TRANSCRIPTS:

Nico Johnson  00:00

Hey, welcome back to SunCast. I'm Nico Johnson, your host. Today we are exploring one of the most ambitious bets happening in American Solar manufacturing. If you're new here, I just want to say thank you for giving us one non renewable resource you've got that is your time. Promise we're going to take good care of it today as we dig into the underpinnings, the fabric of not only the American domestic manufacturing revolution, but how the solar industry is re shoring technology and thriving in so doing it for the past two decades, most of the world's solar supply chain has been built overseas, particularly in Asia, while the United States focused primarily on project and product deployment and development, that dynamic is starting to change. Today's guest, Alex Zhu is one of the entrepreneurs working to rebuild a critical piece of the solar manufacturing stack right here in the United States, one frankly that I thought we'd never see again, solar cells. Alex has been a part of the solar industry since the early days, starting at Sun tech in the mid 2000s as Chinese manufacturing was just beginning its rapid global expansion. Since then, he's helped build and expand solar factories, led manufacturing operations and experienced some of the industry's toughest cycles, including the collapse of brands that you might recognize, maybe Suniva, once one of the largest solar manufacturers in the United States. He's attempting something that very few have had the courage to try reshoring large scale solar cell manufacturing right here in the southeast through his company es foundry. We're going to look at Alex's journey from semiconductors into solar manufacturing, the hard lessons from early attempts to build factories here in the US, why solar cells, not modules, may be the real bottleneck in rebuilding our domestic supply chain, how you raise capital and what it actually takes to build a factory in America today. Alex Zhu, it is a pleasure to finally get a chance to have you on the show. I'm grateful for the opportunity. Thank you, and welcome to the show.

Alex Zhu  02:07

Thank you. Nico, thank you for your terms, and it's a great opportunity to be in your show.

Nico Johnson  02:14

Alex, you've got a phenomenal background. The more I get to know about you, I am really impressed and inspired at how you've been able to link experiences. We call it, you know, a lot of it is pattern matching and just seeing where opportunity lies. But I would love if you could give us a bit of a recap of your background, where you grew up, what drew you into engineering, and how you first entered into the semiconductor world.

Alex Zhu  02:39

Yeah, I was engineer by training. I get my undergraduate in chemistry. I also get my master in chemistry. So when I graduate from National University of Singapore in year 2000 we look at where to go at that times, there's two choices I have. One is going to the medical industry, and another going to semiconductor. That's two choice for chemistry to go to in Singapore at that time. At that times, I think memory is born. So at that times, I joined micro in Michael, in Singapore, you

Nico Johnson  03:25

mentioned something funny and perhaps even fascinating, and by way of a back story, sort of your early training, that during business school, you actually interned at a company we would all recognize now, but hardly anybody knew about back then. What was it like to intern at a small company like Nvidia back in the in the early 2000s Yeah,

Alex Zhu  03:47

I think in 2005 I interned in Nvidia that time. So we are suffering. I mean, a lot of the GeForce was early success. Then we have competition for API and Intel going to launch their graphic. So that's a really tough times. There's a lot of arguing where to go, and I think still at that time, since it's a great company, it's very engineering focus. But I think nobody can expect how successful Nvidia

Nico Johnson  04:26

right now. Yeah, nobody could realize what it would become. But when you look back on that time, are there now in sort of that 2020 hindsight, 2020 Do you see sort of telltale signs that maybe through the experience you now have. You might go, oh, okay, I could see how there was a vision there, or did it completely change in evolve in those two decades?

Alex Zhu  04:51

I think would be very difficult 20 years ago to foresee what's happening. And I think that's something for for. Solar when, when I joined the sun tap, in the 2000 a we just such a small, tiny company. I mean that when I joined Sun tap, Sun tap, whole year capacity is a 400 megawatts. For whole year, there's the largest in the world. No, not just in China, and one of the top 10 in in the world. Yeah, 400 megawatts. That's right now. It's so tiny and no. And to put that in

Nico Johnson  05:33

perspective, I remember when I was at Trina in 2011 we became the, I think, second largest, maybe to Sun tech at two gigawatts. And that was considered massive, and this was long before ja and Longji and everyone else sort of came online to push us into the 20 plus gigawatt range. But what attracted you as an engineer, to the manufacturing side of the business? I'm curious how that came about.

Alex Zhu  05:59

I was engineer. I the first job. I working in memory fab. I was process engineer. I'm doing edge process. And we have lot of interaction with thin film. That's a particle. We the film. We go into edge. So that's really two very interesting process right now, a lot of similarity, semiconductor and and solar. So my first job is manufacturing, and I remember when I first applied my MBA, I'm writing assets. Is my goal is how to get some training on management help, the developments on the manufacturing in Asia. But I have no idea, 20 years later, I'm doing manufacturing in us.

