Chinese solar stocks are on the fire these days, mostly due to the Chinese goverment subsidy news (like this one). For me, this solar thing is ONS, not for long term investments at this time. The most worrisome thing for solar, is not the over-supply (competition), is not the volatility of raw material cost (as I understand, the supply polysilicon is way too much down the road), not even the cost of eletricity generated by solar compared to cost of other traditional energy (fossil, and nuclear).
My question to solar makers, is their business model. Can they get recurring revenue like oil companies do? I am not expert on solar energy, but I believe the majority of cost for solar users are the initial investment for solar panel (installtion included). I think there will be maintenance and spare parts, but this is not significant compared to the new solar panels. On the contrary, we got to use our car everyday, and we fill our gas pump from time to time, twenty some dollars for a typical car these days (regular unleaded is $1.99 today here in St. Louis). Not a small amount, not a big amount either.
This reminds me other business which mostly derives its revenue from recurring revenue: food, beverage, drugs, credit card (more on credit card later), maintenance (think W.W. Grainger), software (Oracle is big getting maintenance revenue), online game (addictive nature, but it will fade away eventually as new game appears). On the other hand, business get revenue on one shot deal: Crocs and Heelys (shoes can last a while, plus fashion and taste changes); Xinhua Finance (XFML, now XSEL) and Ninetowns, I don’t know what they do these days, but it appears they made money by one shot deals, and no more deals for them.
Another obvious one shot deal of business, is the new car business. The US auto industry is under a lot stress these days, and there are many reasons account for that: over capacity, high labor and retiree cost, quality perception (the problem is fixed but perception exists in customers mind) etc. The dealers and Parts companies derive significant revenue from maintenance and repair, but new cars are the only revenue source for GM, Ford and Chrysler. This is obviously in contrast with the oil companies: making small amount of money for each gas refill. Note car companies sometimes lose money selling new cars.