Citing improved margins against very tight capital expenditure control, PV module manufacturers are increasingly outsourcing part of their production needs, benefiting the likes of Flextronics, Jabil Circuits and JA Solar, according to a new report from IHS.
According to the IHS Solar Integrated PV Market Tracker – Q1 '13 China’s JA Solar and Singapore-based Flextronics achieved the fastest growth among the Top 10 PV module manufacturers in 2012.
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Jessica Jin, analyst for solar at IHS said: “Despite the oversupply and price erosion that plagued the solar business though most of 2012, JA Solar managed to almost double its PV module production as it successfully transformed from the top crystalline cell producer into a leading module producer. The company has now built a strong own module brand and could be well positioned for 2013.”
JA Solar was said to have almost doubled its production of modules last year to 950MW (rounded in 50MW increments), a 96% increase from 490MW in 2011.
Pure-play subcontractor, Flextronics increased its production to 900MW, a gain of over 60% in 2011 when production reached 540MW, according to IHS. Both companies featured in the Top 10 rankings for just module production in 2012.
“Flextronics has been largely known for its electronics and IT manufacturing services” added, Jon-Frederick Campos, solar financial analyst at IHS. “Given the global market conditions, Flextronics seems to be transitioning its business model to put more of a focus on renewable energy. With many Chinese solar companies facing a tough struggle against antidumping and antisubsidy duties from the United States and the European Union, Flextronics is filling this void for Chinese PV companies.”
But it is not only Flextronics that is benefitting from the latest trend to adopt flexible manufacturing strategies. Jabil Circuit is rumoured to be the subcontractor for ReneSola, which recently announced it would outsource around 300-400MW to meet customer requirements in Europe. Jabil has a module assembly plant in Poland.
IHS noted that the OEM business sector is expected to grow at an above-average rate.
OEM shipments in 2012 were said to have increased by 51%, whereas total shipments increased by just 21%.
“By working with an experienced contract-manufacturing partner, companies can cut costs by 10 to 15%,” Campos said. “At a time when pricing trends are uncertain, costs have become much more important to a company’s margins. Contract manufacturing can help to optimise the supply chain and solve many of the production problems with which PV suppliers are struggling.”
IHS said that it expects more suppliers would seek high-quality manufacturing partners to reduce cost, thus outsourcing was set to continue to grow. However, it was not clear if this trend would be a relatively short-term phenomenon, fuelled by low capital expenditures amongst the major crystalline silicon manufacturers but curtailed when the manufacturers raise margins and return to profitability, sparking the next wave of internal capacity expansions.
IHS also noted that global module production growth decelerated in 2012, climbing to 31.6GW, an 8% increase compared to a 104% rise in 2010 and 31% increase in 2011.
The market research firm is forecasting that a rebound in production will occur this year and be much higher than the increase in 2012. Part of the reason for the improved growth expectation is due to low module inventories, burnt-off last year and expected increase in global PV installations in 2013.