Is trouble brewing for solar equipment and material manufacturers?

Dr. Robert Castellano, The Information Network

NEW TRIPLOI, USA: I noted in an Insight article last week that by clever misrepresentation of the current situation of slowing demand in solar installations, top tier Chinese solar manufacturers are able to secure financing in the multi-million dollar range under the guise that their cells and modules and only their cells and modules have bankability. Large Chinese government or government-owned banks are extending billions of dollars in loans to domestic firms.

I also noted that China-based first-tier solar firms Suntech, JA Solar, Trina Solar, and Yingli Green Energy, plan to expand total annual capacity by 40GW in 2011. However, global demand for solar cells in 2011 might only be around 15GW, hence an oversupply is very likely. The overcapacity I speak about is real-world overcapacity, not the imaginary-world undercapacity of bankable solar promulgated by the first-tier firms.

If an equipment or materials company has customers in the first-tier group, anticipate another banner year in 2011. According to analysis by The Information Network, the top equipment manufacturers for 2010 were:Source: The Information Network, USA.

The top 13 companies sold 61.4 percent of the total equipment to solar manufacturers in 2010, and there are dozens of smaller companies that sold the remaining 38.6 percent ($4 billion) of the market in 2010.

According to SolarBuzz, Sharp declines in book-to-bill ratios are currently being posted by equipment suppliers that have been over-dependent on c-Si expansions in Europe, tier 2 c-Si spending from China, and speculative thin-film investments. The book-to-bill ratio compares new-order-intake to revenues-recognized within a given period. It is the ratio of demand to supply in the equipment supply chain. SolarBuzz expects the book-to-bill ratio to drop and be below parity (less bookings, more billings) for the remainder of 2011.

That being said, 2011 will be a tough year for solar equipment manufacturers. Equipment manufacturers (and material manufacturers because of the 15 percent demand growth in 2011) will need a “hook”. I’ve mentioned in previous articles that by offering technology to increase yield and reduce costs by more than 10 percent, privately held SolarPA is well positioned to license its technology to these manufacturers.