China, Taiwan take the lead in global shipments

In a slump year that still managed 13% growth, the PV industry witnessed a key regional shift in supply that will cause a rethinking of how PV shipments should be analyzed — thanks to China/Taiwan, where price points for both cells and modules give a distinct advantage, writes Paula Mints from Navigant Consulting.

by Paula Mints, Navigant Consulting

February 25, 2010 – 2009 was a better year for sales than the PV industry expected, with shipment growth of 13% to the first point of sale in the market — this despite a dismal first quarter and ~2GW of inventory waiting to be worked off at the beginning of the year. Of course, with significantly lower prices for cells and modules out of Taiwan and China, there was also significant outsourcing of product. Meanwhile, all manufacturers claimed production for all technology — whether they manufactured it in-house or not. Just as a point of order: every megawatt shipped has to find a home somewhere, and there are limits. Still, 13% growth should be celebrated, because it could have (and probably should have) been worse.

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2008/2009 PV shipments. (*Rest of the world includes Malaysia, The Philippines, and India)

The table below offers data by four regions (US, Japan, Europe, and the ROW), but it does not tell the entire story. Though other countries in the ROW region are experiencing strong growth, the most significant volume of product is coming from China and Taiwan. Product from these two countries has a significantly lower price point (cell or module) than product from the rest of the world, giving them a distinct advantage over other regions. In 2009 over 2008, shipments from China/Taiwan grew by 37%. Shipments from the ROW (Malaysia, The Philippines and India) grew 137% — taken as a whole, the ROW region (Taiwan, China, Malaysia, The Philippines and India) grew 60% in 2009 over 2008. Shipments from the US grew by 14%, with shipments from Japan and Europe falling by 30% and 15% respectively.

In terms of compound annual growth rates for the five-year period, Europe experienced strong growth of 40% while the ROW region (all countries) experienced compound annual growth of 108%. Growth for the ROW region has been significant — note that ROW shipments increased from 89.2MWp in 2004 to 3480.7MWp in 2009, an extraordinary achievement in a five-year period.

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Regional shipments in MWp, 2004-2009.

Of course, a primary reason for strong growth in the ROW region, and specifically China/Taiwan, were the extremely low prices for cells and modules that did — really — make outsourcing a better choice in some cases than manufacturing in-house. It is hard to argue with cell prices that meet or beat in-house manufacturing costs — and, if a manufacturer has wafer capacity, outsourcing cell manufacturing is a reasonable cost-controlling choice.

This is no comfort to the German (or European for that matter) solar industry, which offers the global PV industry its largest market and which imported most of its PV modules from elsewhere. A little metric terminology: installations and demand are different topics. Installations reflect, well, what was installed, while demand reflects what the first point of sale bought (whether or not they installed it or even resold it). In 2009, the first point of sale in Europe included installers, distributors, system integrators, a minor percentage of end users, and PV technology manufacturers. Installations in Germany for 2009 were right around 2900MWp (47% of total shipments), while demand (what everyone bought) was ~3800MWp (61% of total shipments). Much of the inventory that remained from 2008 had landed in Spain and stayed put.

The global PV industry is currently undergoing a shift in the way it does business. Toll manufacturing or processing (one firm processing raw material or finished goods for another) and outsourcing are certainly not new. The degree at which it is practiced, however, is increasing rapidly, and will continue as long as the low price region can continue to bear the slim margins — and, of course, as long as there is enough demand to consume all of that capacity. Oh yes, and as long as incentives are available to stimulate the market. With current momentum from China/Taiwan in terms of pricing and capacity, there is no doubt that the ROW region will be the shipment leader in 2010 also. By the way, technology firms outsource in China and Taiwan too — it is a practical solution to increasing manufacturing efficiencies.

Overhanging all of this remains the incentive/market concern. No one really knows how the German government will react if its market continues to grow unabated. Certainly, lobbying by interested parties along with protests may have staved off significant decreases in 2010, there is always 2011 to worry about. It is an old refrain: the industry needs new markets and these markets are expensive to support. Germany, for example, wanted to support its domestic manufacturing, and this was always a bit unrealistic about the realities. Again, if there is cheap product — of quality — available it will be sold first.

In any case, a regional shift in supply has happened and from now on shipments should be analyzed from five regions: US, Japan, Europe, ROW and China/Taiwan.

Paula Mints is principal analyst, PV Services Program, and associate director in the energy practice at Navigant Consulting. E-mail:

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