Watch for fallout in equipment companies as solar crisis hits in 2010

NEW TRIPOLI, USA: Solar equipment companies will feel the impact of a looming solar industry crisis in 2010 according to the report: Opportunities in The Solar Market For Crystalline and Thin Film Solar Cells, published by The Information Network.

“In our release on September 3, we forecast that in 2010 the solar industry will exhibit capacity utilization of 25.7 percent, inventory will be stretched to 133 days, average selling prices could drop below $1 per watt in 2010 and $0.50 in 2011, and as many as 50 percent of the more than 200 solar manufacturers, mired in red ink with current selling prices above $2.00 per watt, may not survive,” noted Dr. Robert Castellano, President of The Information Network.

In addition to the failure and consolidation of the solar panel manufacturers, companies supplying equipment to manufacture panels will be severely impacted. Two things will happen. The obvious impact will be the loss of customers of equipment suppliers.

Solar manufacturers, in their exuberance to increase capacity from 17.6GW in 2009 to 24.2GW will initially purchase equipment only to have it sit idle in factories as inventory stretch to 133 days. As these companies close or consolidate, this equipment will then be sold on the secondary market, further exasperating revenue growth for equipment vendors.

Currently, the equipment companies are experiencing a slowdown because even though solar customers want to buy, financing is still tight. Going forward, the largest solar manufacturers will survive as a customer base. Chinese solar manufacturers, who prefer to purchase low-cost equipment from Taiwan, will also survive, as the Chinese government will subsidize their survival by stimulus packages, generous subsidies, free land, and cash for R&D.

Solar panel manufacturers that have reported losses just in the past few weeks include Energy Conversion Devices Inc, JA Solar, LDK Solar Co., ReneSola Ltd, Solar Power Inc., and Yingli Green Energy Holding Co. Ltd.

“Interestingly, five of the six companies are Chinese. They continue to increase inventory, lose money, and affect the entire solar panel industry. Perhaps, it is an attempt to become the worldwide leader in the solar market by eliminating the competition,” added Dr. Castellano.

In 2008, the top 10 equipment manufacturers of the $4 billion market were:

Table: Ranking of Top 10 Equipment ManufacturersSource: The Information Network, USA

Applied Materials and GT Solar are the only two U.S. manufacturers in the top 10.

Top-10 solar cell suppliers in 2009: First Solar to produce twice as much as leading crystalline solar module suppliers

EL SEGUNDO, USA: Leveraging its low-cost thin-film process, US-based First Solar Inc. is set to surpass its crystalline competitors to become the world’s largest producer of photovoltaic (PV) cells in 2009, according to iSuppli Corp.

First Solar in 2009 is set to produce 1,100 Megawatts (MW) worth of solar cells, more than double the 503MW it made in 2008. This will give First Solar nearly twice as much production of total solar cells as its nearest competitor, Suntech Power Holdings Co. Ltd. As iSuppli noted in an Aug. 10 release, SunTech in 2009 is set to become the leader of the crystalline segment, which is a subset of the total solar cell market.

“First Solar is leveraging its cost leadership to achieve market-share leadership in the global PV solar cell business,” said Dr. Henning Wicht, senior director and principal analyst for iSuppli. “The company’s proprietary thin-film process is giving it an edge over the competition amid challenging solar market conditions.”

The figure presents iSuppli’s forecasted worldwide market share for all types of solar cells in 2009.

iSuppli:Forecast of Top-10 Suppliers of Solar Cells in 2009 (Ranking by Production in Megawatts (MW))Source: iSuppli, Sept. 2009

“First Solar sells its products at very competitive prices, always undercutting crystalline cells,” Wicht said. “With its capability to produce cells at a cost of 89 cents per watt in the second quarter, First Solar is generating stable operating margins, while its competitors are struggling to stay profitable. Despite global oversupply of PV modules, First Solar is continuing to expand and is able to sell nearly all of its finished goods.”

Beyond low-cost production, First Solar’s success is also being driven by its well-established sales channels in Europe and its own installations for U.S. utility projects.

First Solar will be the only company among the Top-4 solar cell suppliers able to gain market share in 2009, iSuppli predicts. The company’s portion of global solar cell MW production will rise to 12.8 percent in 2009, up from 7.5 percent in 2008. No.-2 SunTech, No.-3 Sharp and No.-4 Q-Cells -- all will suffer contractions in total solar cell market share.

