With 95% of module shipments in 2011 accounted for by a manufacturing group that is comprised of technologies specific to the c-Si community and thin film manufacturer, First Solar, for those seeking a disruptive alternative to compete with this dominance there are few options that command as much attention as CIGS.
With an impressive efficiency roadmap trajectory, the ability to deposit readily on glass or R2R substrates and the use of either vacuum or non-vacuum based deposition equipment, there are significant potential rewards on offer to manufacturers that can bring CIGS to market.
Such appealing attributes form the basis of the continued excitement within the industry (and among venture capitalists) when new CIGS investments are confirmed, ‘high’ panel efficiencies are communicated or downstream contracts (framework or firm) are announced.
Industry conferences frequently champion technology progress, fresh investment has recently flowed into the segment from the APAC region, and capital equipment suppliers continue to realign product portfolios in expectation of repeat-order frenzy. Yet, the market-share from the collective shipments of the 50-plus CIGS manufacturers has been hovering precariously for years in the low-single-digit percentages.
Benchmarking CIGS requires new methodology
Historically, attempting to benchmark the progress of CIGS manufacturers - or the likelihood of future market adoption have used metrics that have not captured the underlying motives behind the original investments, nor the diverse range of strategies employed at the corporate level.
Typically, ranking CIGS alternatives has compared parameters that are more appropriate to PV manufacturers that are in mass production and have already overcome the barriers-to-entry needed to secure substantive PV industry uptake. Instead, factors that are indicative of the extensive R&D, build-out and ramp-up activities that characterize the CIGS segment today would be more valuable.
Indeed, in the absence of any reliable volume manufacturing statistics related to production yield, average efficiency, manufacturing cost and operating margins, it is therefore necessary to construct an alternative methodology that can be used to assess the competitiveness of the different companies – and technologies – that comprise the overall CIGS landscape today.
Different technical and strategic approaches are employed
It is well documented that there are many technical approaches being pursued across the CIGS community. This includes different absorber layer variants, process flow types, and equipment used at almost all stages of both front and back-end sections within the fabs.
However, a more important comparison is offered by assessing the different strategies being employed by the CIGS manufacturers in order to gain market-entry.
Some CIGS manufacturers have chosen to prolong R&D development phases: others have sought to transition quickly from R&D cell demonstration to 50-100 MW nameplate capacity levels. Some have repositioned as technology-licensees, some have halted production and courted potential investors to fund the cost of mass production ramp-up, while others have drawn down extensive government loans on the promise of creating domestic manufacturing centres-of-excellence.
When over viewing this diverse range of technologies and strategies employed by CIGS manufacturers – and factoring in the global PV market overcapacity/oversupply of 2011, including the rapid decline of panel ASPs - it is not surprising that there have been CIGS casualties.
Many of the CIGS bankruptcies and examples of under-performance have been profiled extensively within the PV media. Consequently, investor confidence across the entire CIGS segment is running at a depressed level – perhaps more so than at any time in the past. But given the varieties of production methods and corporate strategies, it is equally inappropriate - and potentially dangerous - to tarnish the prospects of every remaining CIGS advocate with the same brush.
Ranking the CIGS alternatives
While research into CIGS manufacturing can be traced back several decades, considerable investments have flowed into the segment over the past five years. During this period, there have been two ‘phases’ of CIGS investments: 2007-2008 and 2010-2011.
The first phase was justified by polysilicon capacity limitations, high c-Si value-chain pricing and widespread enthusiasm to the growth potential of thin-film alternatives. The second phase was on the back of strong Y/Y industry growth and the expectation of imminent grid-parity with a price elasticity curve that would accommodate the aggressive expansion plans of any new market entrant.
Solarbuzz’s PV Equipment Quarterly reports utilize the methodology in this article in assessing the success of these two CIGS investment phases. This analysis determines technology adoption, inflection points and manufacturer benchmarking based solely on fab investment levels and subsequent panel revenues and market-share gains, and focuses specifically on the ratio of fab equipment spending to revenues generated from panels produced in each fab.
