LINUO - What about Joint Venture between Germany and China - English Version

Linuo: Descent or Metamorphosis?

What's going on at the former joint venture primus of the solar thermal industry?

Linuo was one of the first to recognize the excellent advantages offered by Sino-German joint ventures. 

But what about the dissolution of the Sino-German joint venture Shandong Linuo Paradigma / Ritter with the remaining Chinese company?

It was a surprise to learn that the former flagship joint venture in the solar industry has dissolved. 

Text of the official announcement: 

“Linuo Paradigma was founded in 2001 as a German-Chinese joint venture out of a strategic alliance between the German market leader for vacuum collectors and the world's largest manufacturer of vacuum tubes. Due to the many years of successful cooperation with the Ritter Group (Ritter Energie- und Umwelttechnik - formerly Paradigma Energie- und Umwelttechnik) the Linuo Group has taken over the entire joint venture in 2016 as part of a planned IPO.".

What led to this decision, because the synergetic advantages for the partners involved were obvious?

The German partner receives huge discounts on the purchase of the coveted vacuum tubes for the production of its own vacuum-tube collectors, and in return sells CPC mirrors to the Chinese partner, and also gives "tutoring" in the areas of technology, production and international sales. In addition, the Chinese partner also was able to share existing certifications of products produced in both companies. In addition, countries that should not be touched on by the Chinese partner, since they are looked after directly from Germany. If higher production quotas were needed for the EU market, these are produced in China and a mixed calculation ensures an adequate profit situation. In the Asian and other markets released from Europe, consistent quality by adapting to quality regulations according to German standards and norms was ensured. Add a measurement and test center, which is set up according to the German ITW standard and accredited accordingly, you create the preconditions that clearly distinguish a Chinese company from the multitude of competitors in China.

But what happens if the German joint venture partner leaves the company? What happens if you no longer have German experts in the company? Thus happened as a Paradigm respectively Ritter had withdrawn from the joint venture.

In order to assess these changes, the engineer Andreas Woell, who is an international expert in the industry and has additionally personal management and cooperation experience at Linuo, was interviewed.

“In view to the many advantages and many years of very successful cooperation, I cannot understand the strategic considerations either, but I consider a number of disadvantages for the partner in China to be evident," says Andreas Woell.

The Chinese company loses all certifications that had previously been shared with the German partner. They loses the factor "German", which enabled the JV to achieve higher prices for its products on the domestic market compared to its competitors. Whereas in the heyday of the joint venture, the quality and technology of the products were still comparable, today there seems to be a step backwards towards "standard China production". 

Is this is a goal-oriented strategy? The products often appear to be half-cooked, almost as if they have been copied uncritically by competitors. Are these products the state of the art in terms of quality and technology? Are they useful additions to Linuo's portfolio? Andreas Woell also had no answers to these questions. However, he referred to the very fruitful cooperation at that time, the know-how transfer and the joint development of the best products as his goal. 

“Linuo is an internationally important company that has to lose a lot of reputation if its analyses are correct," Mr. Woell commented on our questions.

Some changes that have already occurred are worrying and can be interpreted as negative signals:

1. Product quality: Flat-plate collectors that have little in common with European high-performance collectors are now being manufactured. The insulation used does not even meet the minimum requirements for fire protection! This insight is already evident in the simple review of the product description.
   
2. Portfolio reduction: Vacuum tube production was sold out for cost reasons. What you will miss is that they eliminates "the most important draught horse" in the stable. In addition, it is not possible to guarantee a more or less constant quality through acquisitions from the market. Not to mention the doubtful performance of the tubes. Currently, it seems difficult to believe that the prerequisites for the Solar Keymark certificate could still be fulfilled.

In addition, PV module production in the group is discontinued! It's hard to believe when you look at the competitors in Europe. Example: the Hanwha-Q-Cells company. This company employs a large team of engineers in Europe to keep the PV modules at the highest technical level. Cell production as such is apparently going to be preserved and, as Mr. Woell indicated, the cell-technology is to be converted to PERC, while at the same time it is planned to increase the production capacity from 300 MW to 1 GW per anno. The goal is to achieve cell efficiencies of >22% in two years' time. A noble goal, if you consider that the current cell efficiency is at about 18%. This goal seems to be very ambitious, but realistic with professional support, Mr. Woell said.

1. Portfolio extension: Because the competitor also are doing it, heat pumps, electric and gas heaters are now also being built. And with all products Linuo is willing to enter the international market, as the competitor does the same. This seems a bit unreflected and seems as if they just want to clone and copy the competitor - without setting their own unmistakable "brand of fragrance" and trusting their own strength (Quality and USP).
   

1. Quality Assurance: Linuo has a huge, fully equipped test and inspection center with high quality equipment. But what good is it, if you would have heard a pin fall in the respective areas, because apart from the office, none of the test areas are used consistently? The measuring and testing center, which was built according to ITW standards, has meanwhile moved and thus no longer seems to meet the requirements, according to our source from China in the opinion of the local properties.

In summary, the signals for a relegation of the former primus, in the solar-thermal industry, in these questions can be summarized: 

But what good is it if the person in charge of the Linuo Group's international department in Morocco or elsewhere in the world is representing a "Sino-German joint venture" which no longer exists and which is also without real marketable products? What good is it, if you make promises you probably can't keep? What is the point of having products that do not even come close to meeting the standards and norms of many countries, Europe in particular?

But there are also "delicate" hints to the desire to develop a transformation strategy. 

The top management of the Linuo holding seems to have recognized that a change process must be initiated. The former technical director of the former joint venture, Andreas Woell Prof.h.c. Dipl.-Ing.(FH), was appointed for this purpose, to bring "German" back into the company. As early as November 2017, a personal visit by the owner of Linuo Holding resulted in a promise of employment, already. Mr. Woell already worked as Senior Director Engineering and Vice General Manager for the JV in Jinan from 2002 to 2005, so he knows Linuo Paradigma and Linuo Power already. He was, as he said in a personal interview, on site in Jinan from the end of November to the beginning of December in order to get an idea of the current situation, in preparation for his new assignment. “I was pleasantly surprised how much the Linuo Group's industrial park has changed. There is a lot of potential for change here, leading to a brand that can be taken seriously on the way to becoming a world leader. However, a great deal of work remains to be done. Some things have returned to the technical level of 15 years ago. However, the technical possibilities are there to change this, to take over the technical leadership in Asia again, as in 2003-2005, and to be perceived internationally as a reputable and high-quality company.". 

Is Linuo in the process of descent or is it a metamorphosis to greater competitiveness and international expansion? There is still no definitive answer to this question.

At this point it is to wish Linuo all the best, only, to get back to better days. It would be a shame if such a company were to join the endlessly long line of competitors in China and then gradually disappear into the sinking of the nameless. A development that unfortunately seems to be so pre-programmed.

Sigurd Roeber was talking with Andreas Wöll