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While solar gets vertical, Q-Cells succeeds by staying put

The one-product strategy pays off for Germany's Q-Cells, which reportedly ranks second in the world, behind Sharp, in solar cell production.

In the solar industry, many are rapidly trying to expand their real estate in the manufacturing process. China's SunTech Power Holdings has moved from primarily making solar cells, the piece of silicon that harvests electricity from sunlight, to making solar cells and panels, the frame in which the cells sit. Equipment maker Schott Solar recently announced it will enter a joint venture for wafer manufacturing.

Not Q-Cells. Founded in 1999, the German company has continued to focus exclusively on solar cells. So far, it has worked. The company ranks second in the world, behind Sharp, in solar cell production, according to analyst firm Photon International.

In a sense, it's a strategy lifted from the Intel or Microsoft playbook: produce a component that can require a significant amount of expertise or intellectual property, sell it to a wide variety of manufacturers of finished products, and let them beat each other up over price.

Solar cells, according to many analysts, are rapidly becoming a commodity. Analysts, though, note that Q-Cells has managed to stay ahead by lowering production costs and pushing improvements. In 2006, revenue came to 539.5 million euros ($729 million), an 80 percent jump from the year before, while earrings came to 1.10 euros per share. This year, annual revenue is expected to pass 800 million euros with earnings hitting 1.42 euros per share.

Earlier in the week, Q-Cells signed a deal to sell $170 million worth of solar cells to Sunnyvale, Calif.-based Solar Semiconductor Last month, it signed a deal to supply $3.5 billion in solar cells to Solaria in the U.S.