UPSTREAM solar photovoltaic suppliers will see a year of intense consolidation in 2013, as the industry is buffeted by rapidly falling prices, mounting losses and massive operational costs.
IHS iSuppli’s predictions indicate that by the end of 2013, the global number of companies participating directly in the manufacturing of PV solar panels, from polysilicon manufacturing through module assembly, will be just 150, down from 2012’s 500.
According to Mike Sheppard, senior photovoltaics analyst with IHS, even the word “consolidation” is an understatement for the shakeup which will occur this year.
“Most upstream PV supply operations will simply cease to exist, rather than being acquired by other companies,” Sheppard said. “Most of these suppliers actually have already stopped production—and will never restart.”
At particular risk of shutting down are 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.
IHS claims smaller thin-film cell providers likewise will face low sales and limited market sizes, putting them on the endangered list.
Many integrated suppliers in China who have spent a lot of money (or are thinking of spending a lot of money) on building integrated facilities will shut down, since a glut in supply will see their factories underutilised.
While the Chinese government may attempt to continue propping up the industry, it is unlikely that it will support all the suppliers. So with the exception of a few, most suppliers will dissolve.
With panel prices still dropping, low-cost players will dominate the 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. Their struggle will not be sustainable.
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. They will need to be nimbler than top tier manufacturers.
Given the price drops, thin-film module manufacturers will be in a similar situation, especially if their products do not remain competitive with crystalline panels.
IHS analysis indicates that even though the consolidation will benefit remaining players in the market, the weak market conditions underlying the problem means even surviving companies at the end of 2013 will still be in a difficult position.
An extensive whitepaper presenting IHS’s top 10 predictions for the solar industry in 2013 can be downloaded here.
Tindo Solar’s Richard Inwood said Chinese manufacturers will be most impacted by the changes predicted by IHS, and differentiation is the key to survival.
“If they are manufacturing to a model or standard that the vast majority of manufacturers are, then they are competing for the same markets,” Inwood pointed out.
Tindo Solar is Australia’s sole photovoltaic manufacturer. Points of differences for the company include the fact that they provide an AC module as opposed to a DC module, and a focus on high quality materials, systems and processes.
According to Inwood, there is a healthy segment of the market which seeks high-end, high quality and innovative products, and automation also keeps overhead costs down to yield an acceptable margin.
“I don’t think a single one of [Chinese manufacturers] has made a profit in the last two years,” Inwood said.
He claimed the downward spiral in panel prices is due largely to intervention by Chinese local governments.
“Chinese local governments have underpinned Chinese manufacturers with $242 billion in the last two years,” Inwood told Electronics News. “That’s allowed them to be clumsy manufacturers. That’s allowed them to get away for over two years without making a profit. That is clearly going to end, because the various governments around China are saying ‘no more’.”
Additional pressure on low-cost manufacturers in China comes as a result of various countries closing their doors to product dumping, including the US, EU and India.
“They will soon be unable to dump into [Australia], at under the cost of manufacturing. We know 80 cents a watt is the bare minimum to make a panel, and they are dropping it here at 40-45 cents a watt. That sort of nonsense cannot go on,” Inwood said.
Inwood says the government’s termination of feed in tariffs and other programs which assisted the solar sector has resulted in an industry which can stand on its own two feet. The cost of electricity will be fundamental to having a healthy and competitive industry.
“Once you have electricity at around 27 to 30 cents a kilowatt, and you get payback in under 7 years, industry will stand on its own quite well.”
However, the Australian government needs to do more to regulate the standard of panels being imported, because manufacturers are continuing to cut costs, and it’s only a matter of time before a poor quality panel causes a fire, sparking concerns and panic over the safety of solar panels and affecting the entire market.