SMU-18-XXX This case was written by Professor GENG Xuesong and Lipika Bhattacharya at the Singapore Management University. The case was prepared solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality. Copyright © 2017, Singapore Management University Version: 2017-2-5 SMU Classification: Restricted REC SOLAR: STRATEGISING ON A SOLAR COASTER I keep a list on my desk; I have to keep reminding myself, that there are over 450 solar companies that have failed, and gone bankrupt. There’re many stories of companies that have made the wrong technology bet or invested in a technology before it’s time. You have to pick the right technology, at the right time, and it’s a very serious decision because you are, really are betting the company on those decisions. - Steve O’Neil, Chief Executive Officer, REC Solar On a sunny afternoon of May 2017, Steve O’Neil, CEO of REC Solar (REC), a leading company in the solar industry, was attending a meeting in the company’s operational headquarters in Singapore. His hand phone had been vibrating relentlessly and he finally took the call after the meeting had just finished. He was informed that yet another solar company, Solar World, had filed for bankruptcy. Just a few weeks earlier, two renowned solar companies, Suniva and Sun Edison had filed for bankruptcy as well. The solar industry was sailing on choppy seas again. The industry had been in constant turmoil over the past several years due to fluctuating material prices, falling solar panel prices, industry overcapacity, aggressive competition, and demand unpredictability. As O’Neil called it, the industry was truly a “solar coaster”. More than a decade ago in 2005, the shortage of silicon supply had forced many solar companies to close down or opt for consolidations. In 2008, solar companies suffered badly from the aftermath of the global financial crisis. The industry gradually picked up pace in 2013, gaining momentum from rapid customer adoption and new renewable energy programmes. High profitability and growth motivated many companies to expand capacity substantially. But in late 2016, the solar industry began riding the downslope of the “solar coaster” again, as panel prices fell suddenly. 2017 looked a tough year financially for REC. O’Neil and his top management team had to respond quickly to the market changes. Could REC offer a price-cut on products to stay competitive? Could REC diversify their product scope and geographic scope to minimise the market uncertainty? They also needed to examine whether their long-term strategy was still viable for sustaining the competitive advantage in the ever-changing market. Could REC focus on developing advantages in manufactur ...

1. SMU-18-XXX
This case was written by Professor GENG Xuesong and Lipika
Bhattacharya at the Singapore Management University.
The case was prepared solely to provide material for class
discussion. The authors do not intend to illustrate either
effective or ineffective handling of a managerial situation. The
authors may have disguised certain names and other
identifying information to protect confidentiality.
Copyright © 2017, Singapore Management University Version:
2017-2-5
SMU Classification: Restricted
REC SOLAR: STRATEGISING ON A SOLAR COASTER
I keep a list on my desk; I have to keep reminding myself, that
there are over 450 solar
companies that have failed, and gone bankrupt. There’re many
stories of companies that

2. have made the wrong technology bet or invested in a technology
before it’s time. You have
to pick the right technology, at the right time, and it’s a very
serious decision because you
are, really are betting the company on those decisions.
- Steve O’Neil, Chief Executive Officer, REC Solar
On a sunny afternoon of May 2017, Steve O’Neil, CEO of REC
Solar (REC), a leading company
in the solar industry, was attending a meeting in the company’s
operational headquarters in
Singapore. His hand phone had been vibrating relentlessly and
he finally took the call after the
meeting had just finished. He was informed that yet another
solar company, Solar World, had
filed for bankruptcy. Just a few weeks earlier, two renowned
solar companies, Suniva and Sun
Edison had filed for bankruptcy as well.
The solar industry was sailing on choppy seas again. The
industry had been in constant turmoil
over the past several years due to fluctuating material prices,
falling solar panel prices, industry

3. overcapacity, aggressive competition, and demand
unpredictability. As O’Neil called it, the
industry was truly a “solar coaster”. More than a decade ago in
2005, the shortage of silicon
supply had forced many solar companies to close down or opt
for consolidations. In 2008, solar
companies suffered badly from the aftermath of the global
financial crisis. The industry gradually
picked up pace in 2013, gaining momentum from rapid customer
adoption and new renewable
energy programmes. High profitability and growth motivated
many companies to expand
capacity substantially. But in late 2016, the solar industry began
riding the downslope of the
“solar coaster” again, as panel prices fell suddenly. 2017 looked
a tough year financially for REC.
O’Neil and his top management team had to respond quickly to
the market changes. Could REC
offer a price-cut on products to stay competitive? Could REC
diversify their product scope and
geographic scope to minimise the market uncertainty? They also
needed to examine whether their
long-term strategy was still viable for sustaining the
competitive advantage in the ever-changing

4. market. Could REC focus on developing advantages in
manufacturing, technology or service?
Could REC scale up the investment in new but uncertain
technologies? In spite of the current
turbulence in the market, O’Neil firmly believed that the solar
industry was on the cusp of
tremendous growth. The growth potential of the market was so
huge that REC could potentially
double its market share, while still being selective in choosing
their customers. Nevertheless, the
question of how REC’s current strategy could be changed
weighed heavily on his mind.
Solar Market
Solar technology dated back to the 1880s, and was based on the
science of converting sunlight
into electricity using crystalline silicon, also known as the
photovoltaic (PV) effect. High cost
and low conversion efficiency had prevented its commercial use
until technological advances in
the late 1990s made solar power more affordable. Ever
decreasing cost coupled with growing
energy demand, concerns about the dwindling sources of

