According to a new study by IMS Research, PV component profits are expected to fall by 70% year-on-year in Q4 2011. Furthermore, an examination of the polysilicon, wafer, cell, module and inverter industries led the research organization to conclude that the continuation of dropping prices in 2011 will cause gross margins for the whole PV industry to drop 17% to 12.4% in Q4.
However, despite the dropping profits and gross margins year-over-year, IMS noted that sequentially gross margins and profits would actually see an increase since most of the damage to margins occurred earlier this year. Ash Sharma, senior research director for PV commented, “Gross margins will stabilize somewhat in Q4’11; in fact total industry profit will increase by 10% compared with the third quarter. However, margins will of course be considerably lower than a year ago and industry profit will be 70% lower in the fourth quarter compared with the last year”.
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IMS additionally noted that although PV module suppliers were hard hit with the severe fall of prices this year, they still hold most of the PV component profits in the industry. “The rapid fall in module pricing and the demise of many if its suppliers has been well documented. However it’s important to note that these same suppliers will still generate more than 50% of industry profits in 2011”, Sharma advised.
The IMS report acknowledged that out of all the players in the PV module supply chain, polysilicon suppliers are experiencing some of the highest margins, even though their profits are less than half of those produced by module suppliers. “Although polysilicon suppliers had average gross margins above 30% in 2011, which was more than double that of module suppliers, polysilicon suppliers will only generate 19% of industry profits due to their relatively lower revenues”, added Sharma.
In review of the five industries that were researched, IMS found that inverter suppliers had the highest gross margins in spite of oversupply and price reduction woes that the industry has endured. IMS noted that inverter suppliers would spawn 17% of the industry’s total profits in 2011.
“One reason for the inverter industry’s relatively robust margins is that Chinese suppliers have so far failed to gain a significant foothold in this market. Unlike the module market, in which Chinese suppliers account for roughly half of all shipments and revenues, Chinese-branded inverters accounted for just 3% of industry revenues in 2010. This is likely to change however now that the domestic market in China is starting to take off. More than 1.5GW will be installed in China this year and the vast majority of projects will be using Chinese inverters”, Sharma concluded.
The report concluded by stating that even though Q4 margins will see a slight growth, the industry’s margins will more than likely continue to drop in 2012 and will reach only 10.4% in Q1 2012.