The resulting metric used, Return-on-Equipment-Spending (ROES), is a variation on return on capital employed. The main difference between the two is the use of only the (fab) equipment spending component of total committed capex. This methodology also allows regional variations associated with plant and labor costs to be split out: essential to benchmark CIGS start-ups currently in a global R&D/early-build-out technology phase.
The real benchmark for any thin-film alternative is First Solar
While the temptation is to form a ranking table specific to CIGS manufacturing, this masks the overriding benchmark set for any non-c-Si approach being pursued in the PV industry today. Regardless of the perceived technical and strategic advantages within the CIGS segment, the milestones already set by thin-film leader First Solar represent a to-do list for any aspiring thin-film contender.
However, First Solar has evolved considerably beyond the stage of CIGS start-ups. The company’s technology build-out, market-acceptance, and downstream sales strategies have long since been achieved, and notably timed during a period of polysilicon supply constraints and high end-market growth. Furthermore, while cost and efficiency remain essential components to maintaining strong market-share, First Solar is first-and-foremost a PV solutions provider, not just a thin-film technology innovator.
Figure 1 provides a stark illustration of just how large the gap is today between First Solar and the CIGS community, by plotting ROES data for each of these offerings. This graphic frames the magnitude of the challenge now facing CIGS manufacturing as a whole, and provides a backdrop to the hesitancy surrounding any new or follow-on financing coming into the segment.
Figure 2 compares the relative fortunes to date of the key CIGS sub-segments. There is little to differentiate the various CIGS technologies, and only when operating costs are factored into the analysis will a true picture of return-on-investment be fully understood here.
New order intake at risk for European CIGS tool suppliers
One of the main beneficiaries of the CIGS investment cycles has been the PV equipment supply-chain. From an equipment-supplier’s perspective, the excitement for CIGS is undisputable.
During the period 2010 to 2012, over US$3 billion will have been spent on production tooling for CIGS fabs worldwide.
It is therefore not surprising that several tool and materials suppliers have been buoyed by bookings growth and have realigned PV product portfolios and strategies on the hope of repeat orders coming from the CIGS segment. This is evident within the current marketing campaigns of European tool suppliers such as Leybold Optics, Manz and Singulus Technologies.
Focusing on the CIGS segment however is not without risk. In particular, this is emphasized by the current downturn in new fab investments, and captured succinctly by the negative growth trajectory of the CIGS book-to-bill ratio shown in Figure 3. This figure also shows the two CIGS investment phases, with bookings spikes during 2007 and 2010.
While equipment suppliers have sought to rationalize the downturn in bookings today with end-market demand, it is important to remember that CIGS equipment spending is not driven by standard supply/demand dynamics that govern capacity expansion and materials requirements of established PV manufacturers.
Rather, CIGS equipment demand is driven by the collective aspirations of companies and state-funded programs seeking to gain an entrance-ticket to PV by financing a disruptive technology. This can tend to decouple CIGS equipment demand from downstream market pull.
Further, the CIGS equipment TAM is not available to every tool supplier. Differences in process-flow, equipment types and in-house tool customization provide served market segments considerably below the US$3 billion figure cited above.
This is illustrated in Figure 4, where the key SAMs for different equipment suppliers for 2011 are shown. Current forecasts for each of these served markets in 2012 show significant Y/Y recognized revenue declines.
To date, the majority of investments in CIGS have come from government/regional funding or well-capitalized firms seeking to participate in the PV industry using CIGS start-ups as their route to market-entry.
In the short term, it is unlikely c-Si producers will pursue new thin film strategies as well. Their hands are already full repairing their margins and operating profitably after the price collapse of the past 12 months.
Before additional funding can safely be put into CIGS, the recent wave of investors will need to demonstrate they can pass the start-up matrices identified in this article. Only then will they be in a position to take on the challenge of meeting the additional performance measures that established c-Si manufacturers and First Solar face in today’s low price market.