On the back of a small 3% decline in PV capital equipment spending in the second quarter of 2011, market research firm Solarbuzz believes the drop is the forerunner to a collapse in equipment spending by tier 2 and tier 3 module and cell suppliers. This is due to overcapacity in the market and an expectation of a wave of consolidation or ‘fall-out’ of smaller players. PV equipment spending for c-Si ingot-to-module and thin-film modules is forecast to decline sharply in 2012 to US$7.6 billion, down 47%, compared to a record level forecast of US$14.2 billion in 2011.
Coupled with market oversupply and strong inventory build through the second half of 2011, Solarbuzz expects the capacity-demand imbalance to usher in a significant cell manufacturer shakeout phase during 2012 to 2014.
Senior analyst at Solarbuzz, Finlay Colville cites the fall of the PV book-to-bill ratio below parity in the second quarter of 2011 as an inflection point, highlighting a slowdown in manufacturing capacity increases planned for 2012. He said that this is the first negative growth rate for PV equipment spending since the second quarter of 2009.
“Strong double-digit bookings and revenue growth through 2010 created a misleading picture for PV equipment suppliers. This was caused in part by aggressive expansion plans of second-tier c-Si manufacturers, and by the quantity of new thin-film fabs that were financed through the recent thin-film investment cycle. An artificial peak in equipment spending was created during 2010 and 2011, providing a short-term pull on equipment that was out-of-sync with the long-term requirements of the industry,” noted Colville.
According to Colville, it is the c-Si cell and module manufacturing equipment suppliers that will feel the full force of the collapse in capital spending. The market research firm is projecting quarter-on-quarter revenue declines of 21%, 12% and 37% forecast from the fourth quarter of 2011 through to the second-quarter of 2012, respectively.
However, Colville believes that only c-Si equipment suppliers with an established upstream product portfolio and strong market shares, such as GT Solar, Meyer Burger, Applied Materials and Jinggong would be ‘sheltered’ from the ‘drop-off’ in equipment bookings during the first half of 2011.
Solar cell overcapacity
Solar cell manufacturing capacity expansions across all tier categories will reach 51GW and 66GW of annualized capacity during 2011 and 2012, accumulated from over 300 manufacturers. Solarbuzz expects tier 1 cell manufacturers to weather the storm better than tier 2 and 3 players.
This is due to better cost-competitiveness and market-leading technology offered by the tier 1 suppliers, as they will account for 24GW and 34GW of capacity in 2011 and 2012 respectively, which Solarbuzz believes is more than sufficient to meet global demand over this time period.
The cell manufacturer shakeout is a key factor driving the scale of the revenue reset and the phasing of equipment spending during the 2012-2015 period.
Equipment spending from tier 2 and tier 3 PV manufacturers is forecast to decline 60% year-on-year in 2012. By 2015, tier 1 companies will account for more than 70% of all PV equipment spending, according to Solarbuzz.
“Tool suppliers will increasingly focus on securing preferred-supplier status with tier 1 manufacturers,” added Colville. “Additionally, competition will intensify ahead of the next spending upturn as suppliers from adjacent market segments (e.g. semiconductor and display) exploit the opportunity to enter the PV equipment supply-chain.”