Solar Meltdown

Solyndra’s implosion this week has invited widespread speculation about just what went so completely wrong at the solar panel company. The bigger issue, though, may be less about this company and more about the intersection of business and technology.

It’s easy to get dazzled by technology in the solar market. What’s green is good and Solyndra has been a poster child in this sector. Even its core substrate material sounds cool—copper indium gallium selenide, or CIGS. The problem is that while it’s cool it’s also rather exotic. And as anyone in the semiconductor manufacturing business knows, it’s hard to sell technology at a premium if customers don’t feel the technology is worth the extra price.

Solyndra’s lightweight, rapid-installation solar panels.

There has been plenty of money invested in Solyndra. The U.S. Department of Energy issued a $535 million guaranteed loan, and President Obama praised the company as a success story in renewable energy. In retrospect it should have been renewable energy that received praise, not a particular company or a particular technology.

While this kind of one-upmanship is interesting to the companies working in the PV market—and frequently in the electronics industry as a whole, where it’s easy to get distracted by the promise of lower energy costs or longer battery life—that has to be weighed against some hard economic research. What is the customer really willing to pay? In the case of solar panels, most customers already believe the cost is too high and the payback takes too long. In the case of low power SoCs, the difference may be measured in pennies. Adding cost to the equation with unusual materials and more complicated manufacturing techniques simply may not be profitable.

The chip industry has learned many lessons about manufacturing over the past half century, often the hard way. While fully depleted SOI holds promise, the majority of the industry still subsists on bulk CMOS. It’s proven, cheap and plentiful—even if its demise has been looming for more than a decade. Moreover, most of the semiconductor industry has decided it’s not in their best interest to actually build devices themselves.

What’s strange is that the solar industry hasn’t learned the same lessons, even at older process nodes. Most companies can’t manufacture PV cells profitably. No one can get an additional premium for using different materials. And the majority of investments in this relatively new technology will fail because the market is overcrowded.

The bottom line is that if the technology isn’t radically different, then the only real differentiator is cost, and that means far more limited innovation until the ranks of companies competing in this market are substantially thinned out. At that point the market should pick up substantially, and investments can be made in the kinds of technology that Solyndra has been driving.

Good business practices, excellent timing, and reasonable technology will make a successful company. Excellent technology, over-exuberant business optimism and bad timing will not—even with the coolest technology on the planet.