Centrotherm Photovoltaics has released its Q1’11 results, highlighting strong year-on-year revenue and bookings performance compared to Q1’10. Revenues grew year on year by 64.2% to €189.3 million, while new orders increased by 187.8% to €224.3 million. However, a more appropriate comparison comes by looking at quarter-on-quarter trends - in particular how Centrotherm’s PV book-to-bill is tracking – and in understanding trends within the industry driving these metrics.
Compared to Q4’10, Q1’11 results revealed a somewhat different picture. While quarterly revenues grew by a more modest 14.2%, bookings were down by 34.4%. As a result, the book-to-bill declined from 2.06 in Q4’10 to just above parity at 1.18 in Q1’11. Embedded within these numbers is the real impact of industry dynamics and capacity expansions facing many PV equipment manufacturers today.
Generic industry trends can be misleading, so it is worthwhile emphasizing a few key points here. First, downstream market demand and equipment spending cycles do not run in phase. Traditionally within the PV industry, strong market growth in module demand has been accompanied by highly aggressive capacity expansions by c-Si manufacturers. This is no truer than in Asia, where expansion by tier 1 cell and module makers announced for 2011 was significantly higher than even the most optimistic scenarios forecast for module demand throughout the year. During Q1’11, 85% of Centrotherm’s revenues were derived from the Asia-Pacific region.
In addition to the changes in cyclic behaviour between market demand and equipment spending, there are also variations in overcapacity across the PV value chain from polysilicon to module manufacturing. Specifically, during 2011, it is the upstream segment that is more likely to remain capacity/production constrained, with the cell and module segment being most at risk due to fab expansions planned during the year. Therefore, each PV equipment manufacturer will see different demand pull for poly reactors, ingot/wafer squaring/cutting tools, and cell and module equipment this year. During Q1’11, 82% of Centrotherm’s revenues came from equipment sold into the c-Si cell and module segment and 96% of new orders were assigned to that sector as well.
Centrotherm’s market dominance during 2010 in the c-Si cell segment was particularly impressive at the key process tool level. Leading market share of around 45% for PECVD tools was matched by equally strong revenue returns for diffusion furnaces (close behind Amtech/Tempress) and firing furnaces (second only to Despatch Industries). Indeed, feedback from the market so far in 2011 highlights similar market-share figures. For 2011, Centrotherm is guiding c-Si cell and module revenues at the €500 million level, out of a total group guidance of approximately €700 million. This equates to 25% annual segment growth, slightly below Solarbuzz forecasts for c-Si cell and module equipment spending to grow by over 30% during 2011.
Equipment spending cycles guide industry book-to-bill ratios across the various value-chain segments. With the c-Si cell and module TAM forecast to decline by 18% in Q4’11 and a further 24% in Q1’12, the implications here point clearly to the book-to-bill for c-Si equipment suppliers dipping below parity during 2H’11. Only a strong upturn to downstream market forecasts in 2012 is likely to reverse these current trends and even then, demand will need to be assessed in comparison to installed tier 1 cell capacity in China and Taiwan at year's end.
For equipment suppliers to the c-Si value-chain, the sweet spot to be active in right now is upstream of cell manufacturing. However, this part of the supply-chain remains dominated by companies such as Applied Materials, Meyer Burger, and GT Solar, each of which having reported significant new orders at the polysilicon/wafering stages in the past few weeks. New equipment suppliers hoping to enter this space during the second half of the year may simply position themselves at the downturn in equipment spending when this takes effect.
At the cell processing stage, the capacity expansion slowdown across the industry this year will however create a window of opportunity for all the next-generation tools awaiting adoption for higher efficiency process flows. In this segment, cell manufacturers are awash with options. Centrotherm is targeting revenue upside from selective emitter upgrades (front-end diffusion masking), Manz is pushing PSG-doped laser diffusion selective emitter variants, and Schmid is offering upgrades via its (etch-back) selective emitter scheme. Add into this space the doped silicon ink technology promoted by Innovalight, ion implanters being championed by Varian, and various double-printing metallization enhancements at the back-end. What revenues are on offer from line upgrades will be fiercely contested and may end up being spread across a range of different approaches to moving the cell efficiency curve forward.
Subsequent CY Q1’11 reporting by Roth and Rau, Applied Materials, GT Solar, Meyer Burger, and Amtech will help complete the overall picture for tool supply over the next few quarters. Ultimately however, breaking out process tool and value-chain book-to-bill metrics will be required in order to gain full insight into the real impact of industry demand on equipment spending cycles this year.
This Guest Blog was submitted by Finlay Colville, Senior Analyst, Solarbuzz