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According to a myriad of recently released market research data, the PV market grew over 100% in 2008, well above the CAGR growth levels of the last five years or more. Looking more closely at the data, the fourth quarter of 2008 indicated a massive change in the industry’s dynamics as the supply change shifted from prolonged undersupply to significant oversupply. The impact of the global financial crisis became fully evident and demand virtually came to a halt.
Encouragingly, PV manufacturers have by necessity - but also with a good degree of near-term vision - tempered capacity expansions, preserved cash and focused on the key business areas that will position them for the next wave of growth, whenever and wherever that will take place.
In the meantime, there looks to be a shakeout across the industry. In a recent seven-day excursion to Germany to attend the Photon conference and exhibition in Munich, followed by the PV Fab Managers’ Forum in Dresden, I was able to talk to a number of executives in many areas of the industry. Though impossible to recount all of these conversations here, there were several emerging developments that I thought would be interesting to share.
The poly party’s over
Kept under wraps for several years but now out in the open, the frustration and anger at the major polysilicon producers for forcing companies to sign long-term supply contracts and make substantial pre-payments is tangible. With spot prices peaking in 2008 at around US$500 per kg, one could almost see and feel that bubble burst in a spectacular fashion. I asked Photon Consulting analysts in Munich how low poly prices will go, and answers ranged from US$50 per kg to as low as US$30 per kg.
My impression is that no one really knows where prices will hit bottom. In a conversation with Nick Sarno, Senior VP of Manufacturing at LDK Solar in Munich, he expressed his view that the Photon forecast is too extreme and that the Sage prognosis is too conservative. In his pragmatic view, the truth would probably be found somewhere in the middle.
However, the rapidly declining spot prices are allowing purchasers to renegotiate contracts both on price and payment terms. Although those I talked to in Germany hesitated to give specifics, the look of relief on their faces spoke volumes. Only a few days ago, Anton Milner, CEO of Q-Cells, vented his pent-up frustration over poly contract terms by declaring in a conference call that polysilicon pre-payments were a thing of the past. He hopes the producers get a “brutal” lesson from the price declines because this was not something he expected the industry to have to experience again, commenting that it was not how the industry should have to operate.
Show me the money?
It also became clear in my travels that the pace of industry growth will slow, and we may well see negative growth for the year. This has far more to do with the credit crisis than true demand for PV. When companies spoke to me about the difficulties in obtaining credit, whether for cell production expansions, thin-film start-up capital or project finance for large-scale utility plants, what became apparent was that not only was it difficult to raise capital, but it is becoming impossible to raise any capital at all. In a way, it’s a credit crisis – but, to put it more accurately, it’s becoming a credit freeze.
Digestion period
The rapid industry growth in recent years has proved to be the catalyst for PV to be taken seriously, which looks set to remain the case for some time. However, a slowdown is upon us and in more ways than I can detail here, it is important that we get manufacturing pointing in the right direction for the next and potentially exponential growth phase that should see grid parity achieved across a broad swathe of countries.
On the exhibition floor in Munich, I was impressed with many new production tools that featured throughput improvements, greater modularization and attention to technical developments on things such as handling thinner wafers. The number of metrology and inspection tools on show indicated that yield improvement could become a key focus for fab managers in the future.
Innovation is most definitely alive and well, but something was missing, in my opinion.
Travelling to Dresden from Munich via train instead of by plane brought home to me what was missing on the exhibition floor and in the conference sessions at the Photon event.
Although I had to change trains and the journey took 6 hours, the timetable said I would arrive in Dresden at 6:02 pm. As I live in the UK, we take such exact times and approximate by 10 minutes, not to be disappointed or shocked that a train could actually do that distance and be exactly on time.
Needless to say, the train did arrive at exactly 6:02pm. There had been no signal failures, leaves on the track, trains in front broken down or any other disruption to the journey.
Talking to and video interviewing fab managers such as Frank Schitthelm of Deutsche Cell at the PVFMF event, it was clear that I wouldn’t have the same experience travelling on a cell production line. Fab managers are faced with a lack of industry standards, correct tool specifications and unscheduled maintenance, to name but a few problems.
The current lull in the industry is a perfect time for fab managers to regroup and refocus on collaboration with suppliers. This will ensure that important issues are tackled, issues that are difficult to address when the industry is growing at 40% plus CAGR - let alone 100% - in a spike year.
I was pleased to see fab managers focused on improving ‘quality’ across manufacturing operations, summed up the best by Gerhard Rauter of Q-Cells in the opening session of the Dresden conference.
Though the debate of standards being required goes on, most would seem to be pulling in the right direction. In order to capitalise on the next wave of growth, manufacturers are addressing quality of operations that not only result in manufacturing cost reductions but enable high utilization rates, flexible production and improved cell performance, to name but a few. Quality focus across the manufacturing lines will be the key to grid parity goals and beyond – it is not a simple question of gigawatt-level ramping.
Safe in the knowledge that I was to most likely reach my destination exactly on time and undamaged, I realised that this is where the PV industry needs to be. It’s not just about SEMI standards and semiconductor industry best practices getting us to the required quality level, but more likely it will take best practices applicable from the automotive and aerospace industries. That said, perhaps we need to add in best practices from the German railway industry as well.
With few PV manufacturers adopting continued fast-track expansions in 2009, the industry has the calm before the next storm to address the quality over quantity issues. Although this will not be resolved in the current period, much momentum can be built in this timeframe.
