Diversification an advantage for PV equipment manufacturers12. December 2013 | Features, Global PV markets, Industry & Suppliers, Markets & Trends | By: Hans-Christoph Neidlein
Due to higher demand, German PV equipment manufacturers have an optimistic outlook for 2014. Florian Wessendorf, managing director of the VDMA Photovoltaic Equipment trade association, discusses the state of the market.
pv magazine: How was 2013 for the German PV equipment manufacturers?
Florian Wessendorf: The year 2013 was a very challenging year for PV equipment manufacturers due to overcapacities and high price pressure. Our member companies are expecting 30% lower sales for 2013 compared to 2012.
And we already saw substantial slumps in sales in 2012 …
Yes, in 2012 there was already a decline in sales of 50% compared to the previous year. In 2011 the market was totally overheated; those times probably won't probably come back. In 2012 our members from the PV equipment manufacturing sector had total revenue of €1.4 billion.
How did the number of your member companies develop?
The number of our members remained pretty stable compared to the previous year. Though several companies have temporarily suspended their operations in the PV sector. . In total we have around 70 to 80 companies that are currently active in the PV equipment area. Especially companies with a strong focus on PV, like Centrotherm, saw a strong decline. More diversified companies like Singulus and Manz have been able to compensate their declining PV business with other products and services. A crucial factor is the technology transfer from PV in other areas like optical discs or displays.
How does the German PV equipment manufacturing sector compare to other equipment manufacturing areas in Germany?
In 2012 German equipment manufacturers achieved total sales of around €207 billion ; for 2013 we expect a similar result. The PV equipment manufacturers are doing comparatively worse. In October 2013 German equipment manufacturers had a volume of orders of five to six months, while the PV equipment manufacturers only had 3.2 months. In the years 2010 and 2011 the situation was just the opposite. Those days the PV guys had order volumes of 10 to 11 months on average. This is almost too much from an economic point of view; the optimum is rather around five to six months.
Did the EU trade dispute with China about the import of modules have negative effects?
This led to market insecurity, especially in the first two quarters of 2013. After the compromise was reached in summer it calmed down as it became clearer what the regulation would look like and the prices stabilized. This was confirmed at the beginning of December through the final decision of the EU member states.
What are your expectations for 2014?
Our expectations are significantly more positive than for 20013. A lot of our clients are doing well again. Chinese and Taiwanese Tier-1 wafer, cell and module manufacturers have already made the turnaround. They are showing interest in investing again in order to gain market shares. New orders are coming in again. We are expecting a growth of sales of 11% for the year compared to 2013.
In which sectors?
We see a rising demand for a wide variety of products, b especially for inline inspection systems of wafer, cells, tabbers and stringers we have seen a strong pick-up. There is a strong demand for everything that brings down costs further in production, silver saving double-printing processes, for example. Machinery and processes that improve cell efficiency, such as PERC technology or backside passivation, are also doing well. For monocrystalline cells we now see a standard of 20% efficiency, for multicrystalline cells 18%.
What role is automation playing?
Especially in module production we see a further automation of production processes that have until now only been semi-automated, as in soldering or the fastening of junction boxes. We have high demand for inline inspection systems in different steps of production, this is also an important part of automation.
Is Chinese demand still dominating?
Demand is still coming mainly from Asia, not only from China but also from Taiwan, Malaysia and Singapore. We also see increasing local manufacturing in other regions of the world that are serving local markets, such as the MENA region and Latin America. India has also great potential, however cell production there is rather flat at the moment. We still see a certain demand in Europe; I think the European market will not disappear completely, although the strategic development of further markets is certainly important for us.
How high will the export share be for German PV equipment manufacturers in 2014?
I reckon that our export share will remain around 80 to 90%.
Isn't it difficult for PV equipment manufacturers to exploit all those new markets?
German equipment manufacturers are traditionally export-oriented; in this respect the development of new markets is not so unusual for our members. Although PV manufacturing in a new market requires a minimum size, particularly cell production. Module production can already be competitive with a smaller production capacity and it can make sense to produce modules locally, which are especially suited for different climate zones. But this doesn’t mean that we will see local manufacturing in each new PV market.
What do you think about domestic content regulations?
I am rather skeptical. Domestic content regulations often do not help the industry nor do they improve competitiveness, as was evident in India. Not all countries comply with the requirements to build up a local PV industry; on top of that there are often political uncertainties. We as a trade organizaton are in favor of free trade.
Other industries, particularly the automotive industry, are increasingly producing abroad, mainly in China. Do you also see this trend in the PV industry?
Several PV equipment manufacturers like Manz, Schmid, Teamtechnik and Reis Robotics are already producing in China and Taiwan. But the German PV industry is still lagging behind other industries with dual business models. For big players from the automotive and chemical industries it’s easier to establish production sites abroad due to their size than it for small and medium-sized enterprises from the photovoltaic sector. In addition, the premium segment of German PV equipment manufacturers is not in demand everywhere and there are also local competitors.
Has there been progress in the field of patent protection in China?
For a long time this was said to be a stumbling block for a stronger engagement thereWe see certain progress in the enforcement of patent claims in China in part because domestic Chinese manufacturers are eager to protect their own business since the market is growing. But overall patent protection in China is still critical. Therefore we advise our members to keep their key knowhow in Europe.
From your point of view, what are the key factors that will maintain the competitiveness of German PV equipment manufacturers?
It is crucial to always be a step ahead in innovation and research and development. Excellent local service is also essential. A local service team can always react flexibly and gain trust. It is critical to be diversified and to have supplementary income. Diversification can also be advantageous for the internal transfer of technology. Other important success factors are efficiency increases in production and logistics, the reduction of procurement costs, the minimization of energy demand, the strategic development of new markets, the cooperation with research facilities and the cooperation with clients and other manufacturers. Cross-cultural competence is also essential. Experiences from countries like China aren’t by implication conferrable to other countries like Brazil.
VDMA Photovoltaic Equipment is a division of the German Engineering Association (VDMA).
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