While delivering GW-levels of manufacturing equipment during 2H’11 that is already surplus to market requirements is bad enough, excessive tool backlogs pose yet another worry that needs to be factored into revenue guidance for 2012.
The precise level of backlog cannot be tied down precisely. Even discounting the framework contracts that often do not come to fruition, there is production equipment valued at approximately US$8 billion sitting on supplier’s order books at end September 2011, 40-50% of which is in respect of c-Si and thin film cell/module equipment. The vast majority of this equipment is still being ‘planned’ for shipment in the next 2 to 3 quarters.
Equipment meeting polysilicon plant expansions is in the only low-risk category within this backlog mix. Every other manufacturing segment (c-Si ingot-to-module and all thin-film) presents much higher levels of risk.
During the past 6 months, very few orders have been de-booked– not by lack of efforts from overcommitted manufacturers unable to shift product from existing capacity. PV equipment suppliers have been highly accommodating on delivery dates, thereby keeping orders on the books for now: pre-payments from many customers being the only safeguard in this respect.
In order to contextualize the impact of the backlog revenue figure is to focus on the gating item for value-chain capacity build-out: wafer wire-saws.
Analyzing wire-saw specific PV backlogs at the end of September (taking account of companies like Meyer Burger, Applied Materials and Komatsu-NTC) suggests that tooling capable of producing 10-15 GW of incremental c-Si module production is still awaiting shipment.
It is relatively straightforward to match the backlogs for leading equipment suppliers against the legacy expansion plans of their key customers; but many of these plans are likely about to undergo a significant reset next week when the leading tier 1 c-Si producers in China report Q3’11 results.
CapEx revisions have already been confirmed by First Solar and SunPower, and this has had a direct impact on the equipment suppliers serving these companies’ expansion plans. For equipment suppliers to First Solar and SunPower, these companies represent a dominant part of their PV tool revenues, having developed process-specific equipment.
China tier 1 manufacturers reporting next week are likely to confirm expected austerity measures that will have a direct impact on PV equipment backlogs.
We should expect large revisions to 2012 CapEx figures; shuttering production capacity that is more than 5-years old, not upgrading the lines; focusing even more on cost-reduction and less on some of the high-risk unproven technology changes that were muted as candidates for mass production in 2012.
Ultimately, fiscal year-end will be the best time for equipment suppliers to perform any backlog ‘reset’, thereby starting next year with a backlog figure that is more consistent with subsequent guidance on revenues and margins expected in 2012.