IHS raises capital spending forecast amid PV industry demand and high utilisation rates

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Global capital spending in the PV industry is expected to increase at a higher rate than previously expected, says market research firm IHS.

Higher end market demand and severely restricted CapEx over the last two-years has seen manufacturers up and down the supply chain experience higher utilisation rates, which will fuel a recovery in capital spending in 2014 and through 2015, IHS said.

PV producers are expected to spend in the region of US$3.3 billion on expanding capacity to meet demand, a 42% increase over 2013 spending, and higher than IHS’ previous forecast of spending increasing 37% next year.

“Things are looking brighter throughout the solar industry as PV demand climbs and spreads to new regions,” said Jon Campos, lead PV capital spending analyst at IHS. “In light of improving sales, PV companies are increasing production. Major manufacturers are indicating that the vast majority of their production upsurge will come from internal resources, requiring even greater increases in capital spending than previously expected.”

IHS also expects strong CapEx increases in 2015, rising 32% from 2014 to reach US$4.3 billion – a major upgrade from the market research firm's previous forecast of only 5% growth over 2014.

However, IHS continues to believe that the current outsourcing trend is simply a fad, in contrast to rival market research firm, NPD Solarbuzz.

“Some companies have engaged in contract manufacturing of products from tier two and tier three suppliers to meet sharp increases in demand,” Campos said. “However, sources from multiple tier one players, as well as from smaller companies, have verified that this is a short-term, small-scale tactic. Long-term, large-scale increases in production during the next few years will be accomplished via increases in internal capacity.”

However, according to senior executives of leading Taiwanese wafer, cell and module manufacturers, the PV industry is increasing outsourcing due to two-years of ‘profitless prosperity’ with the likes of Sharp having increased production outsourcing to 50%, up from only 20% a few years ago.

China-based PV module manufacturers have also adopted outsourcing while limiting capital spending to meet strong demand from China, Japan and the US. Yingli Green remains on track to ship around 1GW of modules above its own internal nameplate capacity in 2013.

Chinese banks have also restricted lines of credit to many manufacturers during the EU anti-dumping investigation, limiting firms ability to increase capacity to meet demand, such as China Sunergy.

Bond defaults from Suntech Power Holdings and LDK Solar (partial default) are expected to impact the ability of other producers to tap US capital markets at competitive rates in the future, potentially limiting firm’s ability to add significant new capacity in the near-term and therefore continuing to outsource.

Other than limited capacity added in 2013, by JinkoSolar, only SunPower has so far announced new capacity expansions, which will contribute around 100MW of new module production in 2014, a further 250MW is expected to come on stream in 2015 as a new facility in the Philippines. However, SunPower has only equipped 50% of its JV fab (1.4GW) in Malaysia with AUO, to date.

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