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NPD Solarbuzz’s latest Solarbuzz Quarterly report states that global demand is projected to grow 6% in 2012, with market declines in Europe to be offset by 43% growth outside that region. Therefore, solar companies will face the challenge of re-building margins during a period of increasing diversity in end solar market mix. PV companies will need to shift focus from seeking market share to instead prioritizing a return to profitability after losses incurred throughout the industry following problems with over-production, excess inventories and collapsing market process.
So far, manufacturers have cut 4.9GW from their previous goal of 28.2GW of module shipments in 2011; downstream companies, particularly in Europe, acted aggressively in Q3 2011 making a reduction of 19 inventory days, with a further 45-day drop projected by the end of Q4’11. For 2012, cell manufacturers are poised to hold production flat but Q1’12 is still forecast to drop 5% Q/Q as manufacturers manage inventory during seasonal weakness. The dramatic 17% reduction in module prices in Q3’11 contributed to inventory write-offs of over US$300 million in the quarter.
Gross margins for vertically-integrated Chinese tier 1 cell and module manufacturers decreased two percentage points Q/Q in Q3’11, while Western and Japanese manufacturers dealt with negative margins for the second quarter in a row. Margins for Chinese tier 2 and other Asian producers tracked by NPD Solarbuzz are also negative now. The 15% cut in German tariffs on January 1, 2012 all but ensures further reductions in module prices in the seasonally weak first quarter. Polysilicon prices that had held up until Q3’11 have now undergone a dramatic reduction as spot prices have taken their toll on contract pricing.
Faster than expected growth in China and the United Kingdom helped to raise the latest 2011 global PV market forecast to 23.6GW, up 22% Y/Y. The Chinese market development comes at an opportune time for domestic manufacturers, as the environment in the US market has become more uncertain since SolarWorld filed anti-dumping charges with the US Department of Commerce and International Trade Commission.
“While market share growth was the predominant corporate strategy at the beginning of the year, companies must now improve their financial viability, or they risk not being able to participate in the strong growth expected by grid parity now being established in key markets,” said Craig Stevens, president of NPD Solarbuzz.