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DE RUEHOK #0102/01 1760209
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O 250209Z JUN 09
FM AMCONSUL OSAKA KOBE
TO RUEHC/SECSTATE WASHDC IMMEDIATE 1407
INFO RUEHKO/AMEMBASSY TOKYO PRIORITY 8528
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RUEHNAG/AMCONSUL NAGOYA PRIORITY 2407
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RUEHSH/AMCONSUL SHENYANG 0083
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RUEHHK/AMCONSUL HONG KONG 0224
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS SECTION 01 OF 03 OSAKA KOBE 000102 
 
SENSITIVE 
 
SIPDIS 
 
COMMERCE FOR ITA BRICKMAN AND SANTILLO 
 
DOE FOR PI BISCONTI AND EE CHALK AND KIMBIS 
 
E.O. 12958: N/A 
TAGS: BEXP EINV ENRG ECON JA
SUBJECT: Kyocera Solar - Kyoto's Tech Edge 
 
REF: TOKYO 596 
 
¶1.  (SBU) Summary:  Kyocera, manufacturer of solar panels 
with among the highest efficiency for converting sunlight 
into electricity, believes that new incentives for solar 
power by the Japanese government will boost the company's 
domestic sales.  Until recently, Kyocera has focused on 
installing its solar products in commercial settings, 
factories and buildings, but the company recently entered 
an agreement with Japanese retailing giant Aeon 
(including Aeon's consumer financing capacity) as a means 
to increase sales of its panels to individual Japanese 
households.  Still reliant on the European market for 
most of its solar sales overseas, the expected increase 
in Japanese domestic sales and the ever-present hope for 
growth of markets in China may keep Kyocera's attention 
focused on sales closer to home.  With high expectations 
for the New Green Deal in America and with European solar 
growth slowing, however, Kyocera is also considering 
ramping up production and jobs in North America, with its 
operations in San Diego, Scottsdale and solar panel 
manufacturing in Tijuana playing major roles. 
 
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Background: Kyocera Solar Division 
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¶2. (U) Founded in Kyoto in 1959 by Kazuo Inamori and 
seven colleagues as a start-up venture to produce 
cutting-edge ceramics, today Kyocera Corporation 
manufactures and sells innovative, high-quality products 
based on advanced materials.  In 1969, the company 
established its first North American sales office, a two- 
person operation serving Silicon Valley's semiconductor 
industry.  Kyocera now has more than 5,000 employees in 
United States, Canada and Mexico engaged in the 
manufacture and sale of its high-technology products. 
 
¶3. (U) Kyocera first began working on solar cells in 1975 
as part of Japan Solar Energy Corporation (JSEC), a joint 
venture among Matsushita Electric (now Panasonic), Sharp 
Corporation, Mobile Oil Corporation and Tyco Laboratories. 
Kyocera's head of International Sales, Hiroshi Yagi told 
us that in those early years, the solar industry proved 
to be unprofitable and only Kyocera and Sharp continued 
research on solar cell technology.  Kyocera began 
investing heavily in solar technology only after 1993 
when the Japanese government promised continuous 
subsidies for ten years under the New Sunshine Project to 
encourage the adoption of solar cell technology in 
commercial and residential settings.  Yagi told us that 
the GOJ's promise of continuous subsidies for ten years 
provided Kyocera with enough business certainty to renew 
investments. 
 
--------------------------------------------- --- 
New Green Deal: Expansion from Europe to the U.S. 
--------------------------------------------- --- 
¶4. (SBU) In recent years as Japan (Reftel) and other 
countries have adopted Germany's feed-in-tariff model and 
similar enhanced enticements for the adoption of solar 
technologies, Kyocera's thirty plus years of experience 
in solar has begun to pay off, said Yagi.  Kyocera has 
big expectations for America's New Green Deal, he added, 
and the company believes its strong technology, high 
quality and complete vertical integrated solar production 
from casting silicon ingot to engineering and solar 
module installation differentiates Kyocera from most of 
its competitors, and the company's comparatively stronger 
financial position differentiates it from equally 
experienced competitors like Sharp. 
 
