TT-539 -- Solar cell insanity, ebiz news from Japan

* * * * * * * * * T E R R I E 'S T A K E * * * * * * *
A weekly roundup of news & information from Terrie Lloyd.
(http://www.terrie.com)

General Edition Sunday, October 25, 2009 Issue No. 539

+++ INDEX

- What's new
- News
- Candidate roundup/Vacancies
- Upcoming events
- Corrections/Feedback
- News credits

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+++ WHAT'S NEW

An article in the Nikkei last week covered the bullishness
of Osaka Titanium over the world market for polycrystalline
silicon (also known as polysilicon) -- the core material
that high-efficiency photovoltaic (PV) cells are made from.
Osaka Titanium, as the name implies, has been a leading
producer of the lightweight, high-strength metal that was
supposed to feature widely in the engines and fuselage of
the Boeing 787 Dreamliner aircraft. But due to production
delays, the market for titanium is glutted right now, and
Osaka Titanium has decided to turn to and expand its other
major product line, making Polysilicon.

Currently the company produces about 1,400 tonnes of
polysilicon annually, enough to account for around 3 percent of
world production. The company, along with many market
experts, is predicting that after a stalled PV market in
2009, down about 20 percent over 2008 due to the weak economy in
Europe and lower oil prices, demand for PVs will recover
from 2010. We agree with them that this is highly likely
-- especially given the likely return of high oil prices
and further declines in the U.S. dollar. Nomura Securities
says that the demand for polysilicon will be around 105,000
tons by 2012.

Osaka Titanium is sufficiently convinced of the coming
global expansion that it is spending 45 billion yen ($470 million dollars) on a
new production facility to increase the volume of silicon
that it can churn out, expecting to hit around 3,600 tons a
year within two years. This is gutsy move, given that the
company saw its first quarter net profit drop from 3 billion yen
for the same period last year to just 340 million yen this year.
Still, maybe they don't have any choice...

This level of bullishness is duplicated by other Japanese
companies as well, based on what seem to be sensible
predictions of massive growth in the PV sector worldwide.
But we wonder if: a) the demand-side growth predictions are
really believable, and b) even if the volumes are met,
whether there won't be an equally rapid commoditization of
the PV market, much as has happened to RAM chips. If this
happens, then companies like Osaka Titanium may get saddled
with lots of debt (45 billion yen is a lot of cash) plus
spiraling loses in the face of competition from China, as
well as from producers of non-polysilicon PVs
(photosensitive dyes, Thin-film products, etc.).

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[...Article continues]

Right now the Japanese account for about 20 percent of the world's
production of PVs. This is a sharp drop from the commanding
60 percent market share they used to have five years ago. There
are plenty of reasons why Japanese manufacturers have lost
market share so quickly, but the main ones are a lack of
domestic government interest in PVs and legislation to
support their implementation at home, unlike Germany which
until this year was subsidizing installations in a massive
way, coupled with the inevitable foreign catch-up in
knowhow and capital to build factories to compete with
Japan. Then there was that inconvenient silicon shortage in
2007 and last year, as well.

For the record, in 2007 11 Japanese companies produced 23 percent
of global demand for PVs, or about 931MW worth of cells. We
read online that to supply 25 percent of the worlds entire electricity
energy needs with PV cells by 2030, we need to be producing
16 million tons of polysilicon a year -- so there does appear to be
plenty of expansion opportunity left yet.

In the last few months, there seems to have been somewhat
of a resurgence of government interest in solar -- perhaps
as tax revenues have fallen and the guys at METI have
convinced the politicians that PVs are good for reducing
foreign oil reliance. Domestic subsidies and a massive ramp
up of new home installations are being planned. Therefore,
there has been such a surge of factory investment that if
all expansion plans are carried out, Japan will be
producing around 3.5GW of cells by 2010 and a massive 7GW
by 2012. Still, even this rate of growth will only keep
them in the "teens" in terms of percentage of global market
share.

Global growth of the PV market is predicted to explode and
right now solar cells are the fastest growing energy
segment. According to analysts, the PV industry grew 60 percent in
2007, and became a 1.932 trillion yen ($20 billion yen) business. It is
likely to expand to 5.5 trillion yen ($57 billion dollars) by next year
(2010). This means that the market will be somewhere
between 7GW and 17GW in 2010. Needless to say, figures like
these have drawn in tremendous levels of private
investment. Apparently $28.6 billion dollars, or 19 percent of all new global
venture capital/private equity, has been pumped into the
sector over the last 4 years (since 2004).

