Posts Tagged ‘Merlin Technology’

by Matt Margolis

I reached to for GTAT for comment and the company representative declined to discuss who GT works with on its technology development programs.

Background

GT Advanced Technologies (GTAT) mentioned during the Q4 2013 prepared remarks that its Merlin technology, “comes out of a research operation we established in the Bay Area, over a year ago, to focus on advancing the state of the art in the design and assembly of solar cells and modules”. GT referred to a “research operation,” which immediately set off my alarm that Merlin product was not tested inside a Bay Area PV module warehouse, but instead it came out a R&D facility located in the Bay Area. GT does not have a R&D facility or even an office inside the Bay Area, which only leaves one option; a research lab that is run by a leading PV module maker.

Merlin the Magnificent

Merlin is GT’s solution to improving the downstream solar equipment marketplace. The Merlin PV module offers a drastic improvement over current PV modules in 5 key areas; total system cost, solar cell efficiency, weight, flexibility and durability. GT’s Merlin technology is expected to deliver a total cost reductions of over 10% and cut silver paste use by up to 80%. The drop in silver paste usage as a result of Merlin’s patented design results in a lighter PV module, which may explain Merlin’s improved flexibility over other PV module designs. Additionally, Merlin demonstrated the ability to improve solar cell efficiency by 0.7% as well as significantly improving overall module durability. A solar cell efficiency gain of 0.7% doesn’t sound like much but when most solar cells are hovering around 17% it represents a 4% improvement. GT’s Merlin PV module technology is “agnostic,” and will improve the efficiency of any type of solar cell. GT also informed investors that Merlin would not be sold exclusively to any one potential customer, which opens the door for all PV module makers to enjoy GT’s game changing technology. Images below were taken from GT’s March Technology briefing.

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GT’s Long Term Relationship with Yingli

If I was to develop a game changing technology with a PV module maker I would not only want to the biggest fish but I would want someone I trust. Someone that I have worked with years! As it turns out Yingli Green Energy (YGE) not only was ranked #1 in 2013 for producing PV modules, but their relationship with GT Advanced Technologies (formerly GT Solar) goes back to 2002, when Yingli became GT’s first customer in China. Also, if you look at the various orders placed over time by Yingli the press releases contain language that translates to “hey scratch my back and I’ll scratch your back.” If you don’t believe me, read these comments between GT and Yingli’s within this order announcement from 2010 to that is focused on celebrating GT Solar’s 1000th DSS450 Crystalline Ingot Growth Furnace shipment as well as the very close relationship between the companies.

GT Solar International, Inc. (NASDAQ: SOLR), announced that it has achieved the milestone shipment of its 1,000th DSS450TM crystalline ingot growth furnace. The recipient of the system is long-time Chinese customer Yingli Green Energy Holding Company Limited.

 

GT Solar is a trusted and valued partner for Yingli,” said Mr. Liansheng Miao, chairman and chief executive officer of Yingli Green Energy. “Their ingot growth furnaces consistently produce high quality material which helps to reinforce our company’s reputation for delivering reliable products to our customers.

We are pleased that Yingli continues to express confidence in our ingot growth technology,” said Tom Gutierrez, president and chief executive officer of GT Solar.

Yingli Green Energy became GT Solar’s first customer in China in 2002 when they set up the first ingot, wafer and cell production lines at their Baoding headquarters. These production lines launched Yingli into the PV manufacturing industry and today they are one of the world’s leading fully vertically integrated PV manufacturers. Yingli has continued to invest in GT Solar’s multicrystalline ingot growth furnaces including the DSS240, which was introduced in 2003, and the current DSS450, which was introduced in 2007. Today, GT Solar has shipped over 1300 crystalline growth furnaces to customers around the world.

It’s very clear that Yingli and GT have a mutually beneficial relationship and both companies have admiration and appreciation of the benefits that have resulted from their long partnership. GT has enabled Yingli to continue to be a leader in the PV module space while Yingli’s investment in GT equipment has allowed GT to expand its business and invest money in its R&D to support the next generation of equipment that will benefit Yingli even more.

