Enphase reports record revenue as price hikes offset ‘dynamic’ supply chain costs

Enphase’s Q3 results came just a day after the microinverter supplier launched its IQ8 product (pictured) to market. Image: Enphase Energy.

Microinverter supplier Enphase Energy reported record quarterly revenue in Q3 2021 but stressed the importance of price increases to help offset price volatility in its supply chain.

Enphase recorded US$351.5 million of revenue in the three months ending 30 September 2021, towards the top end of its guidance for the period, after shipments rose by more than 50% quarterly to 2.6 million microinverters, equivalent to around 913MWdc.

Around 65MWh of storage systems were also shipped in the quarter as Enphase continued to ramp its Encharge product.

Shipments in the quarter helped raise revenues by 11.2% sequentially and nearly double (up 97%) those recorded in the corresponding quarter a year ago, with Enphase’s gross margin standing at 40.8%.

Speaking to investors and analysts following the results disclosure, Enphase chief executive Badri Kothandaraman noted that tight cost management and price increases handed down to customers had “partially offset” ongoing supply chain volatility, with another price increase set to be enacted later in Q4 2021.

Nevertheless, Kothandaraman did stress that some supply chain constraints had been eased. The company qualified additional suppliers of AC FET chips used in its microinverters, taking its total to five, while indicating that supply of its ASIC chip would be “managed” throughout Q4. This, the company said, meant that Q4 supply of its microinverters would be “much better” than previous quarters with the intent of catching up with demand early next year.

Enphase added it would be adding a new automated manufacturing line to its facility in Mexico, taking the site’s capacity to 2.2 million microinverters per quarter, which, when added to an earlier extension this year in India and its capacity in China, will take Enphase’s total output to 5 million microinverters per quarter by the end of this year.

Furthermore, around two-thirds of its contract manufacturing capacity will subsequently be located outside of China, a matter Enphase said was important given logistics constraints witnessed so far in 2021.

Logistics costs – Kothandaraman noted that the cost of shipping freight had risen eight-fold this year, with air freight used when suitable and cost-effective as an alternative – have seen Enphase witness its own cost base increase, and the company said it had to pass on some of these costs to customers, although cost reduction programmes had allowed Enphase to absorb some of the cost itself.

Kothandaraman did, however, add that while the situation regarding supply chains remained “dynamic” and difficult to predict, it is anticipated to ease quarter by quarter and the company was taking control wherever it can, such as in qualifying new component providers.

Supply chain issues has meant that the rollout of Enphase’s energy storage product has been impacted, with lead times still around the 14-week mark against a longer-term target of eight weeks.

Enphase released its Q3 results just a day after the company confirmed that it had begun shipments of its next generation IQ8 microinverter, picking up where the IQ7 left off. Kothandaraman lauded the microinverter’s multiple use cases, including the provision of power during periods when grid power is unavailable to power household lighting even in the absence of a large battery.

Enphase now plans to launch its 640W AC IQ8D product, aimed at the small C&I rooftop solar market, in Q1 2022 following a number of pilot projects conducted this quarter.

Kothandaraman also teased the first few details of its successor IQ9 microinverter, which is now in development. The chief executive said that with module power outputs increasing, more innovative transistors, chips and transformers are required to work in tandem to tolerate higher currents within similar form factors, all three areas of which will be assessed within the development of the IQ9. More details are to be published during an investor day scheduled for next month.

In guidance for Q4, Enphase said it anticipated revenues to fall in the range of US$390 – 410 million, including between 90 – 100MWh of energy storage shipments.

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