Nico Johnson  06:54

You know, I just had TJ rogers on very recently, and he was talking about, he was talking about the similarities and differences of there's a lot of discipline and repeatability in semiconductor. Obviously, the solar industry benefits from a lot of semiconductor processes upstream similar inputs, et cetera. Did working in the semiconductor industry shape how you think about solar manufacturing. If so, how I

Alex Zhu  07:23

think the fundamental of the size are similar, because we are talking about the pn junction formations, but the scale is different, like in memory and the chips we are looking about how tiny line we're going to create. We connect each there. We are afraid of particles, and we want the device to functional, and the speed at the high speed, and people will pay for it. So really, the quality the functionality become a key differentiation. And also reliability testing is one thing. But for solar is different. Solar is going to the opposite, because the key eventually the solar generate electricity. People using the electricity, no one know the electricity is coming from solar or from the natural gas or coal. So eventually you're costing your competing on the LCOE or the the lifetime cost on the electricity. So the cost on the solar becomes so important. And every everything we talking about, the efficiency, we're talking about the scale, but eventually it will reach to the cost. The lower cost will win eventually, I think that that's a crucial things, and that's also very different from semiconductor. People will pay for the technology, pay for the advancement, but for solar price?

Nico Johnson  09:04

Yeah, it's super interesting, right? Because when you think about solar project development now, it's it's a similar moment in data centers as it was in semiconductor versus solar back then, right? Like data centers now will just pay for power at all costs the way that semiconductor in the aughts and into the teens would pay for processing speed at all cost. And then the inverse is true in solar. Everybody wants the absolute lowest cost per watt and lowest cost per kilowatt hour delivered. It's almost 20 years now that you've been in the industry, you joined as likely one of the first product managers in the Chinese solar industry. The industry was so early back then. Can you talk about the moment, what it was like to join when you know, Sun tech hadn't even built a brand presence, let alone Trina or Ginko or q cells or any of the other which was, which was a solar fun back in the day, I'm sure you remember that name, but. Yeah, like very few, nobody had brand presence. Here. We're talking, you know, BP and Kyocera, Mitsubishi and Connor G were the brand names that people respected, right? Rec, solar. Can you talk about that moment coming in from Southeast Asia, and what it was like for you as a product manager to start thinking about building an industry at scale that the industry had not really been thought was possible before.

Alex Zhu  10:24

I think early days really the whole China, China industry is just beginning, and they benefit and the learning from the world leaders at that times, I remember BP, solar and sharp and the Q Cell, the three company is a three, I will say, model. We learn, we learn how to start the product marketing, product management practice and just build the whole systems in China. And we definitely believe the systematic ways we observe from those company are very beneficial. But eventually we we go beyond them. And I think that's really happening, is in 20 years China become build its supply chain, the whole systems. So that's why we can more easily integrate upstream and the downstream, and also look at how to reduce the system costs from Alliance. I think that's really helped the whole industry to go down the cost from like I remember the months I joined. We sell the module 4.3 dollars in Europe. Now think about it. China is used to in last few months, probably just 10 cents or nine cents.

Nico Johnson  12:06

I know it's wild. I was buying Sun tech modules at the time at about about three, at 350, to $4 a watt. I remember when I was at Trina in 2010 we signed a deal with Solar City, and it ended up being like one of those landmark deals where we ended up making money, which was wild, because we signed the deal at $1 a watt, when modules in the marketplace were at $1.18 a watt by the time we were delivering the final modules, modules in the marketplace were at 50 to eight to 60 cents a watt, right in a year, it was unthinkable. Like every year, the price was going down by half. What do you think that China really understood about manufacturing scale early on that fundamentally shifted the way the industry worked? Yeah, I think there's,

Alex Zhu  12:49

I think that some people will think China the cost low is always get subsidized from the government, from the land. So that's, that's the reason of all the ADC, VD, karma. But I think the reality of the cost reduction is really coming from a systematic approach, the way how people can increase the scale so they can reduce all the costs. I mean, from the if you look at the history, silicon cost is a huge portion of the whole module cost. And when, when, when the cost to produce silicon in the past is like you're talking about $100 or even $200 per kilogram, but now the production cost is below 10. Is like the leading guy is four to $6 and among these, you'll see all the technology, all the equipment's process, continuous improvements. It helps the industry to reduce the cost. And I think the cost reduce, of course, increase the market acceptance. So you can see the shipments now is several 100 gigawatts, and in the past it's like one gigawatt globally.

