The Winners and Losers of The PV Industry

As the market becomesrestricted to only the companies with the best products, lowest costsand successful business models, the task now is to identify just whothose companies are.

If you’re a crystalline silicon-based cell or module maker, life ishard right now. Module prices have been in free fall since the fourthquarter of 2008, plummeting from $4.00/W in September to $2.25/W atpresent. At the same time, demand has trended sharply downwards as wellduring this time (so much for short-term price elasticity, right?). Andthat’s just the beginning of their woes: year-end cell crystallinesilicon capacity for 2009 is estimated at over 14 gigawatts. When onereconciles that with around 6 gigawatts or so of demand (and it remainsto be seen if we’ll even get there), of which 1 gigawatt or so will beinstallations using First Solar modules, it doesn’t make for a prettypicture. And if things couldn’t get any worse, many of these companieshave millions in debt repayments due over the course of the next twelvemonths (unlike a number of thin-film firms, which are venture-funded).  

Put this all together and you have a struggle for survival ofDarwinian proportions; much blood will be spilled, and not everyonewill make it through to the other side. Over the next few years, themarket will be increasingly restricted to only to those companies withthe best products, lowest cost structures, and most successful businessmodels. The task, then, is to identify which crystalline silicon-basedtechnologies, business models, and companies will be in a position ofstrength to weather the storms versus those most likely to be at riskfrom the shakeout that is currently well underway in the PV industry.

This question framed the considerations of GTM Research’s recently published report, Surviving the Shakeout: Winners and Losers in Crystalline Silicon PV.Aiming to comprehensively lay out what it will take for a crystallinesilicon-based cell/module manufacturer to succeed over the next twoyears, it conducts a comparative analysis of the 50 most prominentcrystalline silicon-based cell and module manufacturers in the marketover eight key performance metrics, namely:

1. Degree and nature of vertical integration

2. Cost structure

3. Balance sheet strength

4. Polysilicon procurement arrangements

5. Technology differentiation

6. Manufacturing scale

7. Proximity to demand

8. Brand recognition

Figure 1: Determining Metrics for Crystalline Silicon Cell/Module Manufacturing Business Model

A quantitative assessment was carried out for each metric for eachcrystalline silicon cell and module manufacturer, and companies wereranked based on a weighted average calculation. Cost structure andbalance sheet strength (as indicated by the larger circles in Figure 1)are considered as first-order drivers, meaning that they were weightedhigher in the final assessment than other factors. To whet theappetite, below is a sample section from the report.

Technology Differentiation

As pertains to PV, the term "technology differentiation" is largelysynonymous with one variable: conversion efficiency at the cell andmodule levels. Efficiency matters for the following reasons:

1. Gains in efficiency drive costreductions at all steps of the manufacturing process on adollar-per-watt basis, from the cost of the feedstock to moduleconversion: all else equal, higher efficiency means higher energyoutput for the same cost.

2. Efficiency gains also lowerarea-related or balance-of-system costs (i.e., wiring, foundations,labor, etc.). BOS costs scale inversely with module efficiency, sincehigher efficiency means fewer panels are required for the same output.Therefore, given equal module cost, higher efficiency drives a lowerinstalled cost, and thus lower cost of electricity.

3. Efficiency becomes a keyconsideration when space is a constraint – meaning that in such cases,higher efficiency technologies will obtain a premium and differentiatea company’s product. This is precisely the value proposition of "supermono" technologies such as SunPower’s back-contact cell and Sanyo’s HITproduct.

Figure 2 assesses technology differentiation for the top 25 companieson a five-point scale. Aside from current cell and module efficiencies,two other factors were taken into consideration in the final analysis:

1. Near-term technology roadmap:  Eventhough this report has a 12 to 18 month focus, it is necessary to takeinto account near-term targets and innovations into the analysis, asmost cell and module manufacturers are striving to continuously improveefficiencies. Examples include Suntech, which will be retrofitting itsexisting capacity with its high-efficiency (19%+ monocrystalline cell)"Pluto" technology over the course of the year, and Gintech’s 16.4%efficiency "Duoro" product, which it began shipping in March 2009.

2. Alternative technology presence:many producers have placed side bets on other technologies as well,whether through internal divisions, subsidiaries or joint ventures withother firms. These investments serve as a hedge against the rise ofalternatives to traditional crystalline silicon-based technologies, andwould allow them to take advantage of a scenario where one of thesealternatives emerges as a market leader. This factor only really comesinto play, however, if the alternative can scale to material levels inthe near-term, and not all options are equally viable. Asillustrations, Sharp’s amorphous silicon division (2009 capacity of 160megawatts) is considerably more meaningful at the moment than Q-Cells’CIGS presence (6 megawatts) through its subsidiary Solibro, and thevalue proposition of upgraded metallurgical silicon (UMG) technologyhas been significantly compressed following the sharp drop inpolysilicon prices of late.

Figure 2: Crystalline Silicon PV Technology Differentiation Assessment, Top 25 Firms

The full reportcontains similarly data-driven and in-depth analysis of each of theeight metrics discussed above, along with conclusions pertaining bothto individual companies and business models, and final rankings for thetop 50 crystalline silicon PV manufacturers in the industry that allowa crystalline silicon-based manufacturer to accurately assess itscompetitive position in relation to its peers.



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