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PV gross margins fall 75 percent

According to IMS Research, photovoltaic suppliers are suffering from "huge" pressure, following a 75 percent drop in gross profits in the first quarter (Q1) of 2012. It predicts that they will continue to fall, as a result of the persistent price pressures and competitive market conditions.

Crystalline silicon module manufacturers' gross profits are on the decline.

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In its latest quarterly report, IMS Research has found that average gross profits for crystalline silicon photovoltaic module manufacturers dropped to US$0.09/W in the first quarter (Q1) of 2012, down from $0.39 in 2011. By the end of the year, it predicts that they will fall to $0.07/W.

In Q2, gross margins are expected to stabilize at nine percent, as "significant" improvements in non-silicon processing costs and blended silicon purchase prices, forecast to hit $25/kg in Q3, are made.

Overall, it says that Q1 2012 gross profits dropped 75 percent year on year, to below $500 million, thus representing the lowest level since 2008. The cause, says IMS Research, is costs not falling in line with prices. In a statement released, it comments, "Whilst average crystalline PV module prices fell by 67 cents per watt in 2011, average costs per watt reduced by just 42 cents." It adds that average polysilicon prices have not declined as quickly as module prices.

"Although spot prices for polysilicon have quickly fallen over the last year, a large proportion of polysilicon is purchased under long-term agreements, and it has taken some time for suppliers to cancel or renegotiate supply contracts in order to reflect these reductions in spot prices. If we consider this mix of spot and contract prices, on average polysilicon prices fell far less than modules in 2011," continues Sam Wilkinson, senior market analyst.