Nico Johnson  14:21

I was talking to one of the early investors in REC, and one of the things that ended up putting them out of business was that they had the their business plan was built around a slow, steady decline from about $400 a kilogram, right? And, I mean, rec went bankrupt, ended up reviving, and now they've obviously got a very strong brand again. But when the market goes from 400 down to, I think, in the like less than 100 like $40 a kilogram price range, it's a significant shift. It was a seismic shift in not only who has the power in the industry. Be but who's going to survive? Because people raise capital build entire sort of return models based on specific input pricing. It was really fun to watch not not exactly on the sidelines. I was developing and working in different companies throughout that decade and a half, but I'm glad I finally get a chance to talk to somebody who was on the inside. I'm not sure how much we'll be able to really pull back the curtain on all the things. But you've been part now of solar manufacturing in the industry, actively building factories for two decades. You've actually attempted US manufacturing more than once. I'd like to talk about that journey. Your first attempt in US manufacturing was with sun tech, obviously, in Arizona, yes, around, well, I say obviously, but not everybody knows that sun tech tried to put a factory here in the US. Can you talk about the vision behind that factory and sort of where, where it was a where you able to get it to before it ultimately shut down?

Alex Zhu  15:57

I believe that's back to the 2010 at that time, some the management of the Sun tech, believe when we need to promote the solar we have to bring back the manufacturing to where it installed. So that's a reason we built the Redondo factory that's in the good years. So I still remember the name of the road is a cotton land that's the first time. It's funny, and we build the one line of automations on the module lines that's a 30 megawatts, that times. That's the first automation line we have, all the stringers to the laminators. It's fully automation, and it's a showcase for us. However, the cost manufacturing in us is extremely high, because we don't have any supply can find within us, and we have to ship everything into us, and the cost is high. So eventually it was shut down after two years close early of the 2013 is fully closed down. Yeah, that's That's unfortunate to me.

Nico Johnson  17:21

Yeah, for context, for folks at the time in the in the US, there were several other factories manufacturing for solar, famously, Solyndra, SunPower, Solar World, shell shot solar, Kyocera, I remember the twin key, Twin Creek factory down in Mississippi that famously went through a bunch of folks, including stion. Like it was not necessarily novel that sun Tech was trying to put a factory here in the US. In many ways, it was a follower strategy, because it was there were others still making the attempt. You know, those of us who watched it all happen now kind of look at that as the lost decade where, like manufacturing really did go offshore for a decade, get better, and now we're trying to reshore it. But why do you think that factory struggled to survive or struggled to compete?

Alex Zhu  18:12

I think still the cost, as we discussed early on, the end customer eventually choose where to buy the more based on the price. So the price the module coming from Asia, is cheap than the from us made, and very few people will pay for the premium of the US made. So I think that's a that's really one of the issues in the past we face.

Nico Johnson  18:47

And I'll remind folks that this is during the Obama era. There were, there were incentives for American made there were incentives at the government level to buy more renewables and more clean energy. So there were, there were very fundamentally sound business decisions to bring manufacturing domestically. One of the companies that tried to do so was Suniva. How did you get involved with Suniva and ultimately become president of that company to help expand production capacity?

Alex Zhu  19:14

Oh, at that time, so it was in a company called Shin phone, clean energy, SFC. And if

Nico Johnson  19:23

that sounds familiar, that's a company that now owns the sun tech assets.

Alex Zhu  19:26

Yeah, exactly. They are quite Sun tech after sun tech bankruptcy. And so I become part of the team in the Hong Kong, the headquarters to look at merger acquisitions. And that time. So one of the deal we look at in the US, actually two deals we do in company, in us. One is we invest in the power and energy in early days. Power, yeah,

Nico Johnson  19:53

the battery company, the battery company,

Alex Zhu  19:55

we help them grow pretty fastly in the early days and. Then the second deal is we look at the sunnier and become investor of sunnier. We believe there's a chance to revive solar cell manufacturing at that times. So that's why we in 2016 we helped Sun Nico to grow from 100 megawatts capacity to 400 megawatts capacity. So that that's, that's efforts.

Nico Johnson  20:29

What did sunnyva get? Right? I think

Alex Zhu  20:30

sunnyva at that time. So it's a, there's a too many things happening for Sun Nico, but if there's so, if they survive that period of time, I think that will be very successful story, because we are doing perk back to 2016 and we are one of the pioneer to doing perk around the world. Yeah, and, and if we pass that, if you, if you remember back to the 2017 to 18 period time, doing perk sale is like printing the money. Yeah, it's, it's really, we just at the age of success, but unfortunately, it was also called bankruptcy in 2017 Yeah. What do you

Nico Johnson  21:18

think is different in the market from 17 to now nine years like, what? What structural challenges did Suniva face that companies like es foundry don't have to consider now or have changed in the marketplace now,

Alex Zhu  21:32

really the RA is, is the fundamental of the change, because, I mean the law passing 20 IRA, yeah, yeah, yeah. So for for that law pass, really establish a framework, say you have domestic content bonus and incentivize people to make the projects with the 10% even though it's just a 10% of the incentive, it will help. There's a consistent demand for manufacturing from us. I think, honestly, I don't think if we remove the 10% domestic content, then the whole structure, or demand for the domestic sale, I think, will disappear. That's That's just a fact that the structure change on the 2022 become, really help reduce domestic manufacturing.

