Solarbuzz: PV equipment overspend leads to harsh market changes

“Supplemental” capacity expansions have badly inflated PV equipment suppliers’ revenues to the point that it will eventually drag down equipment sales in 2012 and 2013, says Solarbuzz. The result: equipment suppliers need to align with Tier-1 makers’ plans, not the end-market.

October 18, 2011 – Sales for PV equipment suppliers are “temporarily inflated” to the tune of $6B thanks to “supplemental” capacity expansions by Tier 2-3 manufacturers pushing their own sales goals instead of matching the industry’s actual short-term demand, says Solarbuzz. And that overspend will be felt in lower revenues in 2012 and even 2013.

Global PV equipment spending for both c-Si (ingot to module) and thin-film panels is now seen at $13.1B — that’s down from the $14.2B Solarbuzz projected back in mid-July — and then will sink another 45% or more in 2012, says Solarbuzz senior analyst Finlay Colville in a statement. (Reached via email, he confirmed the lower equipment spending outlook is “mainly due to cancellations and push-outs that have occurred in the past 3 months.”) Nearly half of the 2011 spend is from new entrants or Tier 2-3 players whose “aspirations of rapid market entry or market-share gains” have turned out to exceed the capacity required to meet short-term industry demand. Later in the year, a “second strong cycle of thin-film investments also peaked” which boosted investments as well, Colville noted.

PV equipment spending declined by single-digit percentage points in both 2Q11 and 3Q11 as capacity expansion slows down and equipment suppliers’ revenue subsequently softens. Don’t be fooled by equipment suppliers strong (~21%) year-on-year comparisons in 3Q11, Colville warns — on the horizon are “sharp declines in new order intake, resulting from PV manufacturers’ concerns over capacity and demand levels forecast for 2012.” In fact, he sees “double-digit Q/Q revenue declines” from 4Q11 through 2Q12.



PV equipment investment categories during 2011, c-Si ingot-to-module and thin-film panels. (Source: Solarbuzz)


The only equipment suppliers able to weather this storm are those with backlogs tied to poly-Si expansion in Asia and thus meeting upstream demand. (At the other end of the spectrum, some PV equipment suppliers could suffer -30% or even -70% sales declines — e.g. those who benefitted from 2011 expansions for c-Si wafers/cells/modules as new expansion plans are pushed out.) Upgrades and replacements won’t absorb the pullback in capacity additions, and any technology inflection point-driven upgrades “are likely to be spread across a wide range of competing high-efficiency schemes being investigated today,” Colville writes. On top of this, look for a continued shakeout among PV cellmakers beyond just Europe and North America.

Thus, look for PV equipment suppliers to adjust their strategies — from following incremental capacity matched to end-market growth, to now aligning with the roadmaps of Tier-1 manufacturers in Asia. That includes predicting the next upturn in PV equipment spending (both duration and scale) at the process-tool level. “The total addressable market for PV equipment today is heavily influenced by different investment motives and technology preferences, rather than capacity required under any rational supply-demand balance,” Colville explains. “Forecasting the spending cycles associated with these motives and technologies throughout the different stages of the value-chains will be essential for tool suppliers over the next few quarters.”

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