Analyst: “Crisis” looms for solar cell, equipment suppliers

September 9, 2009 –  As many as half of today’s solar manufacturers won’t be around to see the end of 2010 thanks to a combination of consolidation and failures, and tough times await their equipment suppliers too, warns an industry analyst.

September 9, 2009 – As many as half of today’s solar manufacturers won’t be around to see the end of 2010 thanks to a combination of consolidation and failures, and tough times await their equipment suppliers too, warns an industry analyst.

Massive industry buildup and overcapacity have been punishing solar panel manufacturers, pushing inventory to 122 days vs. 71 days last year, and capacity utilization from 48% down to an anemic 27.9%, notes Robert Castellano, president of the Information Network. At the core of the problems are China’s solar panel manufacturers, who are adding 1GW of capacity, and dropping polysilicon-based PV prices to $1.80/Watt (vs. $4.05/W in 3Q08). Other manufacturers are being forced to compete on price by increasing their planned 2010 capacity levels and lower their own costs. Castellano projects this downward spiral will push average selling prices below $1/W in 2010 and even $0.50 in 2011. Caught in this whirlpool could be as many as 50% of today’s >200 solar manufacturers, he calculates, who are “mired in red ink with current selling prices above $2.00 per watt.”

This consolidation would send waves down the supply chain, and the $4B market for solar manufacturing equipment too will see consolidation and shutterings, Castellano notes. Much of the panelmakers’ “exuberant” capacity additions will end up sitting idle in factories as inventory days stretch out even further; as consolidation and closings commence, this equipment will be farmed off to secondary markets, which will cut into tool sales as well, he notes.

The other problem for suppliers is that financing/credit is still very tight for their solar manufacturing customers, and those most likely to come out of this climate will have an eye toward frugality. The largest solar manufacturers will survive, but so will many of the Chinese solar manufacturers “who prefer to purchase low-cost equipment from Taiwan […] as the Chinese government will subsidize their survival by stimulus packages, generous subsidies, free land, and cash for R&D,” he points out.

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