Nico Johnson  22:40

I remember in one of our previous calls, you said that shutting down the sun Nico factory and laying off the employees there was one of the hardest experiences of your career. How did that experience shape how you think about building companies and starting again?

Alex Zhu  22:55

That's definitely a very sad experience I had. I mentioned it also in last year, when we do the grand opening in South Carolina. I mentioned that also because that's how really let me rethink how we can link the company, star, the community, and how you can help the growth and help the people's normal employees to think, not just from investors, from entrepreneur, you think how you grow together with community, And I think that's really help us to structure our working relationship with the local community and how we can work with them and think from different angle, not just from pure capitalist, pure investor return aspects for the whole thing. So last year's we es foundry get the CC award for the corporate investments and community developments. So I think that's really a surprise to us. And then when we study more, we really feel honored to be team of all those tier one big company and make significant contribution to their community. I want to

Nico Johnson  24:31

pull back some of the sort of the layers here around the decisions that you've made, not only in where to manufacture, and we'll talk about Greenwood, South Carolina did. But what to manufacture after the IRA passed, we saw a wave of announcements of us solar module factories. Right? Every, every week there was a new factory that was going to get built. Far fewer companies were talking about or pursuing, in reality, solar cell manufacturing. Why did everyone go after modules first

Alex Zhu  24:59

since the point? Policy was announced, everyone figured out module investments is the best investment because it don't need a huge investment at the beginning, and it gets seven cents per watt and the return so based on the best situations, if you're fully running the factory with just incentive, six months you'll get the return. Wow. Okay, so that's the reason everyone is jumping to build module factories, and I think the even like all the big brand doing huge expansion cost us right now. You can see more than 60 gigawatts of the module capacities in us right now. But if you look at the solar cell, it's only four cents per watt on the incentive and the cost increase among Asia and the US is more than four cents. And then you have multiple times of the investments every gigawatt. You are talking at least 150 million to 200 millions investments. That's a way high than the module investment. So I think that's just basically a mass calculation. Everyone will know making the module will get quick money and quick returns for their investments.

Nico Johnson  26:37

You have to be very convinced that the industry, especially domestic manufacturing, is here to stay, because if you're going to be an upstream supplier, namely of cells, without plans to build your own module factory, you have to fully believe that there's going to be a gap in the marketplace, right? I'm curious, why did you believe the opportunity was so strong to pursue cells instead of modules?

Alex Zhu  27:04

Yeah, I think eventually, if you're looking for the big picture, the RA, when they draft it, they really want to have a strong incentive to to build the domestic the manufacturer. However, if you don't build a solar cell, you really lost the key, because the solar cell really bring the technology, bring the cost down, and the link upstream to the downstream. So without cell, no, no way or can go. So we can believe, if for actually, we do the study, we see what kind of benefit for the 10% domestic content can bring to the end customer. So we believe that will be half the demands coming from developer need the 10% and also, like the success of the first solar really showing the people want to make multi years contract with them to secure all those credits and and when we look at the module, model is too competitive and the sales supply is limited, that's why we believe there's a definitely a need for us made solar cell, and the key is, who can make it quickly, faster and cheaply? And I think that's that's a whole things we've been working on, and we want to convince the investors, the teams,

Nico Johnson  28:45

that's a way, yeah, and very few people, frankly, have the the experience, not just the experience over time, but the experience in navigating incentives and navigating, sort of locating factories, etc. It's a very different type of facility you need for cells and modules. Another critical decision before we talk about sort of how you landed in South Carolina is which solar cell technology to build the factory around. And that's a really interesting conversation in the industry right now, isn't it, when you were designing the factory, how did you decide which cell technology to build around? Walk me through the thinking behind perk versus Top Gun.

Alex Zhu  29:22

That's a link, really link. My past experience in sunpad. I was in charge of the whole modules. I also in charge of model development. So we doing a lot of testing there. We have the internally. We doing the perk and HCT at that times in Santa, then in sun Nico. We work with Georgia Tech. We work on the top, top experience. So that gave me really fundamental understanding on the cell structures. And we also start. See all the IP issues existing. We can foresee the IP on the top column will become a major issue in US manufacturing. So for us, when we try to select the technology, as I said earlier, one of the things is we have to do it faster. If we cannot showing the our execution, there's no way we can success. So I'm not sure whether you read a book before there's a call lean startup.

Nico Johnson  30:37

Yeah. Eric agrees.