5. traditional energy and their
SMU-18-0XXX REC Solar:
Strategising on a Solar Coaster
2/20
SMU Classification: Restricted
environmental impact, as well as various forms of governmental
subsidies, finally led to an
exploding global demand for solar power energy after 2008.1
Solar energy had become the fastest growing renewable energy
source by 2016. Globally, solar
panel installation had grown from less than 1 gigawatts (GW) in
1990 to over 23GW in 2009,
and then soared to 70GW in 2016. It was projected to grow to
250GW annually by 2040 at the
average compound annual growth rate (CAGR) of 5 to 7%. Solar
power was estimated to account
for around 15% of world electricity generation by 2040, up from
about 1% in 2016.2

6. The cost of solar power had dropped from US$2/kWh (per
kilowatt hour) in late 1970s to around
US¢ 7¢/kWh in 2016.3 As a comparison, the cost for
hydropower was about US¢ 0.85¢/kWh,
US¢ 1.7¢/kWh for nuclear, US¢ 2.13¢/kWh for fossil fuel, and
US¢ 3.4¢/kWh for natural gas.4
It was estimated that solar power cost would further decrease to
around US¢ 4¢/kWh by 2040.5
The development of the solar industry had been primarily
policy-driven.6 Germany had taken
the lead by providing generous subsidies to solar panel
manufacturers in the early 2000s. Spain,
Italy and France had followed with similar measures. By 2010,
Europe alone had accounted for
74% of the global demand for solar modules.7 However, after
the 2008 global financial crisis,
these countries had dramatically curtailed their solar energy
programme subsidies. Asia had
replaced Europe as a substantial solar market and reached 65%
of the total global demand in
2017.
Japan had become an important market in mid-2000s with its
ambitious plans of using solar

7. power for large scale electricity generation.8 In 2003, Japan
introduced laws which made it
mandatory for electric companies to use a specified amount of
electricity from renewable energy
sources such as solar and wind. In China, the government had
identified solar industry as one of
their focus areas, and offered export credits and R&D support to
boost solar products
manufacturing since 2000.9 China had taken the lead over
Germany as the largest solar panel
manufacturer in the world in 2013 and became the most
dominant solar player of the decade. The
market in the U.S. had also picked up substantially since 2010.
With the government
incentivisation schemes, the demand for solar products in the
US continued to grow exponentially
since 2013 with the state of California dominating the U.S.
market demand.10
The newly installed solar capacity in 2016 globally was around
34GW in China, 7.7GW in the
U.S, and 7GW in EU.11 China, EU, and the U.S. were expected
to dominate solar PV installation
volumes through 2020, but market growth was expected to be

8. particularly higher in Asia.12 The
Japanese government continued to support the solar industry
with the ambition of increasing its
1 Gil Knier, How do Photovoltaics work?, NASA, 6 August,
2008, https://science.nasa.gov/science-news/science-at-
nasa/2002/solarcells, accessed May 2017.
2 Bloomberg New Energy Finance, New Energy Outlook 2016,
https://about.bnef.com/blog/new-energy-outlook-2016-watch-
the-
story-unfold/, accessed May 2017.
3 Jeff Siegel, Chris Nelder “Investing in Renewable Energy:
Making Money on Green Chip Stocks”, Jhon Wiley & Son’s.,
Inc,
2008, accessed May 2017.
4 http://www.wvic.com/Content/Facts_About_Hydropower.cfm
5 Bloomberg, New Energy Outlook,
https://www.bloomberg.com/company/new-energy-outlook/,
accessed May 2017.
6 World Energy Council, Solar,
https://www.worldenergy.org/wp-
content/uploads/2017/03/WEResources_Solar_2016.pdf,
accessed May 2017.
7 National Renewable Energy Department, U.S. Department of
Energy, 2010 Solar Technologies Market Report,
https://www.nrel.gov/docs/fy12osti/51847.pdf, accessed May
2017.

9. 8 David Cyranoski, Japan goes for the sun, “Nature.com”, April
29, 2009,
http://www.nature.com/news/2009/090429/full/4581084a.html,
accessed May 2017.
9He Nuoshu, Can Brazil replicate China;s success in Solar?,
“China Dialogue”, 20June, 2017,
https://www.chinadialogue.net/article/show/single/en/9865-Can-
Brazil-replicate-China-s-success-in-solar-, accessed May 2017.
10 Daniel Wood, Watch 30 years of U.S. Solar Industry Growth,
“Energy.gov”, US Department of Energy, January 30, 2015,
https://energy.gov/articles/map-watch-30-years-us-solar-
industry-growth, accessed May 2017.
11 Bloomberg New Energy Finance, New Energy Outlook 2016,
https://about.bnef.com/new-energy-outlook/, accessed May
2017.
12 Brian Publicover, APVIA sees steady Q1 growth in Asian
PV, “PV Magazine”, May 26, 2017, https://www.pv-
magazine.com/2017/05/26/apvia-sees-steady-q1-growth-in-
asian-pv/, accessed May 2017.
https://science.nasa.gov/science-news/science-at-
nasa/2002/solarcells
https://science.nasa.gov/science-news/science-at-
nasa/2002/solarcells
https://about.bnef.com/blog/new-energy-outlook-2016-watch-
the-story-unfold/
https://about.bnef.com/blog/new-energy-outlook-2016-watch-
the-story-unfold/
http://www.wvic.com/Content/Facts_About_Hydropower.cfm
https://www.bloomberg.com/company/new-energy-outlook/
https://www.worldenergy.org/wp-

