Tag Archives: Suntech

The Photovoltaic Market’s Return to Equilibrium in 2015 Drives Tomorrow’s Growth for Today’s Innovators

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The PV market has been a minefield in recent years, with shrinking margins, fluctuating subsidies and trade conflicts keeping executives across the globe awake at night. Beneath it all, the market has continued to grow, and will continue to do so in the next 5 years but with markedly different and healthier dynamics.

Due to the extreme price pressure experienced by manufacturers today, many will not survive the next two years. Uncompetitive tier-2 and tier-3 manufacturers, and some tier-1 manufacturers like Suntech, either will dissolve or be acquired. As a result, global module capacity will decrease from 65 GW in 2013 and 2014 to 58 GW in 2015. With demand increasing to 52 GW in 2015, overcapacity is reduced to 12%. As overcapacity shrinks, manufacturers will save up to $0.09/W by increasing utilization from 55% to 90%. Since prices remain mostly stable, manufacturers will be able to return to profitable gross margins. Projecting even further forward, with the U.S., China, Japan, and India taking over where Germany and Italy left off, companies looking for growth need to look no further than the PV global demand doubling from 31 GW in 2012 to 62 GW in 2018.

These projections depend on multiple large movements within the market, such as financing innovation for distributed projects, governments fast tracking utility-scale project development in emerging markets and discontinued government support for failing tier-3 manufacturers. Importantly, manufacturers will also need to reduce costs to maintain low prices while improving margins. These near-term incremental cost reductions will come from innovation such as double printing cell metallization to create thinner, deeper line widths and reduce silver paste use, or upgrading wafer saws to structured or diamond wire to reduce kerf loss and/or reduce wafer thickness. Business models need adjustment to not only survive the next two years, but also to adapt to the future market and come out on top in 2015.

Companies need to invest in their future now to develop products for the next generation of solar – the generation in which differentiated products such as back contact modules, passivated emitters, kerfless wafers, copper zinc tin sulfide modules, and numerous other technologies can earn large margins in a $155 billion market. Successful companies in the long-term will absorb cheap IP now and accelerate development.

Source: Lux Research report “Market Size Update 2013: Return to Equilibrium” — client registration required.

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Hangzhou First PV Material puts incumbent encapsulant suppliers under pressure

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Hangzhou First PV Material produces ethylene vinyl acetate (EVA) films and flouropolymer back sheets and is located in Hangzhou, Zhejiang province, China. Hangzhou First PV Material has more than 500 employees and sales revenue of $67 million. According to the Hangzhou First PV Material’s prospectus, before 2008, STR Solar, Mitsui Chemicals, Bridgestone, and Solutia (Etimex) were the dominant companies producing EVA film – taking 60% of the global market share. Hangzhou First PV Material exceeded Bridgestone and Solutia, and became one of the top three suppliers in 2008. In 2010, the company claimed 25% of the EVA market share; its primary customers are Suntech, Yingli Green Energy, Trina, and Jinko Solar, some of the largest module manufacturers in the world. The company experienced a net profit growth rate of 252.34%, 346%, and 10.76% in 2009, 2010, and 2011 respectively, according to the company’s annual report. This decelerating profit growth, reaching $94 million in 2011, is due to slower growth in the broader solar market, according to the company. Hangzhou First PV Material priced their EVA film at an average of $2.41/m2 in 2011, including a 37.26% gross profit margin (GM).This price is between $0.4/m2 and $1/m2 cheaper than EVA made in Europe or the U.S. (see the report “Module Cost Structure Update: Path to Profitability” — client registration required). Although market conditions are less than ideal for the greater solar industry, the tight-lipped Hangzhou First PV Material has been able to swim against the current. The company hopes to issue approximately 58.1 million shares on the Shanghai Stock Exchange to raise $179 million to ramp an EVA film production line with an annual output of 180 million m2, a backsheet production line with annual output of 2 million m2, and a PV material research center.

Historically, module manufacturers have chosen encapsulants based on the lowest cost, rather than performance, as long as modules pass IEC and UL certification tests; as a result, EVA has dominated the encapsulant market. Still, silicones, thermoplastics, and polyolefin encapsulants continue to compete with EVA. Dow Chemical started production of its ENLIGHT polyolefin encapsulant (client registration required) in Thailand in August aiming to replace EVA. Similarly, Wacker Chemie has rolled out a silicone-based thermoplastic film that claims better transparency and faster lamination times at a similar price to incumbent EVA suppliers (i.e., $3/m2 to 3.50/m2). While encapsulant suppliers with alternatives to EVA claim better performance and/or faster lamination times, success will ultimately come down to cost and how easy it is for module manufacturers to transition from EVA to the new encapsulant. Polyolefins have potential to be less expensive than EVA and Wacker’s silicone-based film can increase efficiency – which can reduce the overall cost-per-watt of the module – but capacity needs to ramp up in locations near module manufacturers to compete with players like Hangzhou First PV Material.

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Solar Module Prices Drop 36% in 2011

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After analyzing quarterly numbers from Yingli, Trina, Canadian Solar, and Suntech, we have determined that module prices declined 36% over the course of 2011. The average selling price (ASP) in Q1 of 2011 was $1.76/W. By Q4 2011, the ASP was $1.11/W for these tier 1 manufacturers. The ASP over the entire year of 2011 was $1.44/W.

The precipitous fall in module prices was caused primarily by declining polysilicon costs. In March 2011, the polysilicon spot price was around $80/kg, which fell below $27/kg in December. The polysilicon spot price rebounded to $29/kg in February 2012, but fell back below $27/kg in late March 2012. At the same time, the intense competition caused by a global oversupply of PV modules has eaten away margins for manufacturers, further reducing prices.

The margins are so low that, even if polysilicon prices continue to drop, we expect module prices will stay between $0.90/W and $1.00/W over the next few years as manufacturers restore margins. Make sure to note that these prices are for tier-one, crystalline silicon manufacturers, not smaller, less reputable manufacturers nor thin-film manufacturers who will sell at lower prices.

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Falling panel prices and Chinese competition creating solar woes

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The precipitous fall of module prices has led to a few casualties in solar. Evergreen Solar filed for Chapter 11 bankruptcy, and is currently trying to sell its assets and core “String Ribbon Technology.” With falling polysilicon prices (currently between $55/kg and $60/kg), the company couldn’t compete with standard crystalline silicon technology which, as we’ve mentioned previously*, has been made substantially cheaper by Chinese manufacturing firms. Chinese manufacturers have enjoyed continuing support from the Chinese government through inexpensive capital, low prices for electricity, and low labor costs. This is clear evidence that government subsidies and support are extremely critical to the growth of the solar industry.

Meanwhile, Solon announced that it has decided to shut down its Tucson facility given its inability to be cost competitive with the low-cost Chinese module manufacturers and instead focus on its project development and power plant business.

In addition, high-cost American sweetheart Solyndra was forced to shut its doors and file for bankruptcy. The start-up attracted high scrutiny for its inability to compete due to significant price drops in polysilicon, even after receiving a loan guarantee from the U.S. government. And Ascent Solar*, a thin-film CIGS manufacturer that was likely heading the Evergreen route was rescued by TFG Radiant Group of China, by signing a royalty and strategic partnership agreement.

Non-cost-competitive technologies and companies with poor strategy and balance sheets will likely go out of business faster given the shift in demand dynamics worldwide for PV that have significantly impacted module prices. This news bodes well for all the low-cost Chinese manufacturers such as Yingli, Trina Solar, and Suntech, all of which are better able to withstand the low-price environment. This news should make smaller thin-film solar companies wary of the competition in the industry.

* Client registration required.

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