New orders for PV equipment suppliers recently reached a critical low point when SEMI posted a PV book-to-bill ratio of 0.40 for the first quarter of 2012. However, market conditions look to have worsened in the second quarter after leading equipment supplier GT Advanced Technologies (GTAT) reported new order intake of only US$13.8 million, while a negative adjustment to its strong order backlog totalled US$31.9 million.
Acute weakness in new orders from the PV and polysilicon segments underlines the current dire conditions at PV manufacturers' who are forced to preserve cash and tackle structural overcapacity.
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GTAT reported new orders for the second quarter of 2012 of only US$13.8 million and included US$0.4 million of polysilicon orders, US$8.5 million of PV orders and US$4.9 million in sapphire orders. The company had US$31.9 million of negative adjustments of backlog.
Revenue for the second quarter of 2012 was US$167.3 million, compared to US$353.9 million in the first quarter of 2012 and US$231.1 million in the second quarter of 2011. However, GTAT did beat guidance for the quarter which had been set within the range of US$105 million and US$125 million.
GTAT also reported lower operating margins for the second quarter of 14.7% of revenue, compared to 32.8% of revenue in the first quarter of 2012.
Gross profit was US$60.2 million, or 36%of revenue, compared to US$152.3 million, in the first quarter of 2012.
“We are pleased with our performance in the June quarter as we exceeded expectations, a notable accomplishment given the continued headwinds in the solar and LED markets that we serve,” said Tom Gutierrez, president and chief executive officer. “Our PV and sapphire businesses performed in line with our expectations while our polysilicon business out-performed with an incremental US$53 million of revenue recognized in the quarter. Our total backlog remains solid and our assessment of backlog risk remains unchanged from our analysis one quarter ago.”
Backlog update
With little comfort coming from new orders, GTAT’s order backlog continues to remain its main source of regular revenue, standing at nearly US$1.6 billion at the end of the second quarter, down from nearly US$1.8 billion.
The polysilicon segment remained strong at approximately US$758.6 million as well as in its sapphire segment, standing at US$697.5 million. However, the PV segment, predominantly DSS furnaces, stood at only US$137.8 million.
“In the short term, our PV exposure is limited with less than 10% of our backlog in this segment and a stated assumption that up to half of the existing backlog in this business is at risk and not considered in our revenue forecast going forward,” added Gutierrez during a conference call to discuss quarterly results.
Not surprisingly, management reflected on the risks associated to its industry leading backlog in a market in flux. The company said that it had approximately US$200 million of backlog at risk due to various factors such as some customer’s financial condition, though the risks were not a guarantee the orders would not eventually be fulfilled.
PV market recovery
Despite current market conditions in the PV sector, management were upbeat about its potential contribution to an industry recovery starting in 2013.
“The PV market is not purely demand driven,” noted Gutierrez in the call. “It is our view that the solar industry’s key challenge at this point is cost and that in order to realize the growth that is projected and restore profitability, in the face of diminishing subsidies and counter productive trade barriers, the industry must accelerate the development of technologies that will allow for profitability at significantly reduced total system costs of US$2.00 per watt or below.”
Gutierrez spent time highlighting that its proprietary HiCz N-type polysilicon production equipment would enable the cost-effective production of N-type wafers that would deliver cell designs that could achieve conversion efficiencies of 22% and above.
Being officially launched in the first-half of 2013, Gutierrez said that he expected orders for its HiCz product offering to kick-start from there.
Guidance for 2012
Management said that it continued to expect revenue in 2012 to be in the range of US$925 million to US$975 million, representing approximately 6% to 12% growth compared to the previous year.
Approximately, 45% of revenue is expected to come from its sapphire segment, 50% from polysilicon and the remaining 5% to 10% from PV.
However, the company lowered 2012 gross margin guidance to between 38% and 39%, down from 40%. Management noted that both its polysilicon and sapphire segments were on track to achieve 40% gross margin for the year, but PV margins were set to be down due competitive pricing strategy on DSS furnace pricing through the balance of the year.
The company said that it expected a recovery in margins from its PV segment upon the commercialization of its HiCz product offering.