Inverter manufacturer SolarEdge posted record revenues from its solar division in Q3 2021 despite a COVID-related shutdown at its manufacturing facility in Vietnam impacting its ability to meet demand.
SolarEdge confirmed total revenues for Q3 2021 of US$526.4 million, up 10% sequentially and a 56% increase on its total revenue figure in Q3 2020, while also representative of a new quarterly revenue record for the company. Solar-related revenues also rose to a new record, up 11% sequentially and 55% year-on-year to US$476.8 million – towards the top end of its guidance for the period.
While the gross margin of its solar division slipped slightly on Q2 2021 to 36.6%, SolarEdge noted it shipped 1.9GWac of solar inverters during the reporting period despite turbulence in its supply chain caused by a shutdown at its Vietnam manufacturing facility, which produced 20 – 25% of its total inverter output.
SolarEdge initially revealed in August that its Vietnam facility had been ordered to shutter as a result of COVID-related lockdowns in the country, however the shutdown continued for far longer than initially expected, going on to last some 12 weeks. The factory eventually reopened last month and is now expected to ramp back up to full capacity by mid-November, however the shutdown has created a gap in the supply of inverter products for Q4 that will take time to replenish, and at a higher cost incurred as a result of an escalation of supply chain headwinds, chief executive Zvi Lando said.
Lead times for inverters are currently between 12 – 14 weeks, Lando noted.
The shutdown of its facility in Vietnam prompted SolarEdge to reallocate manufacturing capacity to other locations, most notably China. Lando said the company incurred further costs in shipping components from Vietnam to China, and the resulting shift in manufacturing capacity to China resulted in a greater proportion of SolarEdge’s products originating from jurisdictions where it incurred import tariffs. During the quarter, some 47% of SolarEdge’s products were shipped from nations subject to import tariffs – namely China – in comparison to just 12% in Q2.
Lando further added that the disruption caused by the Vietnam facility shutdown had prompted the company to accelerate plans for an expansion of its manufacturing capacity in Mexico. That new facility is expected to ship its first inverters in H1 2022, and Lando revealed on a conference call with analysts that it’s SolarEdge’s intent that the Mexico facility caters for the majority, if not all, of demand from the US solar market.
The impacts of the Vietnam factory closure are to last throughout Q4, with SolarEdge issuing guidance that its gross margin for its solar division will fall to between 31 – 34%. Lando stressed this tightening of margins would be temporary, and told analysts during a conference call yesterday that the company had so far resisted price increases to recover its margin.
As supply chain volatility has escalated, many solar component providers have increased prices in recent quarters. PV module prices are estimated to have risen by upwards of 25% this year, while last week microinverter supplier Enphase Energy said it was planning another price rise for later this month – its third this year – to reflect higher input costs.
Despite the impact of supply chain headwinds on the solar industry globally, SolarEdge issued healthy guidance for Q4, forecasting solar revenues within a range of US$490 – 515 million. Lando stressed that it had already received orders for around 4GWac of inverters to be delivered in Q4 2021 and Q1 2022, with further orders still to come in.