High expectations of Taiwanese solar cell companies for 2010 shipments now seem likely to bear out, and the move of new entrants with deep tech expertise and pockets will help improve competitiveness through consolidation, according to an analyst.
April 16, 2010 – High expectations of Taiwanese solar cell companies for 2010 shipments now seem likely to bear out, and the move of new entrants with deep tech expertise and pockets will help improve competitiveness through consolidation, according to an analyst.
After reporting strong shipments in 4Q09, Taiwanese solar cell makers projected 2.7GWp shipments in 2010, twice their 2009 levels, while expanding capacity by 82% to 3.8GWp. Despite initial skepticism at such aggressive targets — which would hike Taiwan’s global market share from 19% to 27% in just a year — Credit Suisse analyst Darryl Cheng says those targets look much more realistic now.
Moreover, several domestic technology groups — from the chip sector, TSMC and UMC; from TFT-LCDs, AUO and Chi Mei Innolux; and downstream, Hon Hai — are prepping entries into the solar sector, several through the M&A path (e.g., AUO investing in Japan’s M.Setek, TSMC investing in Motech). This is an indicator not only of the sector’s perceived viability, but also will usher in a new wave of intense competition that will threaten domestic standalone solar energy companies, with more consolidation and M&A likely to come.
“One of the reasons behind Taiwanese solar cell makers’ aggressive capacity expansion is that they are desperate to build scale of economy as soon as they can, in order to become cost competitive enough prior to the arrival of leading tech companies,” Cheng writes.
On the flip side, that influx and consolidation will help Taiwan firms better compete against Chinese peers who are more vertically integrated and have direct access to end market demand, he notes.
Pulling back to a global perspective, Cheng has raised his 2010 demand estimate to 12.7GWp from 10GWp; that’s nearly double the 6.7GWp tracked in 2009. Three keys to his new outlook:
- Demand is strong, outside Germany — in particular Japan, the US, elsewhere in Europe (Czech Republic, Belgium, Italy), and Australia.
- The German FiT decline won’t have as much of a negative impact on 3Q10 as previously thought.
- Stronger than expected demand in many countries means that price elasticity isn’t being fully recognized.
Cheng lays out the case for demand in some key regions:
- Spain: 900MWp (>800% y/y growth!). Projects deferred from the 2009 quota will get completed in 1H10, on top of this year’s quota.
- Italy: 1.5GWp (142% y/y), thanks to additional FiT cuts coming in 2011, attractive economics, and a large increase in the pipeline for ground mounted systems.
- The US: 900MWp (86% y/y), helped by “price elasticity of demand and marketing efforts by solar panel companies.”
- Japan: 950MWp (99% y/y). Two incentives are key here: a 10% rebate for <¥700/W rooftop systems, and a net FiT of ¥48/kWh for excess electricity coming from solar systems.
- China: 569MWp (174% y/y). China’s expected demand is actually lower (earlier outlook was for 712MWp), due to delays in national FiTs.