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I
mentioned in my previous blog that the PV market has recovered in
Q3?09, but let me now try and quantify it. The exact details can be
found in our latest Weekly PV Supply Chain Health Report. As indicated:
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Revenues surged for most layers of the PV supply chain in Q3?09, as shown in Figure 1. This data is segmented by primary output of the company, so a company that produces wafers, cells and modules but primarily sells modules would be considered a module company. Module revenues were up 32% Q/Q, cell and wafer revenues were each up 36% Q/Q, revenues from poly/wafer companies were up 6%, and equipment revenues were down 20% Q/Q. Strong demand from Germany was the primary source of the growth. After a few consecutive quarters of minimizing procurement to deplete high inventories as demand remained weak, companies throughout the supply chain began ordering the wafers, cells and modules they needed to meet demand in Q3?09 and the anticipated strong Q4?09. We expect to see polysilicon revenues rebound sequentially in Q4?09 now that wafer inventories have fallen and polysilicon price reductions have slowed significantly. The equipment market was down due to the existing oversupply.
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On a Y/Y basis, companies that make modules actually showed a slight increase in revenues despite significant ASP declines. This was a result of higher volumes as well as additional revenue sources through system sales as they looked to capture downstream margins and improve their demand visibility. The PV industry seems to be one of the few industries where companies are looking to increase their value added these days while older, more established companies seem to be spinning off as much as possible. Cell and wafer company revenues were down 33% and 34% respectively on sharply lower prices as well as the increased vertical integration of their customers reducing their relative total available market.
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Speaking of ASPs, we are showing volume weighted average module prices for thin film and crystalline silicon modules at an average of $2.06/W, as shown in Figure 2. Prices for c-Si only would be about $0.10 higher. Because thin film prices have been falling more slowly than module prices, the module ASP decline was slower than cell, module and wafer ASP declines. Cell ASP declines are down around 55% Y/Y, with wafer ASPs down 65% and polysilicon spot prices down 82%. This industry is clearly not for the weak at heart. We are encouraged by single digit Q/Q declines in polysilicon ASPs from the standpoint that it should lead to greater price stability in the market, which should encourage those waiting for further price reductions to purchase now.
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In terms of gross margins, big improvements were made by cell manufacturers rising from 0% in Q2?09 to 7% in Q3?09, as shown in Figure 3, and wafer manufacturers, -45% in Q2?09 to 12% in Q3?09, which wrote off significantly less wafer and cell inventory than in previous quarters. Polysilicon and equipment companies continue to have the highest gross margins.
Figure 3: Q3'08 - Q3'09 PV Supply Chain Gross Margins by Segment
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In terms of operating margins, similar improvements were shown for cells if we exclude Q-Cells, which is undergoing significant restructuring. Polysilicon, on the other hand, had negative operating margins for the second consecutive quarter on various restructuring efforts at the existing players. Equipment manufacturers suffered from negative operating margins for the third consecutive quarter on shrinking tool shipments.
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Looking at regional growth for cells and modules, sharp gains were achieved by China, Japan and Taiwan, as shown in Figure 4, while the US and German companies grew significantly slower on lost market share. On a Y/Y basis, US companies have the highest growth, though, due to First Solar’s rapid annual growth. Japan has the second fastest growth on new stimulus efforts there, with Germany and Taiwan suffering from lost share.
Source: IMS Research’s PV Supply Chain Health Report
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In terms of operating margins by region, the US led with 17%, followed by China at 11%. Japan and Taiwan margins were the lowest.
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In terms of shipments, module volumes were up 49% Q/Q and 82% Y/Y for the included manufacturers to 1.4GW, as shown in Figure 5, while cell manufacturers were up 61% Q/Q and 42% Y/Y to 540MW. On a Y/Y basis, the cell manufacturers’ share of output has fallen from 33% to 28% as module manufacturers increasingly look to lower their costs by producing cells in house. Utilization for the cell and module manufacturers included in this report improved from 62% in Q2?09 to over 80% in Q3?09.
Figure 5: Q3'08 - Q3'09 Cell and Module Shipments
Thus,
it is quite clear that the market has rebounded. Demand is expected to
continue to remain strong throughout 2010 as pointed out in my first
blog. In addition, with renegotiated contracts for polysilicon and
wafers expected to result in lower costs for more manufacturers and
cell and module prices firming, the margin outlook is getting brighter
for cell and module manufacturers. In addition, with more manufacturers
already operating at high utilization levels in China and Taiwan, they
are announcing new capacity expansions, which will boost the outlook
for equipment suppliers.
For any questions, please contact me at This e-mail address is being protected from spambots. You need JavaScript enabled to view it or call at (512) 302-1977 (512) 302-1977.
Figure 1: Q3'08 - Q3'09 PV Supply Chain Revenues by Segment Source: IMS Research’s PV Supply Chain Health Report. Based on the following companies: Applied Materials, Arise Technologies, Bosch Solar, Canadian Solar, Centrotherm, China Sunergy, DelSolar, Energy Conversion Devices, E-Ton Solar, Evergreen Solar, First Solar, GCL-Poly, Gintech, Green Energy Technology, GT Solar, JA Solar, LDK, MEMC, Motech, NSP, Oerlikon, Q-Cells, REC, ReneSola, Roth&Rau, Sanyo, Sharp, Sino-American Silicon, SolarFun, SolarWorld, Spire, SunPower, Suntech, Sunways, Trina Solar and Yingli Green Energy.
