconductor Processes

Today, Varian can do blanket emitters with implanted phosphorous as well as patterned phosphorous emitters. Future roadmap products include boron implantation and patterned boron with potential cell efficiencies approaching 23 percent.

The selective emitter design uses a lightly doped emitter without trading off in terms of contact resistance. Implantation is done through a mask to create a heavily doped region below the "fingers" to enable selective emitter structures.

Varian has shipped thousands of semiconductor tools that are currently in the field running 365 days per year. The team I spoke with prided itself on understanding ramp-up and scaling production. The company envisions 18-month, semiconductor-type process improvement cycles finally reaching solar and bringing at least a hint of Moore's Law to the PV industry.

The adoption of ion implant technology by China's solar manufacturers sends a message to the industry's PV efficiency leaders like SunPower that they can't rest on their laurels.

This deal further solidifies Applied Materials position as an equipment supplier to both the semiconductor and solar industries. China's solar manufacturers will continue to be significant customers for Applied. AMAT's stock price was down 0.39 percent to $15.18.