In its latest quarterly report, IMS Research states that capacity expansions are finally starting to slow down in light of the decreased solar demand and uncertain future demand in key markets, like Italy, Germany and the U.K., after two years of "frantic" growth.
Predictions are, however, that the industry will not see capacity expansions reducing, but rather increasing at a slower rate that has been previously seen. In comparison to last year, IMS believes solar production capacities will increase by just six percent in the first half of 2012.
In a statement released, it commented, " much of the new capacity over the next year [will be] added by start-ups executing their market entry plans, rather than existing suppliers expanding their capacities."
According to the research companys figures, over 50 gigawatts (GW) of photovoltaic module manufacturing capacity will be operational by the end of the year, despite the fact that annual demand will only be at 23 GW. Of the 50 GW, 30 are said to have been added since the beginning of 2010.
IMS has also found that many of the biggest suppliers, as has been widely documented, and smaller Tier 3 Chinese suppliers, are initiating production shutdowns.
Already this year, SolarWorld, for example, has reduced its manufacturing capacity, and REC, Solon and PV Crystalox have announced production shutdowns. Other companies like Solyndra, Signet Solar, Spectrawatt and Evergreen Solar have declared bankruptcy. IMS added that other suppliers, which are not obliged to publicly reveal details of their operations, have made similar moves.
Sam Wilkinson, report author and Senior Research Analyst at IMS Research reported, "In contrast to the rush towards vertical integration that weve observed for last few years, we are now seeing vertically-integrated module suppliers reduce or suspend production of cells and wafers.
"With the supply of these products exceeding demand by such a margin, top-tier branded cells and wafers are available at incredibly low prices and many suppliers are favoring purchasing cells and wafers on the spot market over manufacturing them internally."