Solar shakeout: GT Advanced Technologies to exit DSS furnace business

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Specialist PV equipment supplier, GT Advanced Technologies (GTAT) said it would exit the Directional Solidification System (DSS) market altogether due to market conditions that are not expected to recover sufficiently to justify continued involvement in the sector.

GTAT, which is one of the largest PV equipment suppliers and clear leader in the ingot growth systems market would remove the majority of its DSS furnace equipment from its backlog and take a charge of between US$80 – US$90 million in Q4 2012 for inventory write down on DDS equipment and parts. The total write down of its DSS operations were said to be approximately US140 million.

However, management noted in a conference call to discuss 2013 guidance that it would continue to support customers with exiting tools.

The company had announced in late October that it would undergo a major restructuring due to market conditions in its core markets of solar, polysilicon and sapphire. The company had said then that it would reduce its workforce by approximately 25% and consolidate existing business units into a single ‘Crystal Growth Systems’ (CGS) group.

“It is comforting finally to hear a PV equipment supplier acknowledge the backlog issue. Many have buried debookings in other reporting metrics, or have been silent completely on this issue. Some choose to report new order intake, and sideline the whole bookings issue,” commented Finlay Colville, vice president of NPD Solarbuzz. “But perhaps the biggest question from the DSS bookings reset from GTAT is not related to GTAT activities, but to Meyer Burger. The backlog from Meyer Burger at the end of Q2’12 was still way above industry norms, and many of the customers that GTAT had on backlog for DSS furnaces would have been wire saw customers for Meyer Burger. With the prospects for wire saw deliveries in 2013 similar to DSS or Cz ingot tools, the question is what Meyer Burger will choose to keep on their books, and the risk that should be assigned to pending wire saw deliveries based on orders received from customers back in 2011.”

Order backlog

 

As a result of removing the DSS systems from its backlog, GTAT said that the total its total order backlog stood at US$1.2 billion, down from US$1.5 billion at the end of the third quarter. GTAT had also made a US$56.3 million negative adjustment to its order backlog in the quarter for a contract termination from a Chinese polysilicon start-up.

At the end of Q3 2012, GTAT’s order backlog had included approximately US$617.7 million in the polysilicon orders, US$141.4 million in the PV and US$717.6 million in the sapphire equipment orders.

2013 revenue guidance

Management said in the latest conference call that it expected revenue in 2013 to be in the range of US$500 – US$600 million. However, in respect to PV segment sales these are only expected to account for 1% of sales. Polysilicon segment sales were expected to account of 42% of sales in 2013.

Quasi-mono future?

GTAT’s exit from the DSS market puts further doubt on the viability of the PV industry migrating to quasi-mono wafers, which was seen by GTAT as a key driver of future furnace sales and upgrades from the struggling wafering sector.

Gloomy outlook

As far as Tom Gutierrez, CEO of GTAT was concerned in the call, little if any capital is being made available to the PV sector in China, its major market, especially not for capacity expansions. He noted in the call that what capital was being offered to PV manufacturers focused on working capital only that secured jobs, with little possibility in 2013 that capital would be allocated for new technology, despite the need to reduce manufacturing costs still further.

The propping –up of Chinese PV companies would result in less consolidation, prolonging the structural overcapacity within the industry instead of many firms exiting the sector due to bankruptcy.

Overall, Gutierrez painted a rather dark and gloomy outlook for the PV sector for 2013, while speculating that China would impose duties on imported polysilicon to support domestic producers and that the EU is increasingly believed to preparing penalties and tariffs on imported Chinese modules. 

“We believe that many PV players are facing bankruptcy as there is, in our opinion, no identifiable path to improved profitability absent adoption of new technology that drives costs down well below current levels,” noted Gutierrez.

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