Crystalline supply chain prices falling on lower feed-in tariffs, says IMS Research

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The introduction of lower feed-in tariffs in some of the key PV markets at the beginning of the year are causing prices to fall throughout the crystalline supply chain, according to the latest quarterly report from IMS Research. Polysilicon, wafer, cell, and module prices are expected to fall 7% on average in the first quarter and should continue to decline in the second quarter.

The market research firm noted that the average polysilicon contract price fell by just 2% in Q4’10. However, polysilicon spot prices are claimed to have fallen by 10%, reversing the increases seen in the previous quarter when Tier 2 and 3 suppliers had been able to sell silicon at inflated prices because of high demand and a shortage in supply.

IMS Research expects both contract and spot prices to continue falling in Q1’11, falling by 4% on average over the previous quarter.

“Efficiency improvements and relatively high utilization rates are helping to continue the lowering of manufacturing costs throughout the supply chain,” commented PV market research analyst, Sam Wilkinson. “However, costs are not being reduced as quickly as prices, and gross margins are beginning to tighten. IMS Research predicts that by mid-2011, some polysilicon and wafer suppliers will see their gross margins fall to half of what they peaked at in Q3’10.”

With most Tier 1 module manufacturers ‘sold out’ in 2010, second-tier players were able to gain market share. However, weakened demand at the end of the year meant that supplies were freed up, forcing Tier 2 module pricing to fall. According to IMS Research, Chinese Tier 2 module prices are forecast to fall by nearly 10% in the first quarter of 2011.

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