by Staff Writers
El Segundo, CA (SPX) Jan 10, 2013
Amid rapidly falling prices, mounting losses and massive operational costs, the upstream solar photovoltaic (PV) supply chain is undergoing major consolidation, with the number of companies participating in the market expected to plunge by 70 percent this year.
Worldwide, the total number of companies participating directly in the manufacturing of PV solar panels, from polysilicon manufacturing through module assembly, is set to fall to approximately 150 in 2013, down from about 500 in 2012, according to the IHS Solar service at information and analytics provider IHS. This compares to about 650 in 2011 and 750 in 2010, as presented in the figure attached.
"It would be a major understatement to say that consolidation is occurring in the PV supply chain this year," said Mike Sheppard, senior photovoltaics analyst with IHS.
"Most upstream PV supply operations will simply cease to exist, rather than being acquired by other companies. Most of these suppliers actually have already stopped production-and will never restart."
Finally, smaller thin-film cell providers likewise will face low sales and limited market sizes, putting them on the endangered list.
The disintegration of integration
Government subsidies could be an option to keep integrated suppliers operating. However, while IHS believes that some supplier may be propped up by the Chinese government in 2013, the majority will dissolve.
Second-tier survival tactics
For second-tier module manufacturers, the key to surviving in 2013 will be establishing and maintaining strong relationships with downstream players in the emerging markets. Second-tier manufacturers must move faster than those in the top tier in order to grab mindshare early.
Flexible business models, with consistent outsourcing, will be needed to succeed. Because contract manufacturers require certain levels of business to remain profitable, securing stable relationships with these companies is also critical for second-tier module manufacturers.
Second-tier module makers also must be flexible enough to capitalize on the volatility in high-growth markets, which consist mostly of small and midsized engineering, procurement and construction (EPC) companies. These companies initially have less allegiance to established top-tier manufacturers.
But as their experience in this area grows, price becomes a primary factor, favoring low-cost producers. This is already true in markets like India, and is becoming a factor in Latin American countries such as Chile.
Thin prospects for thin film?
If thin-film pricing does not decline at the same rate as c-Si, the technology will be relegated to select niche markets that generate scant demand.
Consolidation and reduction in a supply chain results in capacity being taken offline, often benefiting the remaining players in a market.
But given the weak conditions in today's PV market, there is no guarantee that the supply-chain shakeout will help surviving suppliers in 2013-or even make it less likely that they will fail.
All About Solar Energy at SolarDaily.com
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