While the over-supply situation in the PV industry impacts the supply/demand balance across the PV value chain, the over-capacity situation has the greatest impact on those dependent on new CapEx spending. And here, it is the PV equipment supply chain that is feeling the brunt of the over-capacity problem.
In the semiconductor industry, the book-to-bill ratio offers a leading indicator to plan against and work through technology buy cycles whenever fab CapEx slows down. In the PV industry, the book-to-bill analysis is slightly different, but can be used also to pull out some key trends.
Before using the book-to-bill ratios however, it is essential to get full transparency on book-to-bill numbers and to compare like-for-like across accounting and reporting practices.
The billings part is easy enough to track. Recognised revenue is the successful payment transfer and defines a shipment as ‘valid’ or real. It is the point that money changes hands officially. Bookings however are fraught with complications, and it is here that the PV industry can be seen to diverge from the semiconductor industry. In particular, this is most evident when looking at the segments of the PV equipment supply chain that have been operating with negative book-to-bill ratios through 2012.
How does a book-to-bill go negative?
It so rarely happens in mature technology segments that it does need to be explained, as the set of conditions is pretty unique.
First, revenue levels have to be low. (It is stating the obvious, but revenues don’t go negative, at worst they just drop to zero!) Then we have very low new order intake. And finally, we have strong order cancellations. Next, the de-bookings dwarf the new order intake, making the net bookings negative. Indeed, if the magnitude of this net (negative) booking level is greater than the revenues recognised, then we have a ‘negative-parity’ situation, where the book-to-bill ratio is less than -1.
This is essentially where the ingot/wafer segment in the PV industry got to in the second half of 2012. By all accounts, it is truly a nightmare scenario and represents just where you land when you fall off a fiscal cliff and have no way to climb back up.
New research from NPD Solarbuzz featured in the January 2013 release of the PV Equipment Quarterly report shows that book-to-bill metrics for the c-Si ingot/wafer supply chain have remained negative throughout the whole of 2012. Recent announcements in Q4 2012 regarding tool supply from GTAT and JYT into this PV segment were just two data points used within this overall analysis.
How has this affected the ingot/wafer equipment supply-chain?
There tend to be three phases that equipment suppliers go through, when orders dry up:
1. Full-scale denial of the problem.
2. Fighting back with new product options, and trying to ‘change’ the landscape with innovation and new technology upgrades.
3. Final resignation and accepting orders are not going to reappear for a long time.
The severity of the downturn for wafer and ingot suppliers is making final decision making clear cut, and some suppliers have simply bypassed options 1 and 2 above and exited the industry. Most however, have gone through the pain of parts 1 and 2 and are dealing with the upshot of part 3.
For equipment suppliers with other sectors and revenue streams, ingot and wafer tool segments are being shut down, staff redeployed and probably a ‘skunkworks’ operation retained to be ready for any upturn.
For equipment suppliers that have no other revenue streams, other than PV ingot and wafer tools, there is no magic wand on offer. And to coin another US-derived term, they are firmly in the ‘valley of death’, burning through cash-in-hand to sustain operations on a day to day basis. In this respect, they find themselves in the same position as many of their erstwhile customer base.
Ultimately however, technology could offer the salvation. But trying to force a decision on this today is highly dangerous. Mono or multi ingot growth? Cast-mono options? n-type or p-type? Greater than or less than 140 micron wafer thickness? Steel or diamond wires?
Jumping the gun is probably too high a risk strategy, but knowing what to do, when and with whom during 2013 is probably the one thing to focus on. At least then, when orders do restart, tool suppliers waiting with the right option and the right customers will stand the greatest chance of becoming the next group of successful PV equipment suppliers.