10. content/uploads/2017/03/WEResources_Solar_2016.pdf
https://www.nrel.gov/docs/fy12osti/51847.pdf
http://www.nature.com/news/2009/090429/full/4581084a.html
https://www.chinadialogue.net/article/show/single/en/9865-Can-
Brazil-replicate-China-s-success-in-solar-
https://energy.gov/articles/map-watch-30-years-us-solar-
industry-growth
https://about.bnef.com/new-energy-outlook/
https://www.pv-magazine.com/2017/05/26/apvia-sees-steady-
q1-growth-in-asian-pv/
https://www.pv-magazine.com/2017/05/26/apvia-sees-steady-
q1-growth-in-asian-pv/
SMU-18-0XXX REC Solar:
Strategising on a Solar Coaster
3/20
SMU Classification: Restricted
installed capacity multi-fold by 2020. 13 14 It was also
forecasted that India would quickly
overtake Japan as the third largest market of solar panels (Refer
to Exhibit 1 for Global Solar
demand monitor Q1 2017). Moreover, countries like Mexico,
France and Australia were expected
to see strengthening demand over the next few years. 15

11. Solar Value Chain
The value chain in the solar industry ranged from raw material
production (like silicon) to solar
panel production, to installation and service for end consumers
(refer to Exhibit 2: Solar Value
Chain). The first stage was the production of solar grade silicon
wherein metallurgical grade
silicon was converted into high purity polysilicon. The next
stage was to cast the polysilicon into
ingots and wafers, which were the inputs for the production of
solar cells. The array of solar cells
were then assembled into solar panels (also referred to as solar
modules) encapsulated within a
protective glass. The final stage involved installing solar energy
systems for residential,
commercial, or utility customers.
The cost in each of these stages continued to be driven down by
technological enhancements.
Polysilicon costs had reduced from US$ 0.43/Wp in 2010 to
US$ 0.18/Wp in 2015. 16
Historically, polysilicon constituted half of the price of a

12. finished solar module until the 1980s.
However, after the fall in prices of polysilicon in the 90s and
then drastically after 2008, this
component cost constituted only about 30% of the total module
cost.17
The production cost for ingot/wafer and solar cells also dropped
continuously as a result of
technology enhancement that reduced the silicon consumption.
The average silicon consumption
for manufacturing solar cells was expected to drop from 4.8
grams per watt (g/W) in 2016 by 25%
to 3.6 g/W in 2020. 18 Assembling cells into solar panels was
one of the simplest processing steps
with the labor cost minimised due to automation. But the
assembly process consumed an
extensive list of commodity materials like glass, sealant and
aluminum etc. 19 In the final
installation stage, the Balance of System (BOS) components,
such as mounting structures,
cabling, electrical components (inverter, meters, surge
protection etc.), labor and overhead costs,
represented more than half of the costs for the total solar
system. Among them, the inverter costs

13. embodied the largest component of BOS, accounting for about
10% of the total cost of the PV
system.20
Besides raw materials, the cost of a solar panel was
significantly influenced by technology and
scale.21 The solar cell efficiency (i.e., the percentage of solar
radiation converted into electricity,
or the electrical power generated per unit surface area) was
expected to play the largest role in
solar panel cost reduction. An efficiency increase of 1% could
result in a reduction of up to 10%
13 Newsletter, “Japanfs”, The spread of Solar Power Generation
in Japan, June 30, 2008,
https://www.japanfs.org/en/news/archives/news_id027851.html,
accessed May 2017.
14 IEE Power and Energy Magazine, Ingram Publishing, First
Solar, Feb 20 2013,
http://web.mit.edu/12.000/www/m2018/pdfs/japan/solar.pdf,
accessed May 2017.
15 Julia Pyper, Global Solar Market to hit 85 GW in 2017,
“Green Tech Media”, April 11, 2017,
https://www.greentechmedia.com/articles/read/global-solar-
market-forecast-to-hit-85gw-in-2017-with-surge-in-china,
accessed

14. May 2017.
16 Polysilicon Spot price, Energy trend, Price quote,
http://pv.energytrend.com/pricequotes.html, accessed May 2017.
17 Eric Wesoff, Solar Power Year in Review,
“Greentechmedia”, December 23, 2011,
https://www.greentechmedia.com/articles/read/solar-power-
year-in-review-2011, accessed May 2017.
18 Irena, Solar PV Cost Analysis,
https://www.irena.org/DocumentDownloads/Publications/RE_Te
chnologies_Cost_Analysis-
SOLAR_PV.pdf, accessed May 2017.
19 Greenrhinoenergy, Solar Industry, PV Modules,
http://www.greenrhinoenergy.com/solar/industry/ind_04_pv_mo
dules.php,
accessed May 2017.
20 Balance of system (BOS) to module pricing ratio opens up
from 50:50 in 2011 to 68:32 this year, “Greentechmedia”,
November 15, 2012,
https://www.greentechmedia.com/articles/read/solar-balance-of-
system-accounts-for-68-of-pv-system-pricing-
new-gtm-repo, accessed May 2017.
21 Irena, RE Technologies, Cost Analysis, Solar Photovoltaics,
June 2012,
https://www.irena.org/DocumentDownloads/Publications/RE_Te
chnologies_Cost_Analysis-SOLAR_PV.pdf, accessed May 2017.
https://www.japanfs.org/en/news/archives/news_id027851. html
http://web.mit.edu/12.000/www/m2018/pdfs/japan/solar.pdf
https://www.greentechmedia.com/articles/read/global-solar-

