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28 Sep 2011
As production equipment bookings slump, Solarbuzz says that the industry should brace itself for another challenging year.
Despite some production cutbacks and a recent slowdown in bookings for photovoltaic manufacturing equipment, there will remain significant overcapacity in the industry and continued downward pressure on PV module prices for the foreseeable future.
That’s the message from the latest quarterly report of the PV industry compiled by analysts at Solarbuzz, coming off the back of a Semiconductor Equipment and Materials International (SEMI) survey backing up earlier predictions of a slump in PV equipment orders this year.
Although some cell manufacturers – notably Germany’s Q-Cells – have slowed production this year, and other PV companies have gone out of business, many of the major manufacturers appear to be pressing ahead with planned capacity increases.
“While some manufacturers have started to cut back their production and shipment plans, tier-one Chinese companies have maintained their full-year shipment guidance,” commented Solarbuzz. “If manufacturers meet their second-half guidance, global shipments are forecast to exceed end-market demand by 4.4 GW.”
That would accentuate the supply glut that has plagued the industry this year, and which Solarbuzz estimates to have prompted a 33% collapse in crystalline silicon module prices over the past 12 months.
Further price declines
Those price cuts have begun to stimulate demand, although that is happening more slowly than Solarbuzz had initially anticipated. The analyst firm is now predicting a further 18% module price decline in the closing quarter of 2011, something that will also have a knock-on effect on thin-film solar module prices as rival PV technologies strive to compete with silicon modules. The price cuts have resulted in slashed margins across cell, wafer and polysilicon manufacturers alike, and 2012 is likely to see that trend continue.
“Leading into 2012, the industry is braced for another challenging year,” predicts Solarbuzz. “Manufacturers are preparing to raise cell capacity by 50% over 2011 levels, while end-market demand is forecast to increase by less than half that level.”
Solarbuzz president Craig Stevens commented: “This is a strikingly similar equation to the supply/demand balance that existed 12 months ago, and resulted in collapsing prices through the PV chain.” The major contrast, Stevens adds, is that with margins already “at breaking point” 2012 will likely see more consolidations and company liquidations.
Failure to cut back production in 2012 will see module inventories soar to more than 20 GW by the end of next year, he thinks – a level approximately equivalent to an entire year’s worth of global demand based on current estimates.
The impact of changes to feed-in tariffs in Europe has been one of the major reasons for the price declines seen this year, and that is now clearly showing though as a shift in geographic demand. Solarbuzz now expects Europe to account for 58% of global demand in the current quarter, down from 78% in the same quarter last year.
Analysts now see the US and China as the fastest-growing markets for PV modules, a trend that will likely continue as Germany – still the largest single market for PV – is expected by Solarbuzz to cut its feed-in tariff by 15% at the start of 2012.
That would likely result in further inventory build, but with Reuters reporting that China-based Suntech Power’s chief executive Shi Zhengrong now expects half of the world’s countries to reach grid parity with PV by just 2015, the benefits of the falling cell and module prices are also evident.
One indication that the pace of capacity expansion may at least be starting to slow comes from the latest data on PV equipment bookings provided by SEMI in collaboration with the Germany-based VDMA. Based on a survey of 50 equipment vendors, they measured a book-to-bill ratio of only 0.88 in the second quarter of 2011, and dipping below parity for the first time in six quarters.
At $1.79 billion, equipment bookings were down 18% from the first quarter of the year, and are at the lowest level seen since early 2010.
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