OK, a little memory test: what was the global demand figure
for solar cells in 2010? Maybe as high as 17GW, but more
likely around 10GW-12GW. The only problem is that the
predicted global production of PVs in 2010 is supposed to
hit 35GW...!

Therefore it is clear that there is going to be a serious
oversupply in PVs from next year -- which can only lead to
substantial price reductions. This is good news for
consumers, but worrying for producers.

Unfortunately for Osaka Titanium, once they get much
further into their factory development, they can't just
turn it off again. In its role of upstream supplier, the
company has already seen its market dynamics change
radically. Whereas in 2005-2006 just 10 companies
globally produced polysilicon in quantity, now over 100
do so in China alone. Yes, many of these have poor
quality control, but their competitive pricing is so
compelling that it is only a matter of time before they hit
the acceptable quality/price ratio and start knocking
Osaka Titanium and its Japanese colleagues out of the
market.

So, needless to say, we won't be buying any Osaka Titanium
shares this year.

*************

If you're not doing anything on Wednesday night, come
celebrate Halloween with us at the Metropolis annual
Halloween Glitterball party. Unlike last year, Metropolis
has promised to limit numbers to 1,500 people -- enough to
feel the energy, but not too much to stop you enjoying the
night. All you can eat and drink, and great entertainment
for just JPY4,000. Metropolis has some fantastic prizes
lined up for best costume -- but of course, we're hoping
that our "ubiquitous salaryman" costume will stand out on
the night and take the prize of a return trip for two to
Singapore!

http://archive.metropolis.co.jp/glitterball%5Fh09/

**************

For over 20 years we have watched the good works of The
Japan Helpline, run by Ken Joseph. Always there 24 hours a
day, 365 days a year, they have been there for the
International Community with help ranging from emergency
assistance to help with day to day problems.

Ken regularly copies us on the many appeals they get from
foreigners all over the country, having personal crises and
begging for help. Ken selflessly responds to each person
and works through their problems -- seeing the police,
talking to immigration, landlords, and embassies, arranging
repatriation of coffins and belongings, and much more
besides.

It's a thankless task, and recently with the financial
crisis the donations to The Japan Helpline have fallen
dramatically. In times like these when things are tough, we
need The Japan Helpline even more. But they rely 100 percent on
private donations to keep going.

So we appeal to our readers to join us in being one of
their "One Hundred Club" members. If just 100 people sign
up to give 3,000 yen per month to Ken's team, they will be
able to cover their costs.

To donate:
https://www.lincmedia.co.jp/jhelp?lang=en
Your support keeps The Japan Helpline going.

...The information janitors/

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+++ NEWS

- Hotels get lots of visitors over silver week
- Cute and cheap, South Korean electric car
- Nishimatsu finally pays war reparations
- Koo says U.S. stimulus needs to continue
- Scientific reason for not mixing fish and red wine

-> Hotels get lots of visitors over silver week

The 5-day Silver Week (a second mini Golden Week) in
September may have been disruptive to regular businesses in
terms of lost productivity, but it had a palliative effect
on major hotels in Tokyo and Osaka. Apparently visitor
nights rose 5.2 percent over the same period last year, with 19
major hotels in Tokyo enjoying an average occupancy rate of
76.4 percent and in Osaka 78.3 percent. While room nights were up,
revenues were down, with most establishments offering at
least 10 percent discounts to guests. (Source: TT commentary from
nikkei.co.jp, Oct 23, 2009)

http://www.nni.nikkei.co.jp/e/ac/tnks/Nni20091022D22JFA14.htm

-> Cute and cheap, South Korean electric car

South Korean start-up CT&T is shipping ultra-cheap 2-person
electric vehicles, for sale in Japan from the week after
next. The plug-in EVs after government subsidies start at
just 1 million yen, and come with a choice of lead-acid or lithium
batteries. The cute cars can travel at speeds of 70km/hr
and when fully charged have a range of up to 120km (lithium
version). (Source: TT commentary from nikkei, Oct 23, 2009)