Alex Zhu  30:39

Yes, exactly. So one of the key takeaway is, he always say, when you're doing the products or something, you'll get some prototype, try first, and the pool, and it's somebody willing to pay for it, want to use it is available for your customer, then you can make the next generation and improve from that. So that's really concepts for us to doing. The ES foundry. We our goal is just try to demonstrate we have way to build a factory faster, quicker and and can deliver products and eventually all the customer will need. So in that case, we don't want to be in the IP fighting with the multiple different company and perky is really standardized, and we've been viewed it since, as I mentioned, 2016 is a newer we know how to do it. That's a pretty standard process for the whole industry. And so that's it's pretty easy for me to decide, we try to do the perk first, then we showing the end customers, and we get the demands, and then we move to the next generations.

Nico Johnson  32:02

That makes sense. And at the same time, globally, we're seeing a rapid shift toward Topcon Talon and others are betting on that technology over perk and next generation architecture. How do you think about the transition when you're building a factory designed to operate for many years? Like, how does it work functionally for you, and the balance sheet, like the business plan, when you can see that there's going to be an evolution, but you have the visibility that there perhaps didn't, that there's also going to be a patent war, there's going to be all these things like, how do you position this for your investors? Okay, first, we're going to start with perk, and then we're going to transition to

Alex Zhu  32:38

next gen technology for our currently Greenwood factory, I think we will continue to produce perk even like in several years later. Instead of like, transition the perk into Top Gun. That's not our plan. We will continue doing the perk. The reason is, come back to the fundamentals of our solar industry is a cost, and we believe right now, okay, our price right now we because we in the shortage. We have some premium, but eventually we, I discuss with our investors, is, in few years, there's more capacity coming out. And maybe there's a top con, there's Hga T but there's values between those new technology, how much Bos cost reduction they can reduce, how much l COE they can increase, make more generation to the end customers. So you can, you can basically figure out there's around two to three cents per watt benefit they can bring to the end customer. So if we can keep our production costs low enough, and the enterprise we sell to the market is, have the three cents difference, then we can survive. I think that's a logic. Tell me,

Nico Johnson  34:09

if you think this is a fair analogy that will feel very familiar for any of us that were around in the late aughts to early teens. A lot of folks were at that time. I mean, it feels wild to think about it now, but they were like, oh, you know, this is a there's it's either mono crystalline, like solar world, or polycrystalline, like all the Chinese manufacturers, right? It kind of feels like perk and Topcon are having that sort of battle today, right? Where it was, like, very clearly more expensive to do monocrystalline, but there were cost evaluations that would suggest that it was better to buy monocrystalline, and there were a very clear push, from a scale perspective, to do polycrystalline. I'll call that. Let's call polycrystalline perk and monocrystalline Topcon, for the purpose of this argument, although perk and Topcon are effectively polycrystalline, is that? Is that like a similar conversation that we're having right now in the in the sort of generational technology? Ji war, I agree,

Alex Zhu  35:01

because if you look at the history right now, we are more mono in the passing, more poorly. The only reason people going to mono, not because of their high efficiency, they are always high on efficiency from the beginning, is only because of the diamond wire technology will reduce the wavering cost in model. And when the cost is similar to get the wafer, then you'll see all the benefit on the efficiency really bring the system cost. So I think this is the same here. Eventually people will care about is how much the system costs. That's which define the LCOE of the energy and eventually the engine costs will make the fundamental difference.

Nico Johnson  35:51

It's a really big bet, though, like not very not many factory settings expect to transition from technology to technology in a two year period, right? Yeah. But if the industry does continue to move towards Topcon or other architectures, how adaptable are the factories that you're

Alex Zhu  36:08

building right now? It's very difficult. I mean, so that's just history of the solar and every in the past, every three years to four years, really, people change all their equipments, yeah. So facility, or probably can kill but a lot of equipments being in the line is a whole new line, yeah, whole new lines, yeah.

Nico Johnson  36:38

Well, let's talk about the factory itself. The building is a part of a business that you call es foundry. How it all came together before starting, yes, foundry, you were working on building module capacity for another Southeast Asian factory. What led you to leave and start a new company,

Alex Zhu  36:55

as we discussed earlier, module investments is quick investments and definitely be very viable and easily make the investment decision at that time. We I also thinking about, I say, I definitely see that needs for solar cell, and no one really is build it, and especially to support the whole industry to grow. So I make proposal internally. However, because of all the challenges, we can see the high investments, difficult infrastructure, we don't have enough engineer and also operation teams. So all those things make the company decided not to move ahead to do solar cell in us. So that's a reason I think I personally see the opportunity and the needs on the market. So that's why I decided to leave and start the ES family. But Alex, it takes

Nico Johnson  38:04

real courage to say, Okay, I'm working on behalf of others. They're stroking the checks. They're, you know, I basically make asks, and they make fulfillment of those asks. And then to step into the position, I'm going to be the founder, the startup CEO. I'm going to raise capital around it. Can you put me in the place of time where you began to develop that sense of confidence? What? What? What changed inside for you, where you're like, Okay, I've got to be the one that goes and does this. Yeah, I

