by Staff Writers
Englewood CO (SPX) Nov 02, 2015
Due to rapid growth in solar installations in 2015, and forecasts for another record year for installations in 2016 IHS has flagged a potential solar wafer supply shortage throughout the entire supply chain. This concern comes despite recent announcements of large capacity expansions in diverse geographical locations from leading solar module suppliers.
Global installations are forecast to increase by 33 percent this year, to reach from 58.7 gigawatts (GW); growth will slow to 12 percent in 2016, with global solar PV demand reaching 65.5 GW. The increase in demand first affected module manufacturers, but it has progressively trickled upstream to cells and wafer producers; in [the third quarter (Q3) of this year], this increase in demand finally reached polysilicon producers.
Compared to the overall module industry, capacity expansions in the wafer industry are far more capital intensive, while margins for wafer manufacturers are currently much smaller than for most module manufacturers. This is one of the reasons wafer capacity expansion plans have been much more conservative than new module capacity announcements.
A second reason is that many large vertically integrated manufacturers have opted to differentiate their capacities for various products now, rather than having matched capacities for every node in their supply chain, as in previous years.
Many of these manufacturers have increased their in-house module capacity, while keeping a significantly lower wafer capacity. They are instead opting to purchase wafers from third-party companies, to reduce their capital expenditures and allow greater flexibility in their manufacturing capacity, in reaction to the fast-moving dynamics of the solar market.
The downstream market increasingly requires higher efficiency products. A large proportion of installations in 2015 require modules rated at 255 Watts and greater, which use high efficiency wafers. This requirement for high efficiency has further accelerated the consolidation of the wafer industry and the removal of most outdated capacity - coinciding with a period of high-demand from China and the United States, which has contributed to the potential short-term supply shortage.
The top 10 wafer producers in 2014 represented 60 percent of global production, and that share is forecast to remain flat in 2015. The average utilization rate of tier 1 wafer producers worldwide this year is forecast to exceed 90 percent; however, most of these producers will be sold out until the end of the year, and some will be sold out through the second quarter of 2016.
Total wafer production will reach 72.2 GW in 2016, which could be insufficient to meet demand. Assuming the top 10 producers maintain the same market share they held this year, a total production of 43 GW would be required from them in 2016; however, the total capacity of the top 10 producers will only reach 36 GW in 2015.
Just two companies plan to increase their capacity in 2016 - GCL by 1 GW and Longi by 500 MW; therefore, there would be still a 5.5 GW shortfall, even if the top 10 companies were to operate at full utilization. This gap could further increase with new policy developments, like the recent announcement from Chinese National Energy Administration (NEA) to add another 5.3 GW of photovoltaic (PV) capacity quota in 2015, which is to be connected to the grid by the end of June 2016.
As a result of strong market demand and insufficient supply, wafer ASPs have slowly started to rise since June. This price increase is significant, considering the declining prices for polysilicon - and costs of wafer production - this year.
+ Increasing demand for high efficiency solar modules from key downstream markets has led to intensive demand for high efficiency wafers
+ The current trade case's barriers to importing silicon to China could also aggravate the shortage for high efficiency wafers in 2016
+ The wafer industry's capacity expansions plans will not keep pace with the IHS forecast for demand growth in 2015 and 2016
+ Most tier-1 module and wafer suppliers have limited product availability, until the second quarter (Q2) of 2016, partly due to high demand from installations in China
+ In an environment of declining polysilicon prices, the average selling price (ASP) for multi-crystalline wafers has been gradually rising since June, which is improving wafer manufacturers' profit margins
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