15. market-forecast-to-hit-85gw-in-2017-with-surge-in-china
http://pv.energytrend.com/pricequotes.html
https://www.greentechmedia.com/articles/read/solar-power-
year-in-review-2011
https://www.irena.org/DocumentDownloads/Publications/RE_Te
chnologies_Cost_Analysis-SOLAR_PV.pdf
https://www.irena.org/DocumentDownloads/Publications/RE_Te
chnologies_Cost_Analysis-SOLAR_PV.pdf
http://www.greenrhinoenergy.com/solar/industry/ind_04_pv_mo
dules.php
https://www.greentechmedia.com/articles/read/solar-balance-of-
system-accounts-for-68-of-pv-system-pricing-new-gtm-repo
https://www.greentechmedia.com/articles/read/solar-balance-of-
system-accounts-for-68-of-pv-system-pricing-new-gtm-repo
https://www.irena.org/DocumentDownloads/Publications/RE_Te
chnologies_Cost_Analysis-SOLAR_PV.pdf
SMU-18-0XXX REC Solar:
Strategising on a Solar Coaster
4/20
SMU Classification: Restricted
of the total system ś cost per Wp.22 23 24 Moreover, economies
of scale were crucial for the
industry as it required high fixed cost investment in equipment,
overhead and managerial costs.
To remain competitive in the industry, at least 1 GW of scale

16. was required. The learning curve
in the industry was phenomenal as well, because of required
experience in installation,
maintenance, and process optimisation, and could reduce costs
significantly. As a result, the
entire solar industry had struggled to stay on the steep learning
curve. In 1976, solar panels sold
for US$72 a watt, which then fell to US$3/W in 2008, and then
to US$0.5/W in 2016 and fell
another 30% in just six months.
Several hundred companies operated across the value chain in
the global solar industry. Other
than polysilicon manufacturing which was dominated by a
handful firms only, each part of the
value chain had anywhere from 50 to 75 companies making up
to 90% of industry activity.25
Among all the manufacturing stages of the value chain, the solar
cell manufacturing was the most
fragmented. The solar panel market was fragmented too, with no
panel manufacturer having more
than 10 % of the market share. In the final installation stage,
besides numerous small installers
(especially in the residential market), some integrated

17. manufacturers provide designing,
financing and project management services at this downstream
installation stage.
The customer of solar panels could be residential, commercial
(e.g., on retail and industrial
buildings rooftops) and utility (e.g., power plants). The
residential consumers were fragmented,
and most were one time buyers, making switching costs
irrelevant, and the barrier to entry for
the installers was minimal.26 The commercial or utility market
was much less fragmented. These
consumers had much larger power generation need, the solar
panels they required were typically
much larger and more expensive than residential ones. However,
the appearance factor of solar
panels in terms of color and look was not as important for
commercial or utility buyers. The
installation design differed because commercial building
typically had flat roofs, as opposed to
slanted roofs in most residential houses27. Though the demand
for residential and commercial
solar panels was much lower than the demand from the utility
sector (9%, 29% and 62%

18. respectively in 2016) all segments in the industry had continued
to see substantial growth year
over year.2829 (Refer to Exhibit 3 for US Solar PV
Installations).
REC: Company Background
REC was founded as a hand-washed wafer producing unit in
Norway in 1996. Over the years the
company had grown to become a leading integrated solar panel
manufacturing company, and the
largest European supplier of solar panels, producing more than
30 million solar panels as of end
2017.30 Its solar panels had generated 10 GWh of electricity for
more than 12 million people
around the world. REC had established itself as a reputable,
quality-focused solar panel
manufacturer over the past two decades and was well known for
its product quality, advanced
technology, and exceptional customer service.
22 Wp stands for Watt peak which refers to the peak power
value or the maximum output power achieved by a solar module
under

19. full solar radiation (under set Standard Test Conditions).
23 Solarmango, Watt Peak, Definition,
http://www.solarmango.com/dictionary/watt-peak, accessed May
2017.
24 Mercom Capital Group, Mercom Solar Intelligence Report,
April 11, 2011, http://mercomcapital.com/news-analysis,
accessed
May 2017.
25 Finlay Colville, Consolidation in the Solar Industry, Think
Again, “PV Tech”, Feb 15, 2017, https://www.pv-
tech.org/editors-
blog/45880, accessed May 2017.
26 Lucas Davis, A deeper look into the Fragmented Residential
Solar market, Energy Institute at Haas, June 8, 2016,
https://energyathaas.wordpress.com/2015/06/08/a-deeper-look-
into-the-fragmented-residential-solar-market/, accessed May
2017.
27 Alan Goodrich, Ted James, and Michael Woodhouse,
Residential, Commercial, and Utility-Scale Photovoltaic (PV)
System
Prices in the United States: Current Drivers and Cost-Reduction
Opportunities, p. 6-11,
http://www.nrel.gov/docs/fy12osti/53347.pdf,
accessed May 2017.
28 Christian Roselund, The U.S. solar market nearly doubled in
2016 to 14.6 GW, “PV Magazine US”, February 15, 2017,
https://www.pv-magazine.com/2017/02/15/the-u-s-solar-market-
nearly-doubled-in-2016-to-14-6-gw/, accessed May 2017.

