Weaker demand in the first quarter is expected to generate a significant rise in PV module inventories throughout the supply chain, according to market research firm IHS iSuppli in a new report entitled PV: Strong Market Has Suppliers’ Inventories at Healthy Levels. Days of inventory (DOI) are forecasted to increase by 22.9% for c-Si modules and by 21.4% for thin-film modules.
“A major factor behind the solar inventory spike is the subsidy-driven nature of the PV market,” noted Stefan de Haan, senior analyst for PV at IHS. “Feed-in tariffs in many countries decreased on January 1, reducing government incentives to install new systems in early 2011. Furthermore, demand—usually lighter toward the beginning of any year—also is being depressed by unfavorable weather conditions prevailing in key European countries. Combined with a less pronounced year-end rally in 2010 compared to 2009, the slowing in demand has resulted in a pileup of inventory.”
As the market research firm was quick to point out, inventory build should be a first-quarter problem only as global solar demand will rebound sharply over the course of 2011, bringing inventory for the entire PV value chain back to relatively low levels. Suppliers should see only a small increase in DOI compared with 2010, which was very low.
Indeed, DOI could reach the levels experienced in 2009 as the Spanish market collapsed and the economic recession took hold. However, a major inventory glut as seen during the first half of 2009 is not likely to recur, according to IHS iSuppli.
The market research firm is still guiding growth for the PV industry overall in 2011.