First Solar chart-topping prevents talk about a revolution

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First Solar is forecast to have been the largest midstream solar PV cell manufacturer in 2012, according to recent checks and preliminary estimates by NPD Solarbuzz of internal (in-house) cell/midstream PV production levels during the calendar year 2012. 

Once again, First Solar is believed to have produced more midstream-MWdc of product than any other c-Si cell or thin-film producer in the world. And at a time when many in the industry are seeking to combat a perceived China-led PV manufacturing revolution, this humbling statistic provides a different slant on how participating in the PV industry is not just about taking on competitors on a legacy like-for-like/capacity-counting basis.

Talk about destruction

However, with the exception of First Solar, Chinese and Taiwanese PV c-Si cell makers now occupy positions two to 10 on the ranking list. Over 75% of all c-Si cell production in 2012 was undertaken either in China or Taiwan.

So, are we really kidding ourselves about the lack of a revolution, or is there more going on here than meets the eye?

Taiwan c-Si cell makers produced a level of c-Si cells in 2012 that was just above the entire c-Si module demand needed to satisfy the whole of the US and Japan end markets last year.

Actually, the geographic comparison here is not for academic reasons. This is exactly where much of the Taiwan cells are now ending up: the unveiling of a new and pertinent trend within the PV industry. In fact, if anyone is looking for revolutionary and destructive effects, then this statistic should be jumping out of the page.

With all the domestic efforts going back to the mid 1970s in the US and Japan to nurture and foster the development of the PV industry, it must be leaving many scratching their heads about what went wrong.

Production of c-Si cells in Europe (especially) and the US (partially) was decimated during 2012, and what few production lines were making c-Si cells at the start of 2012 had either been mothballed, idled, retired or auctioned off by year-end. For many, the last strategy was to keep c-Si cell lines running somewhat in limbo, hoping to be rescued by politicians and lobbying.

PV manufacturing in many countries was destroyed in 2012. Talk about destruction is wholly accurate. Not because of the end market: it grew by double-digits year-on-year compared to 2011. But because of sales teams competing in an oversupplied environment that meant going lower and lower to secure the deal.

All want to change the world

There are various Top 10 lists for 2012 that remain incredibly valuable in understanding how the PV industry is changing and the aspirations of many to change the PV world in 2013.

On the supply side, there are two ranking lists that offer good market intelligence and trends. One of these is module (c-Si module or thin-film panel) shipment. Note the key word here is ‘shipment’, where it is essential to understand the revenue aspect of recognizing a shipment. So, just to be meticulous in getting the definition right here, shipment is really ‘revenue recognition based upon the first shipment of a module.’

NPD Solarbuzz recently published the Top 10 module suppliers to the PV industry in 2012, as featured in a blog exclusive to this site.

It may seem somewhat pedantic to dwell on semantics, but rebranding, contract manufacturing, tolling and component outsourcing is all over the PV industry. It permeates throughout c-Si cell and module manufacturing, and varies depending on the prevailing market dynamics: wafer/cell oversupply environment, or trade-war related discrimination against specific country-of-origin c-Si components/cells.

The bottom line is that revenues based upon module shipments tells one story only, and is weighted towards revenue recognition and not manufacturing. For example, a module manufactured in China under contract from a European module ‘supplier’ sees two parties cite a module-related shipment (or revenue): both the actual module manufacturer in China, and the company in Europe that may well have rebranded the module with their company name/logo. In pulling out any PV module shipment ranking table, only the production data based upon the companies making the modules (from cells!) should be used. (In the case here, the Chinese company would get the megawatt total assigned to it.)

That said, there is unlikely to be any Top 10 PV module shipment list for 2012 that does not have Yingli Green Energy at Number 1.

However, let’s now get more into the heart of PV manufacturing, and pull out who made all the solar c-Si/thin-film cells in 2012, not who shipped the modules. This has long been the key metric for PV manufacturing, and remains the case today. Remember Q-Cells' highly vocal public messaging about being the ‘Number 1’ in the PV industry (based exclusively on cell production tables)?

Actually, it is the only way to assess real production levels, and avoid double (or triple-counting) of module-based revenues (per above). And it is categorically the correct way of checking supply/demand issues and also technology trends.

Before we get into the numbers and talk through the rankings background, it is important to define clearly (again) the definitions. Since we are counting cell-based MWdc levels, cell-to-module interconnection factors need to be taken into account. In a ranking that compares only c-Si producers, this is not needed. But when mixing c-Si cell and thin-film makers, then this must be done. (Basically, 100MW of cells does not mean 100MW of modules, but 100MW of thin-film panels is essentially 100 MW of thin-film ‘cell’ counting.) However, fortunately in 2012 it does not muddy the waters too much because there is only one thin-film producer in the Top 10 list and the rankings would be exactly the same even if cell-to-module conversion was perfect.

Tell me that its evolution

The makeup of the companies in the rankings list here can actually be split into 3 distinct categories: First Solar, China partial-vertical-integrated c-Si manufacturers and Taiwan cell makers. In 2012, the roles and fortunes of these groupings started the year in different places, and by the end of the year, they were largely targeting opportunities independent of one another. But mostly not competing directly, rather co-existing within a changed PV landscape.

This has never happened before in the PV industry.

In the past, anything produced could be sold globally. Mono and multi panels were consumed everywhere, and would compete with thin-film panels selling into the downstream channels. Modules could be manufactured in Asia and shipped to warehouses and distributors in Europe, often with no knowledge of which country the panel ended up in.

But that’s the PV industry of the past. Gone.

In fact – even putting the industry ASP declines aside – this change in supply dynamics alone occurred so quickly that many companies in both the upstream and downstream channels simply had no contingency in place, or were unable to change legacy business models that dated back to the old/former PV times when Europe ruled and policies propped up healthy end-market pricing.

So, with this backdrop in mind, let’s look afresh at the Top 10 rankings table here.

First Solar’s ranking number could simply be considered a function of the company’s strong downstream projects business, and the pull upon in-house CdTe module production. Chinese in-house cell manufacturing may soon be a function of the size of the domestic Chinese market, with other regions trying to exclude them from competing. And Taiwan cell manufacturing could be dictated mainly by anti-China cell-making tariffs and the aspirations of Japanese module suppliers to remain within the PV industry using premium cell supply.

So, again, we have new dynamics in play within the industry that were not there before.

Gone are the days of adding up nameplate capacity levels globally or performing academic cost exercises to try and predict which manufacturers will/will-not remain within the PV industry.

The PV industry has simply evolved so quickly that many legacy metrics and models are no longer valid. And likewise, analysing the market has changed too. Therefore, on a case-by-case basis, understanding what’s behind the numbers and if these justify long-term sustainability forms the acid test of rankings that will emerge going forward.

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