Hopes that demand for solar energy equipment in Germany would rise significantly were dashed and led to disappointing third-quarter earnings, reported several Chinese manufacturers on Tuesday. The market will continue to see a bumper crop of solar panels in the next quarter or two, along with more mergers or potential bankruptcies.

Suntech Power, Hanwha SolarOne, JA Solar, Canadian Solar and LDK Solar all posted losses for the third quarter and many included inventory write-offs in their financial statements because their goods have lost values as a result of the rapidly declining prices in the market. The story is the same for Trina Solar, who reported third-quarter losses a day earlier. The financial pictures given by the companies now follow a now well-known tale of a market bedeviled by a trifecta of oversupply, collapsing prices and tightened project finances throughout this year.

Many companies have closed factories, reduced production or filed bankruptcies. Solyndra, SpectraWatt and Evergreen Solar filed for bankruptcies within weeks of each other this year. Energy Conversion Devices suspended manufacturing and planned to lay off 500 workers by the end of this year. Companies such as Renewable Energy Corp., SolarWorld, Solon and Q-Cells have cut back production or shuttered factories.

“To recalibrate supply and demand, we believe the industry needs to go through a process of calculation, liquidation and then consolidation. The industry simply can’t support 300-plus cell and module manufacturers,” said Suntech CEO, Zhengrong Shi, during a conference call with analysts Tuesday.

In fact, by Suntech’s own estimate, the market share of top six solar cell/module suppliers increased from 26 percent in the second quarter of 2010 to 55 percent in the second quarter of 2011, Shi said. Suntech, the largest solar cell and panel maker in China (if not the world), expects to start making a profit again by the middle of 2012, he added.

Suntech posted $809.9 million in third-quarter revenue, down 2.5 percent from the second quarter but a boost of 8.9 percent year over year. Product shipment grew 16 percent from the second quarter and 36 percent from the third quarter of 2010. Net losses reached $116.4 million, or $0.64 per share, during the third quarter, compared with a net loss of $259.5 million ($1.44 per share) in the second quarter and a net income of $33.1 million ($0.18 per share) in the third quarter last year.

Suntech and other manufacturers have emphasized their efforts to cut costs, improve their products’ performance, adjust their supply with demand and convince customers to stick with them. Suntech, Hanwha and JinkoSolar both had expected sales to pick up in Germany during the third quarter, but the demand fell short of their expectations.

LDK, a polysilicon and wafer producer who added cell and panel manufacturing to its repertoire in recent years, has been pummeled by the market forces and was recently dropped from coverage by Wells Fargo, whose analyst said he wasn’t convinced that LDK’s shares are “a viable investment.”

It posted $471.9 million in sales for third quarter, down six percent from the first quarter and 32 percent from the year-ago period. Losses widened to $114.5 million, of $0.87 per share, for the third quarter, compared with a net loss of $87.7 million ( $0.62 per share) in the second quarter and $93.4 million ($0.71 per share) in the third quarter of 2010.

Europe has been the epicenter of the market collapse. Delays by Italian and French governments to set new levels of feed-in tariffs — which set solar pricing to guarantee returns for investors — earlier this year prompted a pause in installations and delayed buying decisions. Germany lowered feed-in tariffs as planned, but the cuts were significant and drew predictions that the market would install fewer megawatts than it did during 2010, when it added 7-8 megawatts and held on to the claim of being the No. 1 market in the world.

The uncertainties surrounding policies in Italy and France — and the lowered demand expected in Germany — caused a pile up of solar panels, and prices began to drop faster than expected, First Solar’s then CEO Rob Gillette said back in May this year.

A few months back, analysts said solar panel prices had already dropped 30-40 percent this year. Suntech said the average selling price of its products fell 16 percent from the second to the third quarter, and it expects a decline in the "low teens" from the third to the fourth quarter. 

But Europe will remain the largest market, so the fate of feed-in tariffs in various countries and their political and financial health will continue to shape the growth of the solar industry. Germany already plans to reduce its feed-in tariffs by 15 percent in the coming new year. European countries also have been structuring their incentives to favor smaller, rooftop installations.  

But solar companies also have begun to peg countries such as the United States, China and India as the next fast-growing markets. India’s own national solar policy, coupled with financial support from the Export-Import Bank of the United States has issued loans to Indian companies to install solar panels made by American companies such as First Solar and Abound Solar. The Overseas Private Investment Corps., which is also part of the U.S. government, has issued big loans to SunEdison to develop projects in India.