After several years of aggressive PV module manufacturing capacity expansions, market research firm IMS Research reports global capacity will have reached an astonishing 50GW in 2011 especially in light of actual demand this year only growing by 19% to 23GW with an increased capacity of more than 54% this year.

With a range of market forecasts projecting only a small increase (IMS 10% growth in 2012) in end-user demand for 2012, IMS said that wafer, cell and module production capacity expansions would slow dramatically in response to the massive oversupply situation.

Sam Wilkinson, report author and senior research analyst at IMS Research commented, “A number of manufacturers have recently announced suspended production or closure of production facilities. As well as a number of high-profile bankruptcies, German and Norwegian manufacturers, Conergy and REC Group, have also announced that they will shut cell and wafer lines, whilst other suppliers such as Photowatt are reducing production.”

IMS Research said that they had discovered several other non-public module manufacturers had also made similar moves in cutting production.

Even with the massive overcapacity, the market research firm still expects capacity expansions in certain areas to continue but at a far slower rate than the industry has previously seen.

IMS is forecasting that PV module manufacturing capacity will increase by just 6% during the first half of 2012.

“In contrast to the rush towards vertical integration that we’ve observed for last few years, we are now seeing vertically-integrated module suppliers reduce or suspend production of cells and wafers,” added Wilkinson. “With the supply of these products exceeding demand by such a margin, top-tier branded cells and wafers are available at incredibly low prices and many suppliers are favouring purchasing cells and wafers on the spot market over manufacturing them internally.

This has been behind the recent series of polysilicon and wafer contract cancellations allowing PV manufacturers to take advantage of the spot markets and lower prices.

Not surprisingly, IMS noted that smaller Tier-3 Chinese suppliers are stopping production altogether.