Tek Seng set to triple production capacity

GEORGE TOWN: Tek Seng Holdings Bhd, a solar cell maker, is expanding its production capacity to triple its existing size this year.

Group managing director Loh Kok Beng told StarBiz that the group would spend RM237mil on its existing premise this year to add five more production lines and a facility in Penang Science Park to increase the production capacity to 740MW by the third quarter.

At the moment, the group’s production capacity is around 270MW, utilising four production lines.

“The new investment will raise the contribution of the solar panel business to 60% to 70% of the group’s revenue for 2016,” Loh said in an interview.

In the first and second quarters of 2016, the production capacity per month will be 5.6 million pieces of solar cells.

“The order book for the two quarters are already filled up,” Loh said.

When the lines are fully installed in the third quarter 2016, the group will be able to produce 740MW of solar power, which is equivalent to about 156 million pieces of cell, valued at around US$250mil in today’s market.

The price of solar cell is about US$1.61 per piece, compared to US$1.40-US$1.50 per piece a year ago.

The price of silicon wafer, the key ingredient of solar cell, is 90 US cents compared to 80 US cents a year ago.

Tek Seng’s solar cells are sold mainly to Taiwan, China, the US, Canada and Eastern Europe.

On its polyvinyl chloride (PVC) flooring and packaging product business, Loh said the bottom line of the PVC business should stay flat in 2016, despite the drop in PVC resin prices to US$700-US$800 per tonne from US$1,000 per tonne last year, lowering production cost by 25%.

“This is because the buying power from emerging markets has been affected as their currencies have depreciated against the greenback, raising their import costs.

“Another reason is because about 60% of the production cost are used for importing raw materials in US currency,” he said.

According to a IHS Technology report released in November 2015, the global market for solar panels is expected to soar to a record high in the first half of 2016 because of strong demand as well as favourable policies in the US and China.

The report said that in the first half of 2016, solar panel manufacturers would produce almost 35 gigawatts (GW) of solar panels, compared to 27.9 GW produced in the same period in 2015.

One gigawatt is nearly the equivalent energy produced by a large gas or nuclear plant.

“However, in the second half of 2016 and into 2017, growth is expected to slow after the US lowers its solar tax credits and a push by China to install more panels ends,” the report said.