Discussion Case TW-2001-2
AstroPower West, LLC1
AstroPower, Inc. (www.astropower.com), the largest US-owned manufacturer of solar electric power products, began as a division of Astrosystems Inc., founded in 1983 as an outgrowth of semiconductor research at the University of Delaware. In 1989, the company was incorporated in Delaware, and grew rapidly. In the several years up to 2001, Astropower was the fastest-growing major manufacturer of solar electric (photovoltaic, PV) cells, moving into the fifth position in world market share (Figure 1). The firm supplied products worldwide, and had regional offices in the US, South Africa and Singapore.
Its investors were happy: in November 1999 the firm was named by Industry Week as one of the 25 most successful small manufacturers in the US. Then in December 2000 AstroPower was added to the S&P SmallCap 600, and in February 2001 was ranked 39th on Business Week’s Top 50 S&P Small Cap Company list for one- and three-year stock performance. Its employees were happy too: by successfully competing against some of the world’s largest electronics and energy corporations, Sharp, Siemens, BP, Sanyo, Mitsubishi and others, Astropower had created jobs for over 430 people, and plans were in place to for further expansion. AstroPower West, LLC is the newest business unit of the company, operating from Concord, California near San Francisco with the directive of developing residential, commercial, and utility business in the US. Figure 1.
Source: Solarbuzz, Inc.
Leading-edge technology was a significant factor in this success. In May 2000 the firm introduced a new line of 8 inch solar cells and power modules, the largest and most powerful solar cells commercially available. The new AP-108 and APx-208 cells generated approximately twice the power of a typical 5" solar cells, currently the most widely utilized solar cell in the industry. Since many of the costs associated with the processing and handling of solar cells do not increase directly with size, larger solar cells tend to be less expensive per Watt of generated power. The firm hoped 1
This case was prepared by Associate Professor Todd A. Watkins solely as the basis for class discussion. It is not intended as representative of effective decision-making. Some facts have been modified to facilitate the case’s teaching purposes.
AstroPower West, LLC
this new generation of technology and more attractive costs would combine with media attention to the California electricity supply crisis to accelerate what had been relatively slow growing overall consumer interest in solar power.
Unfortunately, capacity bottlenecks were endangering AstroPower’s growth. To handle expected demand, plans were being laid to expand AstroPower’s main manufacturing center in Newark Delaware’s Pencader Business Park area. Barnet had recently issued a press release about Astropower’s expansion plans:
ASTROPOWER ACCELERATES CAPACITY EXPANSION PLANS
NEWARK, DE – AstroPower, Inc. (NASDAQ:APWR), a leading supplier of solar electric power products, today reported an acceleration of its capacity expansion plans. "We continue to be capacity-constrained, in spite of more than tripling our manufacturing capacity over the past three years", said Dr. Allen M. Barnett, President and CEO of AstroPower. "At the time of our follow-on [stock] offering last fall, our plan was to increase capacity to 25 megawatts by the end of 2000. Over the past few months, we have increased this target to 30 megawatts, and have recently adjusted it further to 35 megawatts. We plan to further accelerate our plans for 2001 as well. Our customers continue to want more product than we can currently deliver, and we have had to decline a large number of orders from existing customers and inquiries from new prospects. We need to change that situation, and capacity expansion is the principal way to...
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