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PV makers to suffer from consolidation rounds this year

Posted: 11 Jan 2013 ?? ?Print Version ?Bookmark and Share

Keywords:solar panel maker? PV supply chain? crystalline silicon? polysilicon?

According to the latest data from IHS, the upstream solar photovoltaic (PV) supply chain is undergoing major consolidation. This is despite the rapidly falling prices, mounting losses and massive operational costs. The market research firm also forecasted that the number of companies participating in the market will drop by 70 per cent this year.

Globally, the total number of companies directly involved in the manufacturing of PV solar panels, from polysilicon manufacturing through module assembly, is set to fall by about 150 in 2013, down from about 500 in 2012. This compares to about 650 in 2011 and 750 in 2010, added IHS.

"It would be a major understatement to say that consolidation is occurring in the PV supply chain this year," stated Mike Sheppard, senior PV analyst with IHS. "Most upstream PV supply operations will simply cease to exist, rather than being acquired by other companies. Most of these suppliers actually have already stopped production!and will never restart."

Companies at the highest risk of going out of business in 2013 include integrated suppliers that manufacture PV polysilicon, ingots, wafers and cells to offer complete solutions. Second- and third-tier suppliers of crystalline silicon (c-Si) polysilicon, ingots, wafers and cells also will struggle to stay afloat. Finally, smaller thin-film cell providers likewise will face low sales and limited market sizes, putting them on the endangered list.

Many integrated players will fold up shop in 2013 as the large expense of building integrated facilities!and then seeing them underutilised for the better part of a year!will prove to be financially unsustainable. Many of these players are based in China.

Government subsidies could be an option to keep integrated suppliers operating. However, while IHS believes that some supplier may be propped up by the Chinese government in 2013, the majority will dissolve.

With price declines still occurring across the board in 2013, low-cost players will get the lion's share of the global market. Upstream second- and third-tier suppliers of polysilicon, ingots, wafers and cells will struggle to survive the year in markets that do not have local-content requirements. Many of these companies will not be able to float operations for a very long period of time.

For second-tier module manufacturers, the key to surviving in 2013 will be establishing and maintaining strong relationships with downstream players in the emerging markets. Second-tier manufacturers must move faster than those in the top tier in order to grab mindshare early.

Flexible business models, with consistent outsourcing, will be needed to succeed. Because contract manufacturers require certain levels of business to remain profitable, securing stable relationships with these companies is also critical for second-tier module manufacturers.

Second-tier module makers also must be flexible enough to capitalise on the volatility in high-growth markets, which consist mostly of small and midsized engineering, procurement and construction (EPC) companies. These companies initially have less allegiance to established top-tier manufacturers. But as their experience in this area grows, price becomes a primary factor, favouring low-cost producers. This is already true in markets like India, and is becoming a factor in Latin American countries such as Chile.

Thin-film module manufacturers will have to adopt similar survival strategies as the second-tier c-Si module suppliers. This will be particularly true if pricing for thin-film modules doesn't remain competitive with c-Si during the year. If thin-film pricing does not decline at the same rate as c-Si, the technology will be relegated to select niche markets that generate scant demand.

Module suppliers in these three categories!integrated manufacturing, specialised second-tier manufacturing and thin film manufacturing!will experience the toughest challenges in 2013 given the hurdles needed to make those operations successful. Because of such challenges, some of these companies will fail.

Consolidation and reduction in a supply chain results in capacity being taken offline, often benefiting the remaining players in a market. But given the weak conditions in today's PV market, there is no guarantee that the supply-chain shakeout will help surviving suppliers in 2013!or even make it less likely that they will fail.

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