Alex Zhu  38:34

definitely think when we reach out to talk to a lot of people, we see there's a lot of people interesting in that area, and also they're looking to invest in us. However, because of the uncertainty of the policy, a lot of people really have conservation, I would say, to put a lot of the capital to that direction. I think that's a reality, and that's one of the key reasons us so far, you only see very few. Factory is really in productions. There's only two company, and then you have only probably two other company is really doing construction. So that's that's very tough situation, I would say, Yeah, which

Nico Johnson  39:35

is to say it's hard to show investors that there are others doing it and that it makes sense. One of the interesting aspects of how you built, yes, Foundry is that you actually raise cash. Actually raise capital outside of traditional venture capital lanes. You went to family offices rather than sort of traditional resources. Can you walk us through that process? Not, I don't expect that you'll divulge like, who you raise capital from. But how did you identify those investors that would be interested in this kind of risk profile? And. And why did you feel that family office was the right fit?

Alex Zhu  40:02

Yeah, actually, I also talked to the venture capitalists. I also talked to prior equities. And so I think they we get, actually more high valuation from those peoples and but just between the interaction with answer their questions, I feel a lot of times the VC and the PE, it's difficult. It doesn't fit the needs of the startup like us. So for example, like we do in manufacturing, we produce perk it's not like a brand, brand new, porosity, scale and technology advancement. So and we need a lot of capitals upfront to build it. And so the VC really think your technology not so advanced, and you need a lot of capital that's beyond their normally comfortable zone. And for PE, then, their thinking is you're too young, you don't have proven tracker recall of the sales of customers. We do believe you will have the customer. You will have somebody need yourself, but really difficult for them to say, Okay, we confident, especially a lot of the USP are not in the semiconductor or or like solar manufacturing, there's no success story before. I think that's two reasons really prevent a lot of them participating, and we, I was only say, I'm lucky. We meet the family office who who understand the solar and the renewable industry, and they they are patient, and they really want to see the growth, and they want to bet the US manufacturing will become materialized under the new law enforcement and all the RA's

Nico Johnson  42:31

framework for others who are similarly interested in raising capital from family office, is there something that you would Tell them about contextualizing what it's like to work with those this capital pool versus the venture capital and private equity in your experience, kind of how now it feels different in specific ways, like, are there ways that you manage your business on a different time scale or a different sort of reporting function than than you did in the past?

Alex Zhu  42:59

One of the key things is not like VC and the P, that's kind of stereotype, how you approach them doing these things family office really different. Each one have their own different kind of the interests and their capabilities. So I think that there's no standard way you can work with family office. And sometimes I think luck will be the thing you have to depend on. And I think the the investor we're working on with is really understand the industry, understand the technology so they can access what kind of risk they're potentially

Nico Johnson  43:47

being exposed. I'm going to pivot a little bit. One of the risks that the old industry is exposed to is permitting risk. How did permit timelines change the very underscore, underlying sort of name of the company. I know a lot of people probably ask you, where does the ES foundry come from? Okay, yeah, yeah.

Alex Zhu  44:05

So, yes, foundry right now we say, we enable solar foundry, and we we going to the reason we go into Greenwood, South Carolina, is because the site we choose the X fuji film site, which they're doing a lot of chemical process, they're doing a lot of gas process, so they have all the permits on wastewater treatments and very good electrical facility. So that's the reason we go there. So that's were really reduced significantly. What kind of permitting challenges, and also the facility challenges people normally see, because it's wait two, three years to wait to the electricity a. Substation being built up. That's that's common in this industry. You'll see everywhere. And we are lucky to be able to select the Fuji film and so to demonstrate our ability to show pace and for for the years, as I discussed before, like we originally call it is antico solar foundry. And the reason of Endicott is the first sign we want to do is and Nico, New York, and we go there. They have the, it's used to be the IBM, original headquarter, the birthplace of IBM. They have very good facility, and also have earlier the semiconductor factories, which can convert into the solar factories. So that's the reason we go there. But the permitting is really when we understand the permitting on the New York, it's, it's just too long, and that's one of the key reason we switch to the South Carolina. Yeah, yeah.

Nico Johnson  46:12

So Endicott, solar becomes the ES foundry, yes. South Carolina, which is my original birthplace, home state, becomes the home of ES foundry near Greenwood, South Carolina, the building you chose Fujifilm as a manufacturing facility. What made that building a particularly good fit for manufacturing solar cells?

Alex Zhu  46:33

Yeah, I think the key thing is you need solar cell. Needs a lot of the power, and there's 40 megawatts of the substation just besides our building, and they need a lot of waters, and you need to also treat the wastewater treatments. So we basically have the similar process Fujifilm used to treat the wastewater system, so we can save a lot of money to using that system and just reuse it. So that's where they reduce the permitting process and also reduce the investments we have to using that building. Yeah, yeah.

