- Revenues Rebounded: After falling 44% fromQ3’08 to Q1’09, revenues rebounded 18% Q/Q in Q2’09 to $4.65B as shownin Figure 1. However, the gains are not being shared equally by allsegments, regions or companies. The cell/module suppliers are growingfaster than the polysilicon/wafer suppliers, 18% to 5% Q/Q in Q2’09, aspolysilicon prices fall faster than cell/module prices and cell/moduleshipments outpace polysilicon/wafer shipments on significant inventoryat cell/module suppliers.
- Margins Continued to Decline: Profit marginscontinued to worsen from Q1’09 to Q2’09 as shown in Figure 2 on lowerprices and the fact that slower than expected demand made it difficultfor manufacturers to sell-through their high-priced polysilicon/waferinventory. Some companies were not able to take advantage of the rapiddecline in polysilicon spot prices as they were struck in long-term,fixed price contracts or reduced shipment volumes prevented them fromturning over their expensive polysilicon or wafers. Cell/modulemanufacturers again outperformed polysilicon/wafer suppliers, withgross margins of 19% vs. 8%, due to large inventory write downs atwafer manufacturers.
- North American Suppliers Grew the Fastest and Were the Most Profitable:Unlike all other regions, North American suppliers’ revenues rose fromQ3’08 to Q2’09, up 11%, including 25% Q/Q growth in Q2’09 thanks toFirst Solar’s cost leadership, rapid capacity growth and highutilization. In addition, only North American suppliers were profitablewhen aggregated by region with average gross profits of 38%, operatingmargins of 19% and net margins of 17% as shown in Table 1.
- Chinese Manufacturers Experienced the Largest Decline, Fastest Growth:Chinese cell/module manufacturers experienced the largest declines fromQ3’08 to Q1’09, down 61%, and experienced the fastest growth in Q2’09,up 32%, but are still off 48% from their Q3’08 results. Chinesecompanies improved their gross margin performance from 10% to 16% andhad positive operating margins but experienced -8% net margins due towrite-offs from Solarfun and Yingli. Excluding the charges, all Chinesesuppliers had positive operating margins.
- German Manufacturers Lost Less Ground than Chinese Manufacturers with Higher Gross Margins:German manufacturers’ revenues rose 11% in Q2’09, but are still off 33%from Q3’08, losing less ground than their Chinese competitors. Germancompanies had the second highest gross margins at 24%, but experiencednegative operating margins due to write-offs from Bosch Solar andQ-Cells which experienced a surge in inventories and negative operatingprofits as the market favors the more vertically integrated companiesdue to their greater visibility into end market demand and greatercontrol over their cost structure.
- All Taiwan Suppliers Achieved Negative Operating Margins in Q2’09:Taiwan suppliers, which are all cell-only suppliers, had the worstgross and operating performance in both Q1’09 and Q2’09 which isindicative of the lack of leverage cell-only manufacturers have intoday’s PV market. All the Taiwan suppliers experienced negativeoperating margins in Q2’09. Taiwan manufacturers experienced thesmallest revenue increase in Q2’09, up just 1%, and are tied withChinese manufacturers for the largest decline since Q3’08, down 48%.
- Q3’09 Looks to be Strongest Quarter of the Year:Seasonally, Q3’09 looks to be the strongest quarter of the yearalthough the development of the USA and China markets could potentiallyenable Q4’09 to be just as strong. Some manufacturers are expectingQ3’09 to be exceptionally strong as a number of projects were deferredfrom 1H’09 as project developers waited for prices to fall further andat the same time developers are looking to finish projects before theend of the year fearing budget reductions and lowersubsidies/feed-in-tariff rates. However, the gains are not expected tobe shared evenly.
- Chinese Companies Have Brightest Outlook: Chinesecompanies are expecting rapid growth in Q3’09 as seen in Table 2. Atthese growth rates, some of these manufacturers expect to achieve fullutilization. On the other hand, European companies have a muchdifferent outlook and are reducing capacity utilization or takingcapacity offline as shown in Table 3 due to excessive inventories fromslower than expected 1H’09 demand. Bosch and Q-Cells troubles can beattributed to their overemphasis on the cell business, long termpolysilicon/wafer contracts and higher labor costs. Taiwanese companiesare hoping to return to profitability in 2H’09. As their c-Sicompetitors close the cost gap and to spur demand in a weak financingenvironment, First Solar implemented a rebate program in Germany whichit expects to cost $40-$60M in 2H’09 which along with slower capacitygrowth implies slower Q/Q growth for the leading North Americancompany.
Some of the key questions to be answered during the next round of earnings calls include:
- Will the Chinese players gain share from First Solar?
- Can First Solar continue to stretch its capacity now that Malaysiais fully ramped? What kind of cost reductions can First Solar achievenow that all its capacity is ramped?
- How much share will the German players lose?
- When will REC and Bosch bring all their capacity back online?
- Can LDK improve its balance sheet?
- Can LDK, ReneSola and Yingli bring on their polysilicon capacity at costs equal to market prices?
- Will Yingli write off its high priced polysilicon inventory since it hasn’t written any off yet?
- What will companies guide for Q4?
- Who will raise and lower their guidance?
Figure 1: Q107 – Q2’09 Revenues and Growth for 25 PV Supply Chain Companies
Source: YMR’s PV Supply ChainHealth Report. Includs Arise Technologies, Bosch Solar, Canadan Solar,China Sunergy, DelSolar, Energy Conersion Devices, E-Ton Solar,Evergreen Solr, First Solar, Gintec, JA Solar, LDK, MEMC, Motech, NeoSolar Power, Q-Cells, REC, ReneSola, Sanyo, Sharp, Solarfun, SunPower,Suntech, Sunways, Trina Solar and Yingli Green Energy.
Figure 2: Q1’07 – Q2’09 PV Supply Chain Margins
Source: YMR’s PV Supply Chain Health Report
Table 1: Q1’07 – Q2’09 Cell/Module Manufacturers’ Gross, Operating and Net Margins
Source: YMR’s PV Supply Chain Health Report
Table 2: Chinese PV Manufacters’ Q3’09 Shipment Guidance
Source: YMR’s PV Supply Chain Health Report
Table 3: European Manufacturers’ Q3’09 Outlook
Source: YMR’s PV Supply Chain Health Report
The Weekly PV Supply Chain Health Report report provides its users withall the data and insights released by publicly traded PV supply chaincompanies in their quarterly earnings reports, stock exchange filings,press releases and conference calls along with unbiased analysis with24 hours of their earnings calls with historical data back to Q1’07.The financial and industry data, covering over 100 different metrics,is incorporated into a pivot table which makes comparisons by company,country, technology, level of integration, etc. extremely easy. Theresults are also aggregated to provide industry and financial metricsand trends on a weighted average. Analysis is provided in a PowerPointfile which can easily be incorporated into internal presentations. Thefirst issue, covering Q1’07 – Q2’09 results and guidance for Q3’09 andbeyond, amounted to over 330 slides covering 25 different companies.
This report is available as a single issue from SEMI or as a singleissue or weekly subscription from YMR. For more information, pleasevisit: http://www.youngmarketresearch.com/solar_cell_supplier.cfm orcontact info@youngmarketresearch.com.