First Solar also holds the lowest levels of inventory in the global solar cell industry. Because of this, iSuppli expects the company to actually sell all of its production in 2009, rather than stockpiling it. With inventories throughout the PV supply chain soaring, this give First Solar a significant competitive advantage.

With 3.92GW worth of solar capacity set to be installed in 2009, First Solar’s cells will account for as much as 28 percent of the total, according to iSuppli. The company’s share will be even higher in ground installations and large rooftops, where its products find the strongest acceptance. Its share will be lower in other types of installations, such as small rooftops.

Thin-film represents a new generation of solar cell technology that is gaining acceptance worldwide. Traditional solar cells have employed crystalline material, which is relatively efficient at converting light into electricity, but also more expensive relative to thin-film. In addition to SunTech, crystalline solar-cell suppliers include Q-Cells, Sharp, Yingli and JA Solar.

In contrast, thin-film employs slim layers of materials including cadmium, tellurium, copper, amorphous, and microcrystalline silicon.

Because of its cost advantage, thin film will grow to account for 34.5 percent of worldwide solar production in terms of MW in 2013, up from 14.2 percent in 2008.

Despite the strong rise of thin-films, iSuppli doesn’t believe that the technology will surpass crystalline in the foreseeable future.

“The rise of thin-film is due to the success of First Solar and its unique thin film process,” Wicht said. “There’s no new First Solar yet on the horizon. With only one supplier, thin film’s progress will be limited.”

First Solar employs a patented process using cadmium telluride (CdTe).

Previously committed capacity expansions cause solar cell manufacturing oversupply!

AUSTIN, USA: According to DisplaySearch's Q3’09 Quarterly PV Cell Capacity Database & Trends Report, solar cell manufacturing capacity is likely to grow 56 percent in 2009 to 17GW. Ramped capacity, which was only 2.3GW in 2005, is forecast to grow at a CAGR of 49 percent to more than 42GW in 2013.

"Despite PV module demand shrinking 17 percent in 2009, so much cell manufacturing equipment was ordered and installed over the past year that capacity is still expected to grow 56 percent this year," said Charles Annis, DisplaySearch Vice President of Manufacturing Research and author of the report.

"With demand and capacity moving in different directions, the PV industry is currently experiencing an enormous over-supply that is causing rapid price erosion and potentially setting the stage for the failure of multiple cell manufacturers, particularly companies pursuing a-Si thin film solar cells.

"The PV industry will begin working through this excess capacity as demand recovers next year and takes off in 2011 and beyond.”

Here are just some of the many highlights from the Q3’09 Quarterly PV Cell Capacity Database & Trends Report:

* Through 2006, Japan had the largest solar cell production capacity in the world. However, Chinese companies started to ramp up a host of new facilities in 2005 and by 2007 had more solar cell capacity on line than any other country.

China has continued to invest heavily in production facilities, about a third of the worldwide cell capacity in 2009 and is forecast to be the main region for cell production well into the future.

* Of the 3.58GW of thin film capacity available in 2009, more than 30 percent use 600×1200 mm glass substrates, the standard CdTe glass size used by First Solar.

Gen 5-equivalent substrates, ranging from 1000×1200 to 1100×1400 mm, are the second most common glass size, used for 18 percent of available thin film capacity.

* Between January 2008 and July 2009, approximately 11.4GW of new solar cell capacity was installed in fabs around the world. These previous investment commitments are the reason that capacity is continuing to grow 56 percent in 2009 despite falling demand.

* In 2005, 95 percent of solar cell manufacturing capacity was for crystalline silicon solar cells and 5 percent for thin-film solar cells. In 2009, thin film will account for more than 20 percent of capacity.

By 2013, thin film technologies are forecast to account for as much as 30 percent of solar cell capacity.

* For a-Si factories, in 2009 the four largest turn-key equipment vendors are AMAT, Oerlikon ULVAC and EPV, representing 946MW of ramped capacity or more than 50 percent of a-Si capacity online this year.

* In terms of capacity available for production in 2009, First Solar is the largest solar cell manufacturer with more than 1GW of capacity. Q-Cells and Suntech are not far behind and essentially tied for second place. These and other current leading PV cell manufacturers are forecast to invest at the highest rates over the next four years.

By 2013, these three companies plus JA Solar, Motech, REC, SunPower, Yingli, Showa Shell Solar (assuming it moves forward with a planned 1GW CIGS fab), and Sharp are forecast to be the top 10 makers, with more than 16GW or 38 percent of 2013 capacity.