In its new quarterly report on the photovoltaics (PV) polysilicon and wafer market, IMS Research says prices will, on average, fall by seven percent in the first quarter of 2011, and will continue to decline in the second quarter. The primary reason cited is incentive scheme cuts, which have impacted on installation growth.
In comparison, average polysilicon contract prices reportedly fell by just two percent in the fourth quarter of last year. Spot prices, on the other hand, were said to have declined by nearly 10 percent, thus "reversing the rapid increases that had occurred in the previous quarter, when Tier 2 and 3 suppliers had been able to sell silicon at inflated prices on the spot market, due to high demand and a shortage in supply".
Looking forward, IMS says both contract and spot prices are predicted to continue falling in the first quarter of this year, while similar price declines are forecast throughout the supply chain. In a statement, the company comments: "Reduced incentive rates have placed increased pressure on module suppliers prices, these manufacturers are naturally transferring this pressure to their upstream suppliers and forcing down cell, wafer and polysilicon prices as a result."
Explaining its reasons why the smaller suppliers will be affected, IMS continues: "High demand throughout 2010 meant that their larger competitors were largely sold out, and these suppliers were able to capitalize on the situation and increase their shipments and prices quickly. In particular, a large number of Chinese Tier 2 suppliers were able to gain market share and in fact, in Q310, Chinese Tier 2 module prices were on average higher than Chinese Tier 1 prices. As demand weakened at the end of 2010, Tier 1 suppliers products have become more freely available ( )."
Consequently, it believes the smaller companies will have to become more price competitive, if they want to gain market share this year. Whats more, it states that Chinese Tier 2 crystalline module prices are forecast to fall by nearly 10 percent in the first quarter.
Meanwhile, IMS says suppliers costs are not declining as rapidly. PV market research analyst, Sam Wilkinson comments: "Efficiency improvements and relatively high utilization rates are helping to continue the lowering of manufacturing costs throughout the supply chain. However, costs are not being reduced as quickly as prices, and gross margins are beginning suppliers costs to tighten. IMS Research predicts that by mid-2011, some polysilicon and wafer suppliers will see their gross margins fall to half of what they peaked at in Q310."