(WFR) MEMC Electronic Materials and Jusung Engineering in Solar Deal

A leading provider of semiconductor and solar chips, MEMC Electronic Materials Inc.’s (WFR) Singapore affiliate recently formed a strategic alliance with Korea-based Jusung Engineering Co. Ltd. Under the agreement, MEMC Singapore and Jusung will combine forces to develop and maintain a high efficiency solar cell production facility for SunEdison (an MEMC subsidiary). Jusung Engineering supplies advanced technology and tools for the fabrication of solar photovoltaic cells.

Both partners will have equal interests in the project and will shell out $16.0 million each as upfront cost.

The facility will produce advanced solar cells featuring the latest technologies from both MEMC and Jusung. The combination of technologies will pull down the cost of making high efficiency solar cells. The companies expect the new facility to produce the first 100 megawatts of capacity by fiscal 2012. Apart from producing, the companies will shoulder the marketing responsibility for those solar cells. This way, MEMC’s solar products will get a fair exposure to the Korean market.

In May, MEMC sealed a similar strategic deal with Electronics Manufacturing Services (EMS) provider Flextronics International Ltd. (FLEX). Under the agreement, MEMC Singapore and Flextronics will combine forces to fabricate solar panels for SunEdison. MEMC also entered into a 50-50 joint venture with JA Solar Holdings Co. Ltd. (JASO) in March. The two companies have agreed to build and operate a solar cell production facility in China.

We believe that these consecutive deals could help SunEdison to grow and maximize its revenue.

MEMC’s solar initiatives are encouraging. But the recent cessation of a solar wafer supply agreement with Suntech Power Holding Co. Ltd. (STP) is alarming. The deal came to an end only because of a persistent fall in polysilicon prices. The deal price was much higher.

Though we are unaware of any exact financial impact, we believe that MEMC’s revenues and margins will get affected.

Currently, MEMC has a Zacks #3 Rank, which indicates a short-term Hold recommendation.

FLEXTRONIC INTL (FLEX): Free Stock Analysis Report

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SUNTECH PWR HLD (STP): Free Stock Analysis Report

MEMC ELEC MATRL (WFR): Free Stock Analysis Report

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