The rise and rise of subcontracting in the solar manufacturing industry

The latest slew of announcements from various sectors of the solar manufacturing supply chain to establish partial or complete production outsourcing is no accident and a trend that will continue grow, according to iSuppli. The market research firm noted that the latest SunPower news of a contract manufacturing deal with major electronics manufacturing services firm Flextronics is only representative of the early stages of a boom, especially in module assembly outsourcing.

“iSuppli believes SunPower’s move is part of an emerging trend in the solar market that closely parallels the situation in the electronics market in the early 1990s,” said Greg Sheppard, chief research officer for iSuppli. “Faced with rapidly exploding demand, the need to produce products close to end markets and the requirement to obtain sufficient capital, electronic OEMs in the early 1990s turned to EMS companies like Flextronics for help. This led to a massive boom in electronics outsourcing and explosive growth in the EMS business. In the early 2010s, a new EMS boom is starting up, this time in the solar panel business.”

According to iSuppli, contract manufacturers will manufacture 1.1GW worth of solar panels in 2010, up 200% from 369MW in 2009. One major factor causing solar-panel makers to turn to EMS providers is the rapid expansion of the market and limited funds to expand internal capacity. iSuppli recently updated its global solar installations forecast to a significant new level of 13.6GW in 2010, an increase of 93.6% from 7.0GW in 2009.

“Panel production conducted close to the end-market can minimize logistics costs associated with shipping, breakage and inventory,” Sheppard observed. “In a market where every penny per megawatt counts, this can help tremendously.”