Spending on solar PV equipment for both c-Si and thin-film panels is throttling back even as revenues soar, thanks to "ambitious" Tier 2 and Tier 3 manufacturers' expansions in the past six quarters, and will dent both 2H11 tool sales and 2012 outlooks, according to Solarbuzz.

July 12, 2011 - Spending on solar PV equipment for both c-Si (ingot-to-module) and thin-film panels will be throttled back in 2011 even as revenues soar, thanks to "ambitious" Tier 2 and Tier 3 manufacturers' expansions in the past six quarters, and will dent both 2H11 tool sales and 2012 outlooks, according to Solarbuzz.

As a result of the projected -47% Y/Y decline to $14.2B, look for market oversupply and a strong inventory build in 2H11, and ultimately a "significant cell manufacturer shakeout" from 2012-2014.

PV equipment spending actually showed its inflection point in 2Q11 with a -3% decline to $3.6B, the first slip in two years (2Q09); the book-to-bill ratio similarly dipped below the 1.0 parity mark (fewer orders coming in than sales going out), down from a high of 1.74 just a year ago -- which in fact heralded a coming digestion period. The big numbers throughout 2010 were really "a misleading picture for PV equipment suppliers," notes Solarbuzz senior analyst Finlay Colville. Those Tier -2 c-Si makers with starry goals were joined by a host of new thin-film fabs financed with a recent investment cycle, creating "an artificial peak in equipment spending during 2010-2011" and a short-term run on equipment "that was out of sync with the long-term requirements of the industry."

Who will be hardest hit in this PV equipment spending downturn? c-Si cell/module tool suppliers can expect quarterly declines of -21%, -12%, and -37% from 4Q11-2Q12, with thin-film spending following a similar path as another TF investment phase closes during 2H11. Only those c-Si equipment suppliers with established upstream footing -- GT Solar, Meyer Burger, Applied Materials, Jinggong -- were spared the 1H11 dropoff.

As equipment spending heads south, expansions across all tiers (>300 manufacturers) are poised to add a great deal of annualized capacity over the next two years: 51GW in 2011, 66GW in 2012. But within that ramp-up, Tier 1 makers alone will supply 24GW and 34GW in 2011-2012, which is all the global market really needs, notes Solarbuzz. Thus, it's time for a cell manufacturer shakeout, to push us back to a reset in revenue and equipment spending. Tier 2-3 PV manufacturers will take this one on the chin, with 60% of their spending vanishing in 2012; by 2015 more than two-thirds (70%) of all PV equipment spending will come from Tier 1 players, expects Colville. In the meantime, look for continued inroads from suppliers in adjacent market segments (e.g. semiconductors and display) seeking higher-growth markets.



PV equipment spending forecast scenarios in US $M. (Source: Solarbuzz)