IMS Research reports increased cell capacity in Q210 but expects margins to fall in 2011

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According to IMS Research’s latest report, annualized photovoltaic cell production capacity increased once again in the second quarter of 2010, reaching over 25GW. The analysts further forecast that capacity will reach 33GW by the end of the year, over 80% of which will be for crystalline cell technologies. However, this news also comes with a warning that gross margins will fall in 2011.

The report outlines that megawatt shipments of PV modules grew 15% in Q2’10 over Q1’10. This growth marked six consecutive quarters of increasing shipments and took total modules shipped for the first six months of the year to over 8GW, only marginally less than throughout 2009. Revenues generated by PV modules in the same period amounted to over US$15 billion.

“With module demand so high, it is not surprising that new cell production lines are being added at a frantic pace to capitalize on the booming market. However with demand looking uncertain going into 2011, a dramatic slowdown in growth imminent and likely weak Q1’11 and increasing poly prices, gross margins of cell suppliers are looking particularly vulnerable,” reported Sam Wilkinson, PV cell and module research analyst.

Asia’s share of cell capacity also increased in Q2’10, with IMS predicting a continued growth pattern through to the end of the year.

“Asia has continued to add cell capacity faster than other regions throughout 2010, further increasing its already huge share of global production capacity,” said Wilkinson. “As many of the key incentive schemes that drive the market today continue to reduce, companies remain more focused than ever on reducing costs and we have seen many leading European suppliers such as SolarWorld, Q-Cells, and REC shifting to factories in Asia in an attempt to compete with the low costs of their Asian competition.”

IMS further expects that nearly 80% of cell capacity will be located in Asia at the end of 2010, over half of which will be in China.

Yet, despite these positive predictions from the analysts, IMS also anticipates weakened demand in 2011 and is forecasting utilization to fall below 50%. IMS Research concludes that as a direct result of decreased utilization and declining prices, gross margins will also decline.

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