20. 29 Bloomberg New Energy Finance, New energy Outlook,
https://about.bnef.com/new-energy-outlook/, accessed May
2017.
30 REC, Company History,
http://www.recgroup.com/en/company-history, accessed May
2017.
http://www.solarmango.com/dictionary/watt-peak
http://mercomcapital.com/news-analysis
https://www.pv-tech.org/editors-blog/45880
https://www.pv-tech.org/editors-blog/45880
https://energyathaas.wordpress.com/2015/06/08/a-deeper-look-
into-the-fragmented-residential-solar-market/
http://www.nrel.gov/docs/fy12osti/53347.pdf
https://www.pv-magazine.com/2017/02/15/the-u-s-solar-market-
nearly-doubled-in-2016-to-14-6-gw/
https://about.bnef.com/new-energy-outlook/
http://www.recgroup.com/en/company-history
SMU-18-0XXX REC Solar:
Strategising on a Solar Coaster
5/20
SMU Classification: Restricted
Moving to Singapore

21. The original market for REC was Europe. Until 2010, it had
developed production capacities in
wafers, solar cells and solar panels in both Norway and Sweden.
When the solar market shifted
gear with growing demand emanating from Asia and dwindling
demand from Europe, REC
decided to expand its operations into Asia. The management
team in the company was entrusted
with the task of finding an alternative headquarter that would
facilitate coordinating its operations
and activities across the globe. Explaining the factors that
influenced the choice, O’Neil said,
We looked at over two hundred locations around the world,
before choosing Singapore. We
had a very detailed matrix with various criteria, including cost
of labour, cost of utilities,
cost of materials, cost of logistics, and favourable climate for
using chemicals. We chose
Singapore primarily because of the ready availability of human
talent here, especially in the
semiconductor area, which is very similar to the chemical solar
cell manufacturing process.
The location of the city as a major port, its logistics excellence,
and proximity to materials

22. were important factors as well. Moreover, Singapore is a trade-
friendly country, and the
government is very supportive. We work closely with Singapore
Economic Development
Board (EDB). Singapore is also a good location for doing
research, due to the availability
of human talent in our research study area.
The Singapore government had geared towards adopting an
integrated approach towards
sustainable energy across power generation, transmission,
distribution and consumption. For
example, it had initiated a collaborative program involving REC
to provide new hybrid electricity
solutions comprising of solar energy and natural gas sources.
With such government-backed
initiatives to go solar, Singapore served as a perfect backdrop as
operations and manufacturing
headquarter for REC.31
The firm set up its new large scale integrated solar
manufacturing facility in Singapore in 2010.
The new plant in Tuas was equipped with automated and
integrated facilities to manufacture

23. wafers, cells, and panels in a state-of-the-art factory with multi-
fold increase of its original
production capacity. REC favoured Singapore as a hub as the
city had access to competent
research labs, which could help the company with research in
latest technologies and product
innovation. REC had partnered with a leading solar institute,
Solar Research Energy Institute of
Singapore (SERIS) (a research institute at National University
of Singapore, NUS) to co-create
advanced products.
Change of Ownership
In 2015, REC joined forces with the Elkem Group, a Norwegian
conglomerate,.32 The same year,
REC was rated as the most reliable, dependable and bankable
solar company by New Energy in
the Altman-Z score.33 In a study of the major solar companies,
REC had the lowest debt and
lowest debt/equity ratio (Refer to Exhibit 4 for REC debt/equity
ratio).
Interestingly, many solar companies relied on huge amount of
credit due to the long gestation

24. periods for investments involved in running a solar business.
The downside of choosing products
of such companies is that these consumers may have to purchase
third party warranties to cover
the risk that these solar companies are unable to fulfil their
product warranty obligations, and
even then there was the risk of claims not being met due to caps
and deductibles imposed under
the third party warranties.34
31 Ministry of Trade and Industry Singapore, Solar Nova
Project,
https://www.mti.gov.sg/MTIInsights/SiteAssets/Pages/Budget-
2014/SolarNova.pdf, accessed May 2017.
32 REC, REC Factsheet,
http://www.recgroup.com/sites/default/files/documents/rec_fact
sheet_elkem_en_web_20150618.pdf,
accessed May 2017.
33 The Altman Z-Score is a statistical tool used to measure the
likelihood that a company will go bankrupt.
34 REC, Files, Documents, Fact Sheet, Altman Z Score, 2016,
http://www.recgroup.com/sites/default/files/documents/rec_fact
sheet_financial_strength_2016_en_web.pd f, accessed May,
2017.
https://www.mti.gov.sg/MTIInsights/SiteAssets/Pages/Budget-
2014/SolarNova.pdf

25. https://www.mti.gov.sg/MTIInsights/SiteAssets/Pages/Budget-
2014/SolarNova.pdf
http://www.recgroup.com/sites/default/files/documents/rec_fact
sheet_elkem_en_web_20150618.pdf
http://www.recgroup.com/sites/default/files/documents/rec_fact
sheet_financial_strength_2016_en_web.pdf
SMU-18-0XXX REC Solar:
Strategising on a Solar Coaster
6/20
SMU Classification: Restricted
Products and Technology
Products
REC’s major products included its REC Peak Energy (60 multi -
crystalline cells with an energy
output of up to 265 Wp) and REC Peak Energy 72 (72 multi -
crystalline cells with an energy
output of up to 320 Wp), as well as some variations of these two
core products. In 2015, these
products were upgraded to their new product lines of REC

26. TwinPeak (120 half-cut multi-
crystalline cells, with an energy output of up to 275Wp) and
REC TwinPeak 72 (144 half-cut
multi-crystalline cells, with an energy output of up to 335Wp).
The TwinPeak series’ panels
boasted a 17% energy efficiency and increased power output of
about 10 Wp per panel, achieving
a 275 W per panel performance.35
The architecture of REC panels sought to maximise the amount
of sunlight absorbed. For both
their product lines, the panels’ throughput of electricity
generated could overcome the general
limitations of solar panel technology, including reduced
performance in high heat, restrictive
usage in warm climate, and light-induced degradation leading to
lower efficiency and throughput.
The unique half-cut cell architecture of its modules provided its
solar panels with unparalleled
performance in shaded areas or areas that receive less
sunlight.36 Their solar panels were also
100% free from potential induced degradation (PID) and had
low light induced degradation
(LID).37 As a result, REC solar panels reported a much lower
power loss (1.5%) due to LID

