Planned Production Revised Downward; Market Growth Shifting Away from Europe, NPD Solarbuzz Reports
San Francisco, Calif., December 19, 2011—Financial challenges are forcing solar photovoltaic (PV) companies to shift focus from seeking market share to instead prioritizing a return to profitability, finds NPD Solarbuzz’s latest Solarbuzz Quarterly report issued today. Global demand is projected to grow 6% in 2012, so market declines in Europe will be offset by 43% growth outside that region. Therefore, solar companies will face the challenge of re-building margins during a period of increasing diversity in end solar market mix.
In 2012, the top priority of PV companies will be to improve their financial position after losses across the industry in 2011 that were caused by over-production, excess inventories, and collapsing market prices. Cell manufacturers are poised to hold production flat in 2012, but Q1’12 is still forecast to drop 5% Q/Q as manufacturers manage inventory during seasonal weakness.
As a first step on this road, manufacturers have cut 4.9 GW from their previous goal of 28.2 GW of module shipments in 2011. With the industry now projected to benefit from a modest 12% increase in 2011 demand over previous estimates, global module inventories will be reduced to 7.3 GW by year-end, down from NPD Solarbuzz’s previous forecast of 8.6 GW.
Figure 1: Solar PV Manufacturer Module Shipments (GW)
Source: NPD Solarbuzz Quarterly report
Faster than expected growth in China and the United Kingdom helped to raise the latest 2011 global PV market forecast to 23.6 GW, up 22% Y/Y. The Chinese market development comes at an opportune time for domestic manufacturers, as the environment in the US market has become more uncertain since SolarWorld filed anti-dumping charges with the US Department of Commerce and International Trade Commission.
Downstream companies, particularly in Europe, acted aggressively in Q3’11 to cut inventories, making a reduction of 19 inventory days, with a further 45-day drop projected by the end of Q4’11. However, the dramatic 17% reduction in module prices in Q3’11 contributed to inventory write-offs of over $300 million in the quarter.
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Gross margins for vertically-integrated Chinese tier 1 cell and module manufacturers decreased two percentage points Q/Q in Q3’11, while Western and Japanese manufacturers dealt with negative margins for the second quarter in a row. Margins for Chinese tier 2 and other Asian producers tracked by NPD Solarbuzz are also negative now. The 15% cut in German tariffs on January 1, 2012 all but ensures further reductions in module prices in the seasonally weak first quarter. Polysilicon prices that had held up until Q3’11 have now undergone a dramatic reduction as spot prices have taken their toll on contract pricing.
“While market share growth was the predominant corporate strategy at the beginning of the year, companies must now improve their financial viability, or they risk not being able to participate in the strong growth expected by grid parity now being established in key markets,” said Craig Stevens, President of NPD Solarbuzz.