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Tumbling prices push PV suppliers to switch tactics

Posted: 19 Apr 2012 ?? ?Print Version ?Bookmark and Share

Keywords:photovoltaic? oversupply? price? wafer supply?

According to the latest research from IMS Research, the average price of photovoltaic (PV) wafers in 1Q12 fell by more than 70 percent. This drastic drop in price, caused by global oversupply, has changed the cost structures and strategies of PV module suppliers and forces the switch from in-house production to buying their wafer supply.

Throughout 2010 and 2011, many suppliers had quickly expanded their in-house wafer capacities. However, as wafer prices have fallen by more than $0.70/W to record lows, suppliers are now reducing their in-house manufacturing and purchasing more wafers from third-party suppliers.

The report "PV Modules, Cells, Wafers & PolysiliconSupply & Demand" revealed that average wafer prices fell to $0.30/W in 1Q12, having stood at just more than $1/W last year. This rapid decline in prices was driven by severe oversupply and highly competitive market conditions caused by huge capacity expansions that far out-weighed demand growth last year. IMS Research's report shows that global PV wafer capacity grew by 50 percent to reach 50GW by the end of 2011, while installation demand grew just 35 percent to 26.9GW. The average price of polysilicon, cells and modules also dived throughout 2011, although less severely than wafers, with average prices in Q1 declining by 48 percent, 57 percent and 44 percent YoY, respectively.

PV price

As prices fall by more than 70 percent, suppliers are reducing in-house manufacturing and purchasing more wafers from third-party suppliers.

This severe price erosion has put huge pressure on the margins of all PV component suppliers and IMS Research found that many PV module suppliers have changed their supply and manufacturing strategies to reflect the dramatically changed pricing landscape in the PV industry. "Intense price pressure and competition throughout the PV industry has forced suppliers to focus on reducing costs to achieve profits more than ever," said IMS Research's senior market analyst Sam Wilkinson. "Large Chinese PV module suppliers in particular had previously aimed to achieve 100 percent vertical integration in 2010 and 2011 and quickly expanded their in-house wafering capacity. As wafer spot prices have fallen significantly more than polysilicon prices over the last year, most suppliers are finding that they can now purchase wafers at a lower cost than manufacturing them in-house and are reducing their in-house production as a result."

PV module supplier cost

Average wafer prices fell to $0.30/W in 1Q12, having stood at just more than $1/W last year.

By switching their manufacturing strategies and taking advantage of the low wafer prices that are currently available, many suppliers have been able to improve their cost structure. "IMS Research has found that in 1Q12, Chinese tier-1 suppliers that purchase wafers, were typically able to improve their cost structure by up to $0.05/W in comparison to purchasing polysilicon and producing them in-house, which is a significant amount in today's industry climate. With many suppliers renegotiating their polysilicon supply contracts and also improving their polysilicon purchase costs, suppliers will certainly need to remain flexible in their manufacturing operations in 2012," noted Wilkinson.

Wafer and polysilicon prices are projected to continue declining this year. IMS Research forecasts that by the end of 2012, average wafer will have fallen by 25 percent compared to 4Q11. Polysilicon prices are forecast to fall faster and will fall by 33 percent in the same period.





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