27. when compared to industry averages (5%).38 39 REC products
were guaranteed to perform for
25 years. Their products also had the lowest warranty claims
rate in the industry (Refer to Exhibit
5 for REC Warranty claims).
Typically, solar panels installed on single-axis trackers could
track the sun from the East to the
West from 10 AM to 4 PM. The architecture of REC’s
TwinPeak modules allowed a backtracking
function which tracked the sun before 10 am and after 4 pm,
resulting in improved yield.40 In
addition to capturing sunlight that hit panels’ surface, the
panels could also harness the light that
passed through the surface with the help of a reflective material
at the rear of the solar cell. This
material reflected the light back into the solar cell to be
converted into electricity.
From the design perspective, REC solar modules were typically
thinner and lighter with shorter
cables, and could accommodate more cells per panel, compared
to the average industry products.
Thinner frames of solar panels allowed for greater packing
density and reduced shipping and

28. storage costs. Thinner frames also allowed more modules to be
stored onsite and in remote setup
areas due to less space consumption. Also, the installation of
lighter modules was faster than
conventional modules, which, coupled with shorter cables that
did not require cable ties, reduced
the number of man-hours required for installation while also
improving safety.
Technology
The solar panel industry was experiencing rapid technology
advancement and having the latest
technology was crucial in order to remain competitive. REC
tried to maintain a market image of
being a leader in launching new technology. They had been a
first-mover in launching the multi-
35 REC, Twin peak,
http://www.recgroup.com/sites/default/files/documents/im_rec_t
winpeak_series_ul_rev_f.2_eng.pdf,
accessed May, 2017.
36 Dricus, Half cut solar cells: new standard in product
differentiation?, “Sino Voltaics”, 18 April 2016,
http://sinovoltaics.com/solar-cells/half-cut-solar-cells-the-new-
standard/, accessed May 2017.
37 Pingel, Sebastian & Frank, O & Winkler, M & Daryan, S &
Geipel, Torsten & Hoehne, H & Berghold, Juliane, Potential

29. Induced Degradation of solar cells and panels, 2010, accessed
May 2017.
38 National Renewable Energy Laboratory, Documents,
Understanding Light-Induced Degradation of c-Si Solar Cells,
http://www.nrel.gov/docs/fy12osti/54200.pdf, accessed May,
2017.
39 REC, Documents,
http://www.recgroup.com/sites/default/files/documents/assessin
g_the_impact_of_degradation_0.pdf,
accessed May 2017.
40 REC, Videos, How Solar Works,
https://www.youtube.com/watch?v=pMU6QCTVbWU&index=3
&list=PLE499AE76F77E0032, accessed May, 2017.
http://www.recgroup.com/sites/default/files/documents/im_rec_t
winpeak_series_ul_rev_f.2_eng.pdf
http://sinovoltaics.com/solar-cells/half-cut-solar-cells-the-new-
standard/
http://www.nrel.gov/docs/fy12osti/54200.pdf
http://www.recgroup.com/sites/default/files/documents/assessin
g_the_impact_of_degradation_0.pdf
https://www.youtube.com/watch?v=pMU6QCTVbWU&index=3
&list=PLE499AE76F77E0032
SMU-18-0XXX REC Solar:
Strategising on a Solar Coaster

30. 7/20
SMU Classification: Restricted
crystalline technology and their multi-crystalline products
reported high cell efficiency of
17.7%. 41 Their half-cut cell technology was also reported to
be 2 to 3 years ahead of the
competition. Continuous commitment to improve technology
and product quality had enabled
REC to win several of the world’s most prestigious performance
awards (Refer to Exhibit 6 for
REC awards and Accolades).42
In 2014, REC switched production capacity to half-cut PERC
cell technology. It had taken REC
several years to lab test and pilot their latest technology before
its mass production in 2015.
REC had developed a streamlined process for commercialising
their technology. First, they used
a long-term strategic technology roadmap. Second, they
developed a pipeline of new
technologies to be adopted at different stages of product
development. For example, while
researchers were experimenting with mono-crystalline silicon
technology in their research lab,

31. the company was also testing other emerging technologies with
partner research firms. At the
same time, technologies that had already been researched and
developed (e.g., multi-PERC
technology) would be adopted in the production process on a
larger scale. (refer to Exhibit 7 for
Solar panel Technology variances) As O’Neil emphasised:
R&D in this industry has to be very close to manufacturing. To
do otherwise is a mistake
many of our competitors have made. You can’t do it in a
laboratory. It’s all about “can you
do it at industrial scale”. So it’s really important for the
research and development to be
very close to the manufacturing plants.
To manage a change like assessing new technology or assessing
a new focus geographic market,
REC assigned a team to start with RBS (REC Business System).
Typically, the team would define
the questions, and key requirements, formulate the working
assumptions and then develop the
hypotheses and the tests accordingly. However, decision on
technology adoption was primarily

32. a financial decision that revolved around the estimated cost-
benefit analysis and risk assessment.
However, it could be a strategic decision when a certain
technology was not financially feasible
but could provide first-mover advantage for REC.
Target Consumers
REC’s products catered to the residential, commercial and
utility markets. Their residential
clients ranged from farm owners in the U.K. to homeowners in
California. Their commercial
projects included IKEA in Germany, Dubai International
Airport in United Arab Emirates,
Heineken Wickse Brewery in Netherlands, and the Sports Hub
in Singapore. The utility clients
included Phoenix power plant in Italy, and BMD solar power
plant in India. Because utility
segment had the lowest prices for the solar modules and was the
most competitive, REC focused
more on the residential and commercial rooftops segment but
without completely withdrawing
from the utility sector because it was an ‘important segment in
the long run’.