Nico Johnson  47:20

The facility is also quite tall, right? Like, most of the factories I've been into for modules are just a tilt up building maybe 30 or 40 feet tall.

Alex Zhu  47:28

Yeah, that building is very high. It's a, I think the highest location is like almost 70 feet

Nico Johnson  47:36

Yeah, yeah. And the equipment that you have also requires that sort of vertical space, right? So it's

Alex Zhu  47:42

not easy. We the equipment, so we need, probably only need, like 3035. Will be good enough. But yeah, that building really is, is

Nico Johnson  47:54

a huge, yeah, part of sort of when I'm thinking about why all this sort of May in the time and space and the investment coming together and you being the right founder, you had already for prior employers, scoured the entire east coast, the southeast, looking for facilities, right? Like you had already encountered this facility in a pre in a prior engagement, right? It wasn't Is that true? Yes, and I have to assume, then that that plays into how quickly you're able to not only pivot from Endicott not working and finding this but how long would you estimate it would have taken you to find these facilities if you had been starting from scratch the way some of your peers are.

Alex Zhu  48:36

Yeah, actually it takes us three to four months we I fly during that time, I find multiple locations, a lot of state or city. I never with it before. Just see the factory obsolete, all the factories. And it's really you need to spend time with your design company to look at their design to figure out whether that factory will fit in multiple aspects, and then you'll find out which one is the best fit. And it's really a cooperation between multiple organizations to find out what's the best way to move forward.

Nico Johnson  49:25

Alex, a lot of the push for a domestic industry is around creating durable, long term jobs. Many of our communities have suffered from offshoring of the film industry, of the steel industry, of the auto manufacturing industry. You told a remarkable story when we first connected that while you're building the factory, a nearby plant was going through some hardship, and the CEO reached out to you. What happened next?

Alex Zhu  49:58

Yeah, so I. When we sign up lease in green world, and of course, we work with local business development teams. And then the world come out. We We will come in, and then we have a nearby factories will have some challenges, and there's potentially reduction of the labor force, so they reach out to us, and then we we just openly discuss what's our plan, what's our ramping up schedule, and what kind of people we are looking for, and then we basically build working teams so review every weekly and to see how we can help them to observe and the people that release. So I think most of the people we hire, we hire more than 100 people from the factories, and almost is they left the factories on Friday, next Monday, they join us. So really it's become corporations help them to be able to finish the work they need to do, and we just compromise to say when we can take them and how quickly we need take them, and that's really reduce the impact for the normal people employee and make sure that smooth transactions.

Nico Johnson  51:38

Yeah, Alex, it's not lost on me. Earlier in your career, you experienced the shutdown, not just of the Sun tech factory, but the very painful experience of having to be responsible for letting folks go at Suniva. Now you're building a factory and creating hundreds of jobs in rural South Carolina. What perspective does that give you about the role manufacturing plays in these communities?

Alex Zhu  51:58

Making new ventures make products our customer appreciate and make a return to the investor. Is good. But I saw sometimes I feeling is when, when we talk to the employee, we have some of them, they appreciate us, not at the beginning. It's several months, for example, several months later we have our own celebrations. We sit down to have the meal with our technicians and operators, and they told me directly say, Oh, I'm coming from that factories. We appreciate your help us to to this period and and I honestly, I feel very honorable, and I feel much happier when they say that, because I think that's really contribution we make to the community, to the normal peoples. And I think the more we can work towards our communities, because we are really in small town, we don't have too many people either these cities, yeah, yeah,

Nico Johnson  53:16

yeah, it's, I mean, Greenwood is, for those who are not familiar, is a is a is a suburb West, about an hour away from Greenville, right? Yeah, yeah, very small town. I mean, you are helping prop that community up to prevent brain drain, or even, you know, urban flight folks leaving to go to Columbia or Greenville or Atlanta or other places for jobs. It's admirable and remarkable to see. And that story is is true for ES foundry. It's true for others who are standing up manufacturing in solar and elsewhere. And I think it's a story that we need to tell more of, because, as folks try to in other sort of areas of media, villainize in some way, still baffling to me how you can villainize solar, but they try to villainize it as an industry that doesn't deserve to take tax dollars we are replacing businesses that are going out and helping to rehabilitate these facilities in these communities, and I'm really encouraged that the solar industry gets to take part in that. Alex, I've got a couple more. So one more segment we call quick charge, just rapid answers to brief questions. You don't need to think over, overthink it. I'll just ask you a few quick questions. There's five of them, and you just give me the answer that's in the top of your mind. All right, okay, yeah, okay. What's the most underrated part of the solar supply chain?