GT typically goes after strategic deals with the best and the biggest companies in their target market (i.e. Apple for sapphire), so it only makes sense that GT would reach out and try to work with one of the top 3 PV module makers in the world. According to Solarbuzz 2013 rankings the top 3 PV module makers were

  1. Yingli Green Energy
  2. Trina Solar
  3. Sharp Solar

So far I have focused on GT’s Q4 prepared remarks that indicated GT’s patented Merlin technology came out of a research operation in the Bay Area over a year ago. Secondly, I dug into GT’s closest and longest relationship with a PV module maker by the name of Yingli, that was consummated in 2002. Lastly, I provided 2013 Solarbuzz rankings of the top 10 PV module makers and focused on the top 3, which included Yingli. The only item that is missing to connect the dots is a R&D facility that is run by a leading PV module maker inside the Bay Area. As it turns out, Yingli opened up a Bay Area R&D facility in 2011 with the primary focus of accelerating their understanding of module performance and reliability. Yingli’s R&D facility located in the Bay Area is the perfect facility for GT to battle test its Merlin technology and truly understand how Merlin stacks up against the competition.

Yingli Opens up a Bay Area R&D Facility in 2011

Yingli announced on July 12, 2011 that the company was opening up a R&D facility in the San Francisco Bay Area for comprehensive product testing and evaluation. Furthermore, the announcement indicates that the new research and development lab will accelerate the company’s understanding of module performance and reliability. Additionally, R&D facility lab will allow Yingli to evaluate new technologies and deliver next generation products.

Yingli Americas also announces the opening of a new research and development facility in South San Francisco for comprehensive product testing and evaluation.

“Our new research and development lab will accelerate our understanding of module performance and reliability,” said Brian Grenko, Director of Operations for Yingli Americas. “This investment will enable us to more quickly evaluate new technologies, deliver next generation products, and better serve our customers throughout all stages of a project’s life cycle.”

“We now have the ability to offer product testing and development support within the U.S. for our customers here,” added Mr. Petrina. “We plan to use this new facility to proactively address market opportunities and trends to better support our pre- and post-sales efforts – a sign of our continued dedication to technical leadership.”

Image from Yingli

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Image from Yingli

Additional Images of Yingli’s PVTL obtained from Greentechmedia

Conclusion

GT mentioned that Merlin came out of a research operation that was established over a year ago. I was able to retrieve a copy of GTAT’s “Investing in Continued Growth and Diversification” presentation, that was discussed in August 2012 during Canaccord Genuity Growth Conference (image below). GT’s 2012 presentation clearly indicates its intentions of heading downstream and venturing into Module Manufacturing. The August 2012 presentation states GT is, “considering opportunities to move downstream solar equipment market to support next generation solar cell and module manufacturing.” As it turns out, it took GT less than 2 years to introduce Merlin as an opportunity and then bring it to the market. GT’s module manufacturing opportunity, which officially was introduced as “Merlin” technology, is referenced in the second bullet point in the image below.

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I’ve established clear evidence that GT’s Merlin PV module technology fits like a “T” within the primary scope of Yingli’s Bay Area PV Testing Lab’s that was established over 2 years ago in 2011. The contract announcement in 2010 between GT Solar (renamed to GT Advanced Technologies) clearly exhibits the co-dependencies, trust as well as a high level of engagement between both companies. Additionally, Yingli has been ranked near the top of the PV module supplier charts for the last several years. I believe Yingli is the “unnamed” collaborative resource, that helped GT battle test and monitor the results of GT’s game-changing Merlin technology within their Bay Area research operation, that opened its doors in 2011.

According to the market research firm IHS, Yingli claimed the #1 spot again in 2013 as the biggest PV module supplier, increasing the company’s market share from 7.4% (2012) to 8.3% in 2013. Solarbuzz reported that the top 2 PV module suppliers (Yingli and Trina Solar (TSL) accounted for 15% of PV module shipments in Q4 2013. Trina Solar is also long term customer of GT and has placed over $70m of solar equipment orders with GT since 2008. Trina Solar placed a $49m Polysilicon reactor order in 2008 and a DSS equipment order totaling $24m in 2010.

