(JA Solar, MEMC deal updated with analyst commentary)NEW YORK ( TheStreet) -- JA Solar ( JASO) announced today that it will supply solar modules to MEMC Electronic Materials ( WFR), starting this quarter. JA Solar has been pushing beyond its core solar-cell business into a more vertically integrated structure with module production. MEMC, meanwhile, acquired solar project developer SunEdison last year to drive its effort to push out beyond its core solar wafer-making business. Even though JA Solar rallied on the business win, analysts said there was too much left out of the announcement to judge the significance of the deal. For one, there was no indication as to the total level of module shipments to be made by JA Solar. If it turns out to be relatively minor -- and there were previous indications that MEMC was looking to work with a number of suppliers for solar modules -- then the deal won't likely be a big one for JA Solar models. Analysts said selling modules to complement its core solar cell business will help JA solar to make incremental profit gains -- but one deal, lacking details, isn't going to drive that strategy. Edwin Mok, analyst at Needham & Co., who is bullish on the outlook for JA Solar, said the Chinese solar company has talked about growing its market share outside its core base of Chinese customers for its solar cells, wanting to reduce its current 80% reliance on Chinese customers to a 50%-50% split between Chinese and international sales by year-end. However, Mok's resopnse to the MEMC deal was tepid. "MEMC is a great fit for JA Solar, but I don't think SunEdison will be only using JA Solar modules, and I would think the size of the order is not that huge for JA Solar." For MEMC, it wasn't clear from the announcement if its wafers would be used to make the JA solar modules. Analysts said that it seemed likely MEMC would want its own wafers to be part of the solar supply chain going into the JA Solar modules, but the announcement didn't make it clear.
Steve O'Rourke, solar analyst at Deutsche Bank, said the deal with JA Solar helps to solidify MEMC's downstream strategy -- with JA Solar among the largest solar cell manufacturers in the world -- but the absence of concrete information in the announcement made it difficult to read too much into the news. The Deutsche Bank analyst said that trading at a 52-week low, MEMC is a turnaround story that is going to need more than one news item, and possibly several quarters, to rally its share price. JA Solar shares were up more than 5% on Tuesday, one of the only solar stocks to hang onto big gains as the market rally fizzled during afternoon trading. MEMC shares had hit a new 52-week low on the Friday before the July 4 holiday, at $9.51, and barely moved above that low point, finishing Tuesday trading at $9.68. -- Written by Eric Rosenbaum from New York. Follow TheStreet.com on Twitter and become a fan on Facebook.