Alex Zhu  54:37

For our supply chain, we need a civil pace rebuilding silver. Yeah, in us, because right now we we have to import and with uncertainty of supply chains, it's

Nico Johnson  54:53

crazy, yeah, what's the hardest part of running a factory? I was saying,

Alex Zhu  54:57

When is the boring? Because. Basically have to be precisely produce the same thing, hour by hour, minute by minute, doing the same thing to keep the same kind of quality. A lot of people will think this really boring. I think how you can motivate teams doing exactly keep the same string quality standard and deliver the products consistently. It's kind of challenges we see that's difficult.

Nico Johnson  55:35

What do you think is the biggest misconception that you encounter, either in the community or with investors about solar manufacturing,

Alex Zhu  55:43

I think one potentially is pollution. So I remember in early days in China, a lot of people think polycythemia production is very toxic and very pollution. But within the 20 years of the developments, really, if you build it right and doing follow the protocol and the standard, all those is controllable and mitigated. And I think the pollution conceptions from the solar is, is kind of big Miss conception.

Nico Johnson  56:27

If there is one, is there one technology that could reshape solar manufacturing? Honestly, I don't think

Alex Zhu  56:32

anything can really change a single thing, change everything. I think that just a history of the solar is really the efforts across the supply chain. You see the benefits and performance increase is, of course, from poly silicon, from wafer, from cell module, and it's also coming from the glass climb from the EVA Poe, all the components is all. Everything is contribute the success of the solar it's not just one. I think in the past history, probably the poly sector process to reduce the cost potentially be the one, because that's changed. Really changed the biggest cost, but right now, because that cost is already so low, it's hard to say anything right now, what significant change? Alex, you've

Nico Johnson  57:35

got two decades of experience working specifically on manufacturing Hardware and Building hardware companies. What advice would you have for entrepreneurs in that sector, in the hard tech sector,

Alex Zhu  57:47

I think it's really need the dedications, because the US tend to want to build software company in the past. I think really the manufacturing will bring back the really hard job and also create the whole industry Foundation which will be needed in the long run. And software is good, but we hope more manufacturing can happening every year.

Nico Johnson  58:23

Alex, I'm really grateful for the time that you've given today. In my final question, if we sit down again in a decade from now, what would success look like for us, solar manufacturing, how will we know that we did it? Well, I

Alex Zhu  58:36

think we hope there's a more company like us and invest into not only just a solar cell and also going to the solar wafers or even polysecond and go into the different manufacturing glass frame and rebuild the whole supply chain here. I think only the whole supply chain is happening in us, and then we have more long term advantage for the whole industry.

Nico Johnson  59:12

So in order to realize that that future state where we've successfully reshored Solar manufacturing, what I hear you saying is we have to really be able to focus not just on the cells and the modules, but on the rest of the supply chain. Yes, yeah. I know a lot of folks are familiar, as we've talked about here on the show, the campus model that the Chinese have so perfected. I know a lot of folks are trying to think that way, especially in the hotbed of Texas, is it your hope that we can have more solar manufacturing at the module and maybe frames and fact sheets there in Greenwood or surrounding areas South Carolina?

Alex Zhu  59:52

Yeah, I think in the south in Texas will be one hub another in the in the Georgia and Carolina. I think that will be another hub for solar manufacturing, for sure. I love to

Nico Johnson  1:00:04

hear it. As a Carolinian and South Carolina native, it will make me very proud to know that our industry has brought thriving jobs and respectable jobs that are helping build the energy future that we all foresee right here in the Carolinas. Alex zoo, thank you for the time that you've given here and for the dedication, the intention, the courage you've poured into ES foundry. Thank you. Thank you very much. This has been a fascinating conversation with Alex, the journey from semiconductors to early days of Chinese solar manufacturing through the ups and downs of our own us factory development now, building es foundry really illustrates just how complex rebuilding a domestic supply chain can be. I'm curious what stands out for you. What stands out for me is that most manufacturing is never just about the technology. It's about people, the capital we need to deploy, the infrastructure and the long term conviction to pull it all together. I've learned so much about that from Alex in this episode. In particular, I think it was really interesting and insightful how he chose which capital providers, namely family offices, to lean on, and was able to sort of thread the needle to get a facility up and running faster than anyone else in the industry as an independent, individual company standing up a cell factory. Alex zoo is the founder and CEO of ES foundry. If you missed that, they're building one of the few solar cell manufacturing facilities right here in the United States. SunCast is bringing you this story on the front lines of the Clean Energy Transition, as we always do. We've got more than 900 episodes like this in the back catalog that I hope you will go back and dig through. If you're new here, if we've earned your trust and respect, if you want to listen to more, I hope that you'll also subscribe, and you will be notified every week. If you're in Apple podcasts or Spotify. If you're watching us on YouTube, please click that button that allows us to send you a notification every time we publish another episode just like this. Thanks to our sponsors. We help make sure that we keep the lights on. They pay the bills. We just ask you to pay attention. You are what you listen to. Thanks again for showing up. It's half the battle.

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