Winners and losers in crystalline silicon PV

USA: An influx of new entrants, combined with dramatic capacity expansions from established manufacturers, has meant that crystalline silicon-based PV has become an increasingly crowded and commoditized space over the last two years.

Add to that a recession-driven demand slump and an expected thin-film ramp over the coming years, and there is little doubt that competition in this segment will be extremely fierce.

Building off the insights and findings in GTM Research’s ground-breaking reports PV Technology, Production and Cost and Global PV Demand Analysis and Forecast, this report will take a closer look at crystalline silicon-based business models, detailing what it will take for a cell/module manufacturer to succeed over what is widely expected to be a challenging time for the industry.

The report dives deeper into 50 prominent crystalline silicon-based manufacturers in the market and conducts a comparative analysis over a range of key metrics, extracting conclusions pertaining both to individual companies and business models. Along the way, it details a wide range of company-specific data that allows a crystalline silicon-based manufacturer to accurately assess its competitive position in relation to its peers.

Key Insights

* In the wake of rapidly falling ASPs, a superior cost structure is critical for a successful manufacturing business model, especially for a firm that lacks downstream access. In-house polysilicon production capabilities still confer a material cost advantage, and can offset high conversion costs.

At the same time, the fact that spot prices are down to around $100/kg today means that companies at large scale or that have production facilities in low-cost locations (China, Taiwan, other Asian countries) can make up for higher blended polysilicon prices through a lower non-silicon cost.

* A large majority of producible cell supply in 2009 to 2010 comes in between $1.35 to $1.75/W, and most module supplies will be produced in the range of $1.80 to $2.20/W.

* Next to a competitive cost structure, a strong balance sheet is the most important metric in determining a company’s fate over the course of the impending shakeout. Amongst the public firms, JA Solar, Solarworld, Kyocera, Ersol and Delsolar have the healthiest balance sheets when taking into account current cash reserves, near-term debt repayments, estimated cash inflows and capital expenditures.

* Based on the dynamics of polysilicon spot and contract pricing from 2006 to 2008, producers can be grouped into one of three categories: (i) well-capitalized and established firms that were able to secure long-term contracts with incumbent poly producers in 2006 to 2007, and will remain relatively unaffected by the spate of recent and upcoming perturbations in the spot market; (ii) firms that have a low contracted position coming into 2009, and will be able to take advantage of the relatively cheap polysilicon on offer in the spot market; (iii) companies that entered into long-term contracts past 2006 that signed with lower tier, higher marginal-cost players, and could find themselves in the unfortunate position of being locked into contract prices higher than current spot levels.

* Given significant oversupply at the components level, downstream access has emerged as the most crucial aspect of a cell/module manufacturer’s vertical integration strategy. Downstream integration is especially important for firms that do not have a low-cost business model.

* Business model strengths exhibit a marked bifurcation along regional lines: China and Taiwan-based companies have a definite edge when it comes to processing costs while American and European firms have superior brand recognition, downstream access and proximity to end-demand. An approach that would merge these strengths would be for a US/Europe-based manufacturer with a strong brand to outsource cell and/or module production to a low-cost Asian manufacturer, and brand, market, sell and deploy modules under its own name. Subject to the success of first movers (BP Solar, Evergreen Solar), there is a high probability that more companies will adopt this model in coming years.

This report is available for Single License: $995, and Enterprise License: $1790, from GTM Research.