As leading CIGS manufacturers and equipment suppliers in Europe prepare for quarterly and half-year reporting during August, the impact of Veeco’s parting comments may force a closer examination of existing market-share adoption rates and business-unit operating margins. The company’s rationale for exiting the CIGS systems business was based on its assessment that “the timeframe and cost to commercialization [of CIGS tooling] are not acceptable,” coupled with “the lower-than-expected end-market acceptance for CIGS technology.”
Rather than speculating whether Veeco’s prepared remarks will—or will not—have any tangible effect on investor confidence levels across the CIGS community as a whole, it is perhaps more prudent to revisit the fortunes of other PV equipment suppliers that have been championing CIGS in support of dedicated product portfolios offered to the market.
Equipment suppliers within Europe have historically benefitted from strong CIGS (and thin-film) research activities, often through regionally funded collaborations with leading PV research labs. Extending back over two decades, this enabled tool makers such as Centrotherm (FHR Anlagenbau), Von Ardenne, and (recently) Singulus to develop production tools as their industrial partners accessed funding to construct pilot lines followed by initial mass-production fabs.
The collective opportunity arising from this group of European CIGS proponents (including Avancis, Solibro/Q-Cells, Sulfurcell/Soltecture, and Würth Solar) created considerable hope for European PV tool suppliers. As the first thin-film spending cycle (2007-2009) drew to a close, Centrotherm was sufficiently encouraged to release a turnkey CIGS production line offering. Interestingly, the only uptake for the line has been with Sunshine PV in Taiwan, not from any of the aspiring CIGS manufacturers within Europe.
The other tool supplier in Europe to realign an internal strategy based on the domestic pull for CIGS process tools was Singulus, perhaps the one company to have benefited most (from a bookings perspective) from the CIGS events of the past 12 months. At the end of Q1’2011, Singulus’ CIGS product portfolio was estimated to account for more than 70% of its record US$80-million-plus PV-specific backlog.
The onset of the second thin-film funding cycle (2010-2012) then offered European toolmakers a further served market for tools already developed and placed within the early production lines. The pull this time was not restricted to Europe however, as the Asian market opened up, typified by Hyundai’s joint-venture activities with Avancis for a 100MW-scale CIGS fab in Korea.
The most noticeable development from the equipment supply chain during the second cycle has been Manz’s decision to release a turnkey CIGS production line. This is a high-risk strategy, requiring the company to invest resources to develop in-house deposition tooling to compliment its thin-film laser patterning know-how previously adopted by virtue of AMAT’s Sunfab customer base prior to 2010. With success strongly tied to the prospects of additional fab expansion at Manz’s CIGS-collaborator, Würth Solar, pressure is mounting from the equity analyst community on Manz to reach break-even status for internal CIGS development activities—a direct analogy to the challenges that Veeco faced in recent times, culminating in the announcement by that company to terminate its CIGS systems business last week.
But these factors do not mean we have seen the final chapter for European CIGS tool suppliers. Just last week, Singulus was quick to highlight participation in the latest regionally-funded CIGS project seeking to create a value-added proposition for European CIGS tool-makers and manufacturers alike—the “CIS Cluster Tool” program, which includes Avancis and Singulus.
Tangible benefits from this latest homegrown, cross-party alliance will not be directly measureable for some time. As alluded to by the Veeco experience, the worry here is that the benchmark for PV manufacturing may have shifted considerably by then, driven by Chinese PV leaders aggressively repositioning cost metrics and market entry requirements across the industry as a whole. The days of the CIGS community aspiring simply to $1/W manufacturing costs as a means of gaining PV market share are rapidly becoming a legacy target only, and one which much of the thin-film PV manufacturing community has yet to fully absorb.
Equipment manufacturers across the Asia-Pacific region have also been hedging their bets on CIGS commercialization, as companies such as TSMC and Solar Frontier unveiled announcements over the past few years. An eager group of local tool suppliers—having been sidelined somewhat by the limited success of amorphous-silicon thin-film manufacturers during 2007-2009—then identified CIGS as an adjacent thin-film PV tool segment in which they could participate. While various Japanese tool suppliers were provided some short-term revenue gains through Solar Frontier’s Miyazaki fab build during 2010-2011, prospect lists for CIGS equipment suppliers have also largely dried up within Asia.
Ultimately, the problem facing CIGS equipment suppliers stems from the lack of any appreciable market share (or market pull) from their respective customers. This creates the undesirable situation for tool suppliers where repeat business is not contingent on downstream end-market demand, but on the prospects of further external investments into CIGS manufacturing—and specifically across their subset of customized tool adopters.
The fragility of this business environment is perhaps most clearly highlighted in the accompanying figure. Here, the two thin-film investment cycles are clear to see: each cycle is driven by a combination of federal grants/loans underpinned by local job creation initiatives or corporate (wildcard) investments to diversify future revenue streams. The lower (dashed) line however captures the ultimate return on investment (ROI) from CIGS production equipment so far – statistics which simply quantify the pain felt across the CIGS manufacturing community in recent years.
Beyond 2012, CIGS equipment manufacturers therefore are likely to be in a holding pattern, awaiting market adoption from the likes of Solibro or Solar Frontier, or hoping for a third thin-film investment phase that will look kindly on a new group of CIGS hopefuls. However, with the level of investments during 2010-2011, coupled with the number of CIGS fabs now capable of producing in excess of 100MW annually, the prospects for repeat tool business may turn out to be greater than they were during 2009-2010.