Market research firm IHS has countered recent reports from rival firm, NPD Solarbuzz, as to the next direction PV manufacturers will take, which could have a significant impact on equipment and materials suppliers to the sector.
According to the latest edition of IHS’ ‘PV Manufacturing & Capital Spending Tool’ report, there is little likelihood of PV manufacturers moving to one of the key semiconductor industry business models, known as ‘fabless’.
“Some analysts have claimed that top Chinese and Japanese module makers are utilising excess manufacturing resources from second- and third-tier manufacturers, expanding their available capacity and thus staving off any requirement for new capital spending,” said Jon Campos, solar analyst at IHS.
“Such a fabless or asset-lite strategy may have worked in other industries, where some companies with minimal or no manufacturing assets—such as Qualcomm Inc. of California—have achieved great success. However, in the PV market, where manufacturing expertise is more proprietary than in other areas, the fabless model is unlikely to be adopted on a large scale. This means that leading solar suppliers must make capital investments as demand rises in the coming years—even if extra capacity is available from other PV industry suppliers.”
Indeed, the fabless business model, adopted by Upsolar and more recently, SunEdison, is not expected to experience any notable growth beyond these companies, according to several recent blogs and reports from NPD Solarbuzz.
The key growth vehicle, however, which has seen the likes of Yingli Green guide PV module shipments to as much as 1GW ahead of internal nameplate capacity in 2013, is due to reliance on third-party module manufacturers in China.
Referred to as ‘fab-lite’ in the semiconductor industry, companies retain a certain level of internal manufacturing capacity while also outsourcing production to offset for a given time significant capital expenditure requirements, notably during a market upturn after a period of oversupply.
Yingli Green is not alone in adopting the fab-lite model in 2013; indeed the likes of ReneSola have outsourced production to European third-parties to bypass the EU anti-dumping threat, while also enabling the company to run at full capacity to meet demand in faster growing markets in Japan and China.
Chinese companies that sell modules to the US have also increasingly relied on Taiwanese solar cell producers for cells used in modules shipped to the US to avoid anti-dumping charges on Chinese imported cells.
Indeed, several German-based module manufacturers, for example Conergy and Solar Fabrik, have opted to outsource wafer and cell production, respectively.
Recently, due to the booming Japanese market, companies such as Sharp have secured third-party module supplies under contract with Chinese tier 2 suppliers, supporting the growth in fab-lite adoption, while withholding new capital spending in an effort to meet demand and recoup losses made over the last two-years.
Under these conditions, NPD Solarbuzz has highlighted that despite the majority of tier 1 PV manufacturers running at or close to full-capacity the next wave of capacity expansions is expected to be delayed until excess available capacity is also fully-utilised. The market research firm recently noted that the ‘effective capacity’ globally was around 45GW. Global PV demand in 2013 is expected to be in the range of 35 -37GW.
“The proposition that tier 1 Chinese manufacturers would come to rely on capacity from tier 2 and tier 3 suppliers is highly unlikely,” added Mike Sheppard, senior PV analyst at IHS. “The top players wouldn’t give away the fruits of their efforts during the past two years to improve their technology, quality and bankability with financiers or owners. This is especially true as these companies attempt to improve their positioning relative to Western players.”
However, as NPD Solarbuzz has also highlighted, mainstream bankable PV modules, excluding the likes of SunPower and Panasonic, the majority of manufacturers have used c-Si equipment from a select number of leading suppliers, enabling an almost de-facto commonality for critical processing steps such as metallisation and thermal diffusion. This has enabled the likes of Yingli Green and others to outsource without the need to specify specific in-house cell characteristics or provide third-parties with unique intellectual property.
Indeed, even SunPower has adopted a joint venture approach to manufacturing its proprietary solar cell technology to lower capital costs, while Hanwha Q Cells and Hanwha SolarOne are also sharing manufacturing IP.
As far as IHS is concerned, it is reiterating its CapEx forecast for 2014 at around US$3.0 billion globally, a 30% increase over 2013 and the first time that expenditures would have risen since 2011.
There have also been signs of new technology buys and small-scale module assembly capacity additions, according to reports noted by IHS.
However, no tier 1 PV manufacturer has guided any major capacity expansions for 2013 or given any indication yet that any large-scale expansions are planned in 2014.