http://www.nni.nikkei.co.jp/e/ac/tnks/Nni20091022D22JFA01.htm

-> Nishimatsu finally pays war reparations

Major construction company, Nishimatsu, has agreed in a
court sponsored mediation to pay five Chinese wartime
laborers 250 million yen ($2.74 million dollars), and to issue an apology and
build a memorial for those that died during the war and
since. The Supreme Court turned down an appeal in 2007 from
the plaintiffs for damages, on the basis that China had
already given up its right to future claims for war damage
upon its signing of the Japan-China Joint Statement in
1972, and that individuals have no right to seek such
reparations. ***Ed: Although this was a private settlement,
Japan would do well to copy the German response and face up
to its history. In doing so, it will earn a lot less
ill-will elsewhere in Asia. May we also be so bold as to
suggest that Nishimatsu's major projects in China and Hong
Kong might have had something to do with the decision to
settle? Either way, it was the right/smart thing to do.**
(Source: TT commentary from xinhuanet.com, Oct 23, 2009)

http://news.xinhuanet.com/english/2009-10/23/content_12309262.htm

-> Koo says U.S. stimulus needs to continue

Leading Nomura Research economist, Richard Koo, has made a
public statement recommending that the U.S. does not step
back from its current stimulus efforts, despite an apparent
recovery in the markets. Koo says this would be a huge
mistake and will lead the U.S. to experience a recession of
the order that Japan suffered in the 1990's and early
2000's. Koo says that the U.S. government needs to stay its
course for at least three to five more years, until
consumer savings improve and can replace government
spending again. Koo says that the Japanese 1990 stock
market implosion caused a loss of JPY1,500trn (US$16trn) in
shareholder wealth. (Source: TT commentary from
bloomberg.net, Oct 23, 2009)

http://www.bloomberg.com/apps/news?pid=20601068&sid=a5682ThUSwY4

-> Scientific reason for not mixing fish and red wine

While it seems like commonsense not to mix most fish dishes
(perhaps seared tuna is an exception) with red wine, now
Japanese scientists at wine producer Mercian have found
that the iron content in red wine appears to accentuate the
fishy taste and smell of seafood and thereby makes it less
appealing. Mercian ran tests with subjects eating scallops
with various types of wines and spirits and found that
they could accentuate the fishy taste and smell by
artificially increasing the iron content of the red wine.
***Ed: Some very interesting comments to this article at
the original website. Go check them out.** (Source: TT
commentary from sciencemag.org, Oct 22, 2009)

http://sciencenow.sciencemag.org/cgi/content/full/2009/1022/2

NOTE: Broken links
Many online news sources remove their articles after just a
few days of posting them, thus breaking our links -- we
apologize for the inconvenience.

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+++ CANDIDATE ROUND UP/VACANCIES

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+++ UPCOMING EVENTS/ANNOUNCEMENTS

--------------- CCH Labor Law Seminar ---------------------

Labor and Employment Law Update seminar.

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Date: Thursday, November 19, 2009 1:30PM-5:00PM
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Fee: 20,000yen +Tax

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-----------------------------------------------------------

***------------------------****-------------------------***

+++ CORRECTIONS/FEEDBACK

In this section we run comments and corrections submitted
by readers. We encourage you to spot our mistakes and
amplify our points, by email, to editors@terrie.com.

*** To all those readers of TT538 who pointed out that the
Yen-Dollar rate didn't drop to 50 yen in 2001, clearly we
had a typo. The forecast was for the dollar to fall to 50
yen next year -- 2010. Got the "1" in the wrong column!

*** Concerning visas and health insurance in TT534.

Reader comment: Great commentary in your Terrie's Take 534
(September 24, 2009) that I forwarded to many here in
Kansai. It made its way into the mailbox of a General Union
Rep who sent me a thanks for passing it on.

Anyway, for my 2 yen worth, when I resigned from Onkyo last
year, I noticed that my payments for and coverage from
health insurance (through the Japan Electrical Workers
Union) immediately ceased on the final day of my
employment. I am now covered by TJK (www.tjk.gr.jp/) as a
"regular salaryman". I can only assume these organizations
handle health insurance or claims on behalf of the
government, but it is unclear as to whether or not one is
required to continue to pay if the employment contract
finishes.

So, it may all be very well to make it a legal requirement
to pay into these programs, but the transparency of how it
will actually work in practice is still unclear.

==> Our response: We think you'll find that you are supposed
to start paying in to the Kokumin Kenko Hoken program as
soon as you lose your job or become unemployed...

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