33. Geographic Outreach
REC products were sold primarily in Asia Pacific (India, Japan,
Australia and Southeast Asian
countries), Europe (Germany, France, Spain, Italy, Belgium,
The Netherlands, UK), the Middle-
East and the US where REC enjoyed strong cost advantages vis-
à-vis Chinese suppliers who had
to pay higher import duties in the US. The company had become
the number one supplier to the
residential market in California. In the third quarter of 2016,
around half of REC’s sales came
from the U.S. (refer to Exhibit 8 for REC Module Shipments by
Region). REC had been ranked
41 REC, REC Twin Peak,
http://www.recgroup.com/sites/default/files/documents/ds_rec_t
winpeak_2_series_rev_e_eng.pdf,
accessed May 2017.
42 REC, Japan Media, News Archive, 2011,
http://portals.recgroup.com/ja/media/jpn_news_archive/REC-
Solar-Modules-ranked-
as-a-Top-Performer-in-Independent-Photon-Field-Performance-
Test-/, accessed May, 2017.
http://www.recgroup.com/sites/default/files/documents/ds_rec_t
winpeak_2_series_rev_e_eng.pdf

34. http://portals.recgroup.com/ja/media/jpn_news_archive/REC-
Solar-Modules-ranked-as-a-Top-Performer-in-Independent-
Photon-Field-Performance-Test-/
http://portals.recgroup.com/ja/media/jpn_news_archive/REC-
Solar-Modules-ranked-as-a-Top-Performer-in-Independent-
Photon-Field-Performance-Test-/
SMU-18-0XXX REC Solar:
Strategising on a Solar Coaster
8/20
SMU Classification: Restricted
as the top module supplier in Germany for 2016 and had been
able to improve shipments to
Europe, Middle East and Africa (EMEA) by 24% year-over-
year.43
High Value Customers
REC aimed to serve their high-value customers (customers who
valued new technology, quality
and reliability of their product) at scale with REC products sold
at a premium.
Solar systems typically needed a lot of customisation depending
on the weather, location, and

35. power utilisation patterns. They also required regular
monitoring and maintenance. Although the
upfront installation costs could be very high, they could be even
more expensive and inconvenient
for individual consumers if their solar systems failed after a few
years and they had to replace
the panels. Moreover, it was not feasible to use panels from
multiple suppliers because that could
reduce the efficiency of the entire system and could prove
troublesome on occasions that the
customer had to replace only part of the system that had failed.
Therefore, consumers provided
more consideration to long term costs than the upfront costs in
installation.
O’Neil had observed that customers over time often realised
that the maintenance, service and
replacement of cheaper but low quality products could be a
headache in the long run. Many times,
customers returned to REC after poor low quality product
experiences. Because REC wanted to
build long term relationship with its clients, it was very
selective in choosing their consumers.
REC therefore, focused more on smaller consumers with whom
mutual trust was easier to build.

36. Sustainability Edge
REC focused on those consumers who were environmentally
conscious and looking for products
that were truly environmentally friendly. The production of
solar cells was very energy intensive.
For example, to melt quartz the temperature had to be extremely
high. The energy consumption
in producing solar panels could outweigh the energy savings
produced by panel usage. REC had
a leading low carbon footprint in the industry that acted in their
favour to attract “green”
consumers. The Company had developed a unique process that
required only 25% of the energy
of industry average and used a 100% hydroelectric power in
Norway to reduce the carbon
footprint in the production process.
REC solar panels therefore delivered an energy payback time of
1.2 years. In other words, after
just over one year, REC panels could generate an equivalent
amount of energy to what was
required to produce them. REC’s sustainable manufacturing
principles also helped them reduce

37. consumption of raw materials and water, and minimise waste.
However, because of this, REC
had managed to maintain a comparatively slower drop in their
price with respect to the price drop
in the market, making their price premium even higher relative
to the market in recent times.
Manufacturing and Sales
REC had integrated manufacturing facilities. Their operation
facility in Singapore had 1.3GW of
production capacity in 2016, including a wafer plant (two wafer
factories), a cell plant (eight cell
lines), a module plant (six module lines) and a utilities support
office. The Singapore facility
manufactured approximately 15,000 solar panels a day and
could operate 24x7. Scale was crucial
for REC to compete in the scale-based industry. As O’Neil
described,
When you get up to over 1 gigawatt, you are well down, you are
as competitive as the guys
that are now at about 8 gigawatts of scale because you are way
down the flat part of the
economies of scale (curve)… [When you] get so large then it

38. gets harder to manage costs in
some cases where you have very large sprawling operations.
43 REC, News and Media, Solar Market Insight Report Q1
2017, http://www.recgroup.com/en/rec%E2%80%99s-q1-2017-
solar-
market-insight-report-new-world-record-setting-products-
serving-enlarged, accessed May 2017.
http://www.recgroup.com/en/rec%E2%80%99s-q1-2017-solar-
market-insight-report-new-world-record-setting-products-
serving-enlarged
http://www.recgroup.com/en/rec%E2%80%99s-q1-2017-solar-
market-insight-report-new-world-record-setting-products-
serving-enlarged
SMU-18-0XXX REC Solar:
Strategising on a Solar Coaster
9/20
SMU Classification: Restricted
Production
Product Efficiency

