Tier 2 rising: New Chinese c-Si firms challenging thin-film producers

Who’s challenging the leading c-Si cell makers today? It’s not the thin-film panel suppliers as expected, says Solarbuzz’s Finlay Colville, taking the pulse from last week’s EU PVSEC show — it’s Chinese Tier 2 c-Si cell makers.

September 14, 2010 – There was a time when pictures of ribbon-cutting ceremonies or safety-helmet clad dignitaries participating in groundbreaking procedures were greeted with a firm dose of scepticism. As zero-to-hero GW fab capacity expansions failed to materialize, the gap between top-tier manufacturers and the chasing pack was widely expected to only grow during 2010. The threat to leading crystalline silicon (c-Si) cell makers and First Solar would then still come from thin-film manufacturers who managed to scale manufacturing capacity with low production costs and bankable panels.

At least, that was the prevailing wisdom. In practice, PV manufacturing has panned out somewhat differently this year, and the effect of this was one of the key takeaways from last week’s EU PVSEC trade show in Valencia, Spain. While leading c-Si cell manufacturers in China and Taiwan continue to ramp up new production lines, the threat to them in terms of market share has not come from the non-First-Solar thin-film community — rather, it’s from within the ranks both from a geographic and a technical standpoint.

First, companies previously suppliers or customers to the leading c-Si cell makers have finally made decisive moves into the midstream cell-making segment (e.g. LDK, Canadian Solar, and Yingli). While these companies retain the scope to move upstream or downstream depending on market conditions (or in reaction to competing with some of their existing OEM customers), the bigger threat to leading-tier PV makers now comes from a new group of Tier 2 c-Si cell makers whose ascendency has been the dream of would-be thin-film manufacturers for years. And once again, China provides the backdrop for these new c-Si cell production lines.

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Equipment spending by Chinese Tier 2 c-Si cell makers has exceeded $150M each quarter through 2010. (Source: Solarbuzz, “PV Equipment Quarterly,” due Oct. 2010)

In comparison to the fanfare that often greets thin-film pilot line production, the Tier 2 c-Si cell makers in China have been operating well below the worldwide PV radar. (Unless, of course, you happen to be a c-Si equipment builder sitting on a healthy backlog of process tool purchase orders bound for China.) This is precisely what differentiates the threat level this time around, in comparison to more wildcard technologies previously seeking to disrupt the current status quo. First, capacity expansion for the new Tier 2 c-Si cell makers in China is mostly based upon standard c-Si cell production: nothing next-generation, nor anything too ambitious on the c-Si cell roadmap curve. Second, production lines can truly be ramped to mass production within 6-9 months, since they are utilizing process equipment currently qualified by most of the top-10 PV cell makers and representing the most mature tool types available within the PV industry.

The Tier 2 cell makers were quick to spot this by drawing attention as much as possible to production lines prominently displaying Centrotherm, Rena, Schmid, Despatch, and Roth and Rau logos. One particular tool jumps out today, however, more than all others here — AMAT-Baccini screen-printers have emerged as the ultimate iconic symbol of cell making authenticity, with a market dominance in China that would appear to vindicate AMAT’s recent Sunfab exit strategy. At EU PVSEC, Baccini tool images adorned the inner sleeves of brochures probably more than any other equipment type used within the industry, and especially throughout the Tier 2 community seeking customer confidence.

Analogous to the turn-key a-Si fab explosion of 2007-2008, low-cost production output may ultimately determine whether these new Tier 2 c-Si makers can establish themselves within the market. However, as soon as demand starts to lag midstream supply, or if the top-tier players seek to reduce margins at the midstream production stage to combat this new competitive threat, then the lack of technology differentiation may move very quickly from being an advantage today to a hindrance tomorrow.

Click to EnlargeFinlay Colville is a senior analyst with Solarbuzz, responsible for reporting on solar manufacturing equipment including technologies, trends, and forecasts within the solar industry. Prior to joining Solarbuzz in March 2010, he was director of marketing for Coherent Inc.’s solar business unit. He holds a bachelor’s degree in Physics from University of Glasgow and received a PhD in Laser Physics from the University of St. Andrews, Scotland. Contact: finlay.colville@solarbuzz.com, www.solarbuzz.com.

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