GT indicated that Merlin could generate $1B a year in annual sales based on a 20% market adoption rate by 2018. Yingli and Trina Solar have a combined PV module market share of 15% as of Q4 2013. GT likely “battle tested” Merlin at Yingli’s R&D facility in the San Francisco Bay Area and Trina Solar has been a long time GT solar equipment customer since 2008 or earlier.  GT is well positioned to sell Merlin to the top 2 PV module suppliers in the world and drive Merlin’s market adoption rate above 15% and generate over $800m of annual revenue from with just two customers much sooner than previously expected.

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GT’s CEO Tom Gutierrez indicated during the March technology briefing that, “we don’t build the trap and wait for the mice, we work directly with the customer to find out what they want”. I just hope GT has enough cheese to feed all the mice that will come crawling through the door for a bite of GT’s Merlin technology. Furthermore, it wouldn’t surprise me in the least, if Yingli and GTAT celebrate their long tenured relationship and continued partnership within Merlin’s inaugural order announcement in the 2H of 2014.

 

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Merrimack Expansion, Renovation and Shift from R&D to Manufacturing

GTAT was granted approval on April 1, 2014 by the Merrimack Planning Board.  The memorandum dated March 27, 2014 sheds significant light on GTAT’s sense of urgency and dramatic shift in plans to respond to customer behavior, specifically global manufacturing partners.  GTAT will be constructing a 46,000 square foot building expansion and 117,532 square foot renovation of the existing facility located in Merrimack, NH at 243 and 247 Daniel Webster Highway.  The project is targeting an “aggressive” completion target of Fall 2014 based on the correspondence between Merrimack’s Community Development Director and the Planning Board Chairman.  The current Merrimack facility measures 117,532 square feet, the approved expansion would bring the facility to 163,532, which represents a 39% increase in the size of the facility.  The memo also details GT’s plans to shift the facility from an R&D and test facility to a manufacturing facility.  The memo cites “recent contacts at  global manufacturing partners are driving the need to grow their current facility.”

  • Recent contacts at global manufacturing partners are driving the need to grow their current facility
  • The existing facility will be renovated to support the company’s manufacturing processes rather than the research and testing operation currently in use.
  • The company would be making a significant investment in replacing their outdated and obsolete equipment and installing additional equipment to support their manufacturing use.
  • The applicant is requesting the waiver to allow the plan to be recorded in the fall, following boundary survey and completion of an as built plan

Merlin Interconnect Technology

GT’s Technology briefing held on March 14 introduced several new products that will have a significant impact on GT’s top and bottom line that are expected to come online by early 2015.  Some of the new products that are expected to grow significantly over next several years, include GT’s Merlin Advanced Metallization and Interconnect Technology along with their Hyperion 4.  The presentation on 3/14 indicated that Merlin was expected to be “ramp ready for solar scale volumes in CQ4, 2014.”  GT’s CEO Tom Guiterrez also indicated during the conference that if Merlin’s adoption rate approached 20% of the potential market than GT would likely look to bring the manufacturing of the product in-house.

According to GT’s presentation a 20% adoption rate of Merlin would be worth approximately $1B in annual revenue by 2018.

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Hyperion 4

GT’s presentation on 3/14 also indicated that Hyperion 4 is “now ready for commercialization” and that they were expecting orders for the  Hyperion Accelerator in 2014.  As of 5 weeks ago, GT was already working closely with a variety of Hyperion 4 interested parties across several target markets.  In the Power Electronics space they were working with a device manufacturer.  In LEDs they were engaged with lead customers and in the Consumer Electronics & Industrial Applications GT is focused on low-cost sapphire lamina.  In the Solar and Semiconductor space GT was already reviewing samples with a lead customer in Asia.  Lastly, in the Military and Medical market GT was working towards receiving a PO in 2014.  The Merrimack expansion and renovation of the current facility could be related to a significant order of Hyperion 4 tools that need to be delivered in 2015.

