Earlier today – 30 August 2013 – the world’s largest global solar PV module supplier, Yingli Green Energy, reported its second quarter earnings results and guided on expectations for the 2H’13 and 2014.
The data mostly confirmed Yingli Green’s clear status as the number one module supplier in the PV industry today. Just to get this into perspective, here are some stats from the latest NPD Solarbuzz Module Tracker Quarter report, based on Yingli’s new updates:
• Yingli has shipped the most PV panels per quarter, every quarter, for the past six quarters going back to Q1’12.
• During each of the past 3 quarters (Q4’12, Q1’13 and Q2’13), Yingli has set a world record for quarterly shipments for a PV module supplier.
• Yingli has shipped almost 1GW more than any other PV module supplier in the trailing twelve months to end Q2’13.
• Yingli’s market share has reached 10% and is trending upwards
Records aside however, embedded in the results were some alarm bells. Not for Yingli but for companies that had been hoping to hear the words ‘new CapEx’, ‘capacity expansion’, ‘new process flows’, ‘high efficiency upgrading’, etc…
The news on CapEx is really bad if you have Yingli as a key customer. During the entire 6-month period of 2H’13, CapEx (for a company with >2GW vertical integration) is only US$40 million. That’s as close as you can get to maintenance-only.
But the more troubling news for PV equipment suppliers is that Yingli has now stated it can ship 4GW of modules in 2014 without having to add any new capacity.
Well, first off, this fully contradicts some of the strange press releases and new stories in the past two weeks that claimed new PV capacity additions from the leading makers were imminent, and we should be expecting to see all the leading players adding lots of capacity in 2014.
And – it also squashes the odd claims that an equipment spending rebound is only a few months away and might get driven out of the Middle East or Latin America?
Neither of the above claims had any strong basis or analysis to support, but each got picked up on – maybe this is because people are still desperate for any positive news on new-capacity and new equipment spending.
The true explanation is that the PV industry is dominated by Chinese module suppliers today – more so than in the past. Chinese c-Si manufacturers have consistently operated in a part-fabless or asset-lite manner. Lately, leading Japanese module suppliers have adopted this approach also. During 2012 and 2013, the leading Chinese module suppliers have been able to increase the levels to which in-house and third-party capacity is adjusted to prevent inventory levels building up.
With more module share coming from China now, and as many Western competitors leave the industry or lose further market-share, the use of asset-lite operations is having a more profound impact on any company waiting for new capacity to be added.
Other factors allowing Yingli to guide 4GW shipments with no-CapEx include:
• There is a 12GW virtual fab in China from tier 2 and tier 3 manufacturers with me-too capacity and limited access to overseas markets.
• The US demands non-China cells in modules.
• The leading suppliers are still posting negative operating margins. Saving costs everywhere is essential. CapEx can be avoided by using third-party capacity.
• Market-share gains (with overseas sales/marketing cost) outweighs adding new capacity.
• There is multi-GW idled capacity at Suntech, LDK and elsewhere in China that could still be acquired at very low cost.
This all points to the equipment spending downturn lasting well into 2014, and perhaps the next meaningful new capacity is not going to arrive until 2015. Unless – of course – technology can rescue the industry and force every module supplier to perform significant line upgrades/process-flow changes in order to remain competitive. But without any technology roadmap being followed, this is highly unlikely to happen within the next 18 months.