39. REC’s production cost was controlled through several quality
focused manufacturing
practices.To ensure production efficiency and product quality,
the manufacturing units in REC
had implemented many innovative automated processes in their
facility. For example, to limit
the impurities present in their silicon mix, REC sourced only
the highest quality silicon available
in the market. REC also used its own unique coating technology
(an automated process) that
coated the crucibles used to melt silicon with silicon nitrate to
protect the melt from any
contamination and improve the quality of the wafers. In
addition, the company had implemented
a stringent product quality and management system, a
production monitoring system, and a
product qualification system.
Product Uniformity
REC had implemented the REC Business Systems (RBS) and
REC Product Development Model
(RPDM) systems based on a lean six sigma approach to enable
continuous improvement in cost
control, process improvement, and adoption of new low cost
process technologies, thus

40. optimizing the value chain at every step (refer to Exhibit 9 for
RPDM and Exhibit 10 for REC
RBS system).44 REC’s high level of control over production
assured product uniformity, giving
it an advantage over other manufacturers.45 46
Integrated Production
The vertical integration not only helped REC to have a tight
control of quality in every stage of
production, but also made it less vulnerable to market
fluctuations of critical components’ prices
and suppliers. O’Neil shared,
In the solar industry, having scale is important for a company as
price competition among
manufacturers is cut throat. REC is relatively smaller in scale
compared to some large scale
solar companies, but through integration and automation of our
production capabilities we
are able to achieve the cost advantage that is normally
associated with scale.
Although integrated production ensured adequate control over
the production process, it was
complex to manage. In REC, there were more than 120 steps in
making a solar panel. Different

41. skillsets were required for the various stages in the solar panel
production process. Wafer
production was very much a chemical process, but cell
production was a semi-conductor process,
and assembly was a mechanical engineering process. Electrical,
chemical and mechanical
engineers worked together in REC and it needed high level of
coordination and communication
for them to understand each other and what made for excellence
in different fields.
Sales and Service
Delivery
REC had tried to consciously build a brand name for themselves
for providing premium products.
Besides quality products, REC also emphasised on quality
service and timely delivery. The
average turnaround time from REC warehouse to order
confirmation date was about one day for
local consignments and approximately seven days for
international container shipments. This on-
time delivery performance was universal across all projects and
regions.
Customer focus

42. 44 SolarWorld, Solar Energy 101, How we make solar panels,
https://www.solarworld-usa.com/solar-101/making-solar-panels,
accessed May 2017.
45 Jan Schmidt, Light-induced Degradation in Crystalline
Silicon Solar Cells, Solid State Phenomena Vols. 95-96 (2004)
pp. 187-
196, accessed May 2017.
46 REC, Videos, REC Automated Production plant,
https://www.youtube.com/watch?v=Zw0uAQvfn3g&list=PLE49
9AE76F77E0032, accessed May, 2017.
https://www.solarworld-usa.com/solar-101/making-solar-panels
https://www.youtube.com/watch?v=Zw0uAQvfn3g&list=PLE49
9AE76F77E0032
SMU-18-0XXX REC Solar:
Strategising on a Solar Coaster
10/20
SMU Classification: Restricted
REC was selective in choosing its customers as it had limited
production capacity. A narrower
customer focus resulted in tighter customer relationships and
consistent service. Another benefit

43. of building long-term customer relationship was to allow REC
to follow their customers when
they entered new markets. REC closely monitored their high
value customers who valued
performance and long term relationship, and were really willing
to pay a premium for a better
product and service. Customer’ preferences and demands could
be very different between
different regions. In a particular geographical segment, REC
would try to figure out what the
unmet user demands were, what were the special requirements
specific to the region, and how
REC could develop a product that was better than their
competitors for those consumers.
Sales support
REC maintained a dedicated market intelligence team, who were
constantly comparing and
benchmarking REC with its competition. REC employed
engineers and service personnel in the
field who constantly monitored their customers’ systems, and
often were the first to identify any
pertinent problems for their customers. For example, during
monitoring if they found a drop in
panel performance, they would immediately investigate the

44. cause and call the customer to
provide a solution for it. Such additional services, although
coming at a cost, enhanced the brand
reputation of REC amongst its customers.
Installers as partners
REC did not sell their panels directly to end users. They usually
partnered with third party
installers. This meant that the company had ensured that the
racking, invertors, electrical fittings
provided by the installers were of high quality and matched
REC standards of product quality.
REC’s Solar Professional Programme helped educate installers
on how best to install and sell
REC solar panels, enabling them to maximise their business
potential. REC would also provide
their installers exclusive access to their tools and services, as
well as re-certification programmes
to ensure that they were properly trained to continuously meet
REC’s delivery quality standards.
REC treated installers as partners and would jointly market their
products with them. For example,
in Singapore, REC had partnered with Phoenix Solar to provide
solar systems in Changi airport,

45. Singapore, Sports Hub, the National Stadium and Tiger
Brewery.
REC had ventured into downstream installation activities
before. They had established a separate
unit called REC
Solution
s, which provided consumers with a full range of services
including site
identification, permit management, due diligence, investment
structuring, facility design, project
and site management, monitoring and maintenance and a host of
other services.4748 REC also
provided financial analytics services to help evaluate the
financial benefits and feasibility of
installing solar systems. However, the company quickly realised
that an installation business
could potentially shift their focus from the core manufacturing

46. business. As a result, instead of
competing with the installers, they withdrew from this
downstream business and built a more
cooperative relationship with their installers.
Organisation Structure, Vision and Values
REC’s mission was: “We want every person to benefit from
electricity directly from the sun”.
REC demonstrated its green mindset in every aspect of its
company operations. REC had a
leading low carbon footprint in the solar industry, around 25%
less than their competitors.49 REC
also applied its sustainability principles in choosing suppliers,
selecting those that shared similar
47 REC, Systems