 

Hyperion 2

 

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Obscure Analyst Takeaway

GTAT’s expansion plans refer to “recent contacts at global manufacturing partners are driving the need to grow their current facility”.   The shift of converting an R&D and test facility into a manufacturing operation with a targeted completion date in just 6 months is a signal of a major deal or a number of significant deals in the works from one or several of GT’s global manufacturing partners.  Due to the timing and sense of urgency of the submitted expansion and renovation plan, I currently do not believe the facility expansion and conversion of the facility from R&D to manufacturing was included within the relative magnitude of GT’s 2015 or 2016 market opportunity slides that were presented on March 14.   Any recurring revenue will be generated from GT’s newest manufacturing facility located in Merrimack, NH beginning in 1H2015 is likely to be incremental to the current Wall Street 2015 and 2016 revenue and EPS projections. I’m modeling an additional $0.13 EPS contribution for every $100 million of sales that will be generated from this new manufacturing facility beginning 2015, assuming a 35% margin and 148 million shares outstanding. 

 

Full Disclosure: I am long GTAT and have no plans to buy or sell any holdings

GT’s Merlin Technology evolved from GT Equipment Technologies’ Patent US 6620645 B2 titled: Masking and connected bus bars on solar cells.
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The abstract and (Images):
A method for fabricating multi-cell solar devices using thermal spray deposition techniques to spray metal powder directly on solar cells and on the backing upon which solar cells are assembled, to form collection grid lines, bus bars, electrodes and interconnections between solar cells.

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The Invention:

The invention relates to the application of bus bars for interconnecting solar cells, and in particular to thermal spray depositing of bus bars across the grid line surfaces and the back surfaces of solar cells to form interconnections for a sequence of solar cells to make a solar panel.

The Issue with today’s Process

In the prior art process, the tabbing machine is very complex, combining mechanical parts that move and cut tabs and electrical parts that heat up the cell surface and solder the tabs. Moreover, for the soldering of tabs on the back side, an extra step is required for screen-printing the silver pads. This adds to the cost of machines and working space, as well as to production time and costs, since extra machines for printing and baking are necessary.

Summary of Benefits

Enables interconnection of cells to be completed in less time and at a lower cost than current methods

  • Allows connections directly to a single- or poly-crystalline silicon solar cell and of interconnections between cells.
  • Enable the interconnection of solar cells by a single apparatus instead of multiple-step, tabbing and stringing equipment as is currently practiced (no more equipment!)

Higher electrical and mechanical quality and improved solar/electric conversion efficiencies

Sprayed metal particles have high velocity and temperature, the coating made by these particles has strong bonding with the substrate materials.The thermal spray system is the only apparatus needed for the whole process.

  • Replaces machines for mechanical handling and electrical soldering of tabs
  • Replaces an extra screen-printing machine and a baking oven for the silver pads
  • Reduces the required investment in processing equipment.

No restriction to the metal that can be used if it is available in the form of a fine powder suitable for spray techniques.

  • Silver, copper, aluminum, nickel, gold or any of their alloys are good candidates and more
  • Suitable thermal spray methods include any form of the commercially available spray deposition techniques, such as arc plasma spray, flame spray, HVOF, and laser spray.

Conclusion:

This technology does sound “magical,” one spray bottle can replace equipment, soldering,  printing and baking equipment.  The technology will reduce weight, reduce costs and take a bite out of the metallization paste providers top and bottom lines (DuPont, Heraus, and Giga Solar Materials).  The thermal spray can utilize any any fine metal powder so the application being showcased today might be for solar, but it could be broadly applied to the electronic devices and minimize the need for soldering all together.  Merlin, reminds me of Willy Wonka’s patented three-course dinner inside of a little piece of gum, because one little bottle of thermal spray certainly packs a heavy punch!

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~Obscure Analyst 3/13/14

Full Disclosure: I am long GTAT and have no plans to buy or sell in the next 72 hours

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