¶5. (SBU) Kyocera's main overseas solar market is still 
Europe where it sells fifty percent of its solar panels, 
said Yagi.  The company's solar headquarters in North 
America is located in Scottsdale, Arizona.  U.S. sales 
 
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account for only 25 percent of Kyocera's global solar 
sales, with most, 75 percent, coming from operations in 
California.  As with its 1993 decision to renew investing 
heavily in solar only after the introduction of Japanese 
government subsidies, Kyocera has focused on the 
California market, said Yagi, because of the California 
Solar Initiative subsidy.  Under California's solar 
initiative subsidy, it takes purchasers only 10 to 12 
years to recoup investment costs of solar electricity 
systems, and Kyocera has been active in California's 
commercial Power Purchase Agreement (PPA) market in which 
solar panels are placed on the roof of commercial 
business and the business, in turn, pays a fixed rate for 
the electricity generated for a set period of time. 
 
¶6. (SBU) Anticipating a rapid rise in demand under the 
new domestic solar power incentives from the Japanese 
government and the New Green Deal in the United States, 
Kyocera is accelerating investments to increase capacity. 
In conjunction with the phased increase of annual solar 
cell production to 1 gigawatt (GW) by 2012 from the 
current 400 megawatts (MW) by expanding its 
polycrystalline silicone solar cell production to 500 MW 
annually at each of its Yokaichi and Yasu, Shiga 
Prefecture production sites, Kyocera is also building 
additional panel assembly capacity to increase annual 
capacity to 250 MW at each of its panel assembly plants 
in Mie Prefecture, the Czech Republic, Tijuana, Mexico 
and Tianjin, China. 
 
--------------------------------------------- --- 
Prius Solar Panel Moonroof - Gimmick but Quality 
--------------------------------------------- --- 
¶7. (SBU) Kyocera manufactures the polycrystalline silicon 
solar cells used for the USD 2000 solar panel sunroof 
option for the new Prius, which Toyota Motor Corp 
announced in May 2009.  The electricity generated by the 
solar cells directly drives the vehicle's ventilation fan, 
even when the vehicle is parked.  Originally, the solar 
panel system was designed to recharge the vehicle's 
batteries, but Toyota gave up on the idea because 
repeated charging and discharging caused deterioration of 
the batteries. 
 
¶8. (SBU) Even though the Toyota solar panel moonroof is 
something of a gimmick, admitted Yagi, Toyota's 
specifications were quite demanding and the selection of 
Kyocera indicates the high quality of Kyocera's solar 
products.  For example, when Toyota tested the new Prius 
on uneven roads, which vibrated the car, the solar cells 
did not crack, detach or otherwise lose functionality. 
 
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Product Differentiation, Future U.S. Plans 
------------------------------------------ 
¶9. (SBU) As the Prius solar moonroof project suggests, 
Kyocera believes its competitive advantage in solar is in 
high-end quality, not quantity, in part as a result of 
its ability to finance research and development to create 
cutting edge products.  Our solar products will last for 
20 plus years, Yagi told us.  Kyocera, he added, uses its 
highly developed computer-aided engineering (CAE) tools 
and analysis to shorten the engineering process, and 
Kyocera's completely integrated production and strength 
in pure casting of silicon ingots keeps its solar cells 
among the highest conversion efficiency rated cells in 
production. 
 
¶10. (SBU) When Japan temporarily ended solar subsidies 
support three to five years ago, it took ten years to 
recoup the cost of a Kyocera solar panel system, said 
Yagi.  By way of comparison, in Germany under the feed- 
in-tariff, overall costs are recovered after only six 
years.  In Arizona, at least one utility company offers a 
30-40 percent subsidy which allows recovery of costs in 
 
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5-6 years.  Kyocera's goal is to achieve a cost level in 
Japan which reduces to ten years, from the current 
fourteen, the period of time it takes for purchasers of 
its products to recover the costs without any subsidies. 
 
¶11. (SBU) While Kyocera is interested in participating in 
R&D projects to create a Smart Grid in the United States, 
to invest more broadly throughout the United States 
beyond California and the Southwest, the company wants 
greater business certainty, said Yagi.  Kyocera is 
waiting to see a nationwide feed-in-tariff or long-term 
commitment to a renewable energy portfolio standard. 
 
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China Market Not a Focus - Needs FIT 
------------------------------------ 
¶12. (SBU) Despite many years of discussions, China has 
not yet implemented a feed-in-tariff, but Kyocera would 
like to see a FIT implemented in China, said Yagi.  The 
Chinese government seems to prefer a direct subsidy to 
Chinese companies, but this will not likely work because 
China has too many solar companies, so it will be very 
difficult to both fairly and beneficially distribute 
limited subsidies.  Without a FIT, most Chinese consumers 
will not be able afford Kyocera's solar technology. 
Kyocera believes that for the foreseeable future, China 
will remain focused on coal for power production, Yagi 
told us. 
 
DONG