Following on from last years theme of plummeting photovoltaic module prices, the first few months of 2012 have also been plagued by sharp price drops. This time, wafers are the victim, with many suppliers now procuring the material from outside sources which, due to the low spot prices, is said to be more economical. Indeed, prices, says IMS Research in its latest quarterly ‘PV Modules, Cells, Wafers & Polysilicon – Supply & Demand’ report, have fallen from just over US$1 a Watt (/W) 12 months ago, to an eye watering $0.30/W today.
In a statement released, the company, which was recently acquired by IHS Inc., noted, "This dramatic price collapse, caused by a global oversupply, has significantly changed the cost structures and strategies of leading PV module suppliers Throughout 2010 and 2011, many suppliers had quickly expanded their in-house wafer capacities. However, as wafer prices have fallen by over $0.70/W to record lows, suppliers are now reducing their in-house manufacturing and purchasing more wafers from third-party suppliers."
Like modules, wafer production in 2011 far exceeded installation demand. IMS Research says that wafer capacity grew 50 percent last year to reach 50 gigawatts (GW), while installation demand rose by just 35 percent, to reach 26.9 GW. Average prices for polysilicon, cells and modules also significantly dropped in 2011 48 percent, 57 percent and 44 percent year-on-year, respectively although the company says that wafer prices have been more severely affected.
This change in strategy from 100 percent vertical integration, to outsourcing wafers has helped to improve cost structures, claims IMS Research. Senior market analyst, Sam Wilkinson commented, "IMS Research has found that in the first quarter of 2012, Chinese tier-1 suppliers that purchase wafers, were typically able to improve their cost structure by up to $0.05/W in comparison to purchasