Based on its latest 2013 numbers, LDK Solar Co., Ltd (ADR) (NYSE:LDK) is also stuck in a rough spot with huge operating losses. Yingli Green Energy Hold. Co. Ltd. (ADR) (NYSE:YGE) was not forced to declare bankruptcy like Suntech Power Holdings Co., Ltd. (ADR) (NYSE:STP), but it is still in a tough situation. Quarter over quarter, Yingli saw its recent panel shipments increase 23.6%, but it was still stuck with an operating margin of -3.8%.
The bottom line is that it is hard to justify increasing R&D spending while running operating losses. Low R&D spending limits a company’s long-term ability to improve its products and compete. Based on recent quarterly statements available for Yingli, Suntech, and LDK Solar, every Chinese manufacturer was stuck in a situation where its R&D spending and earnings are below the standards set in the U.S.
Big R&D spending improves products and allows a company to gain an advantage over its competitors. While U.S. manufacturers like SunPower Corporation (NASDAQ:SPWR) and First Solar, Inc. (NASDAQ:FSLR) don’t have access to cheap capital like many Chinese manufacturers, their strong R&D budgets give them a significant advantage. A combination of improving profitability and continued R&D spending make investing in U.S. solar manufactures an attractive proposition.
The article One Simple Reason to Buy American Solar originally appeared on Fool.com and is written by Joshua Bondy.
Joshua Bondy has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.