Analyst: Why AMAT’s thin-film Si fears are exaggerated

Recent bad news surrounding Applied Materials’ SunFab turnkey solar technology and some of its customers have put industry watchers in a bearish mind about thin-film silicon solar technology in general — but that’s a bad rap, says one analyst.

May 11, 2010 – Recent bad news surrounding Applied Materials’ SunFab turnkey solar technology and some of its customers have put industry watchers in a bearish mind about thin-film silicon solar technology in general — but that’s a bad rap, says one analyst.

The news hasn’t been good lately about AMAT’s SunFab line: new orders have plummeted, existing deals have been scaled back, clients are pulling back in the face of module oversupplies. Rumors have been circulating that the company may be heading for the exits in the TF Si business — including comments from none other than CEO Mike Splinter suggesting it’s time the unit swims (or sinks) on its own merits.

As with many other thin-film solar technologies, times were good when silicon was scarce and prices were high. But with contract prices plunging past $75/kg on their way to possibly $45/kg, AMAT’s x-Si module prices of $1.95/W can’t keep up with the ~$1.50/W (COGS $1.05) or lower for silicon.

Nevertheless, “the current desire to bury the technology is as much of an overreaction as was the initial hype,” claims Lux Research analyst Ted Sullivan, in a research note. ” There is significant room for TF-Si in the long-term technology mix — maybe just not AMAT’s variant.” The firm pegs it as a 2.4GW market by 2015, built “on the backs” of not just AMAT but firms including Sharp and Kaneka, which are still investing heavily. Sharp has a 1GW facility in Sakai with on-site silane and glass manufacturing, and started 180MW initial production (with JV equipment partner Tokyo Electron, which ironically is No.2 in semiconductor tools behind AMAT). Meanwhile, Oerlikon has pushed to >10% module efficiency with its TF-Si technology, vs. AMAT’s 9.5%.

Nor are the problems with AMAT SunFab adopters a big surprise. “Since we estimate SunFab’s TF-Si panel manufacturing costs at $1.40/W, including depreciation, $45/kg polysilicon would wipe out smaller-scale AMAT clients,” Lux notes. In this category would be recently-insolvent German PV module maker Sunfilm, and there have been rumors of others in similar straits; “we have heard of similar troubles with other AMAT clients and expect announcements of bankruptcy or production shutdowns soon [and] a few have quietly happened already,” Sullivan notes.

Nonetheless, AMAT’s x-Si time may not be up just yet, he suggests. The company may have “overreached with SunFab,” but can tap its “strong technical pedigree” to correct flaws in its approach, since equipment upgrades will be a continual need for TF-Si. Moreover, AMAT is familiar with a spike/trough market ride from its semiconductor industry pedigree, and is “not likely to get spooked by the current thin-film silicon panic.” And even if its x-Si plans ultimately gets scaled back, Sullivan hints the company is probably tinkering with CIGS, organic PV, and other non-silicon technologies in the background.

AMAT “has lost a battle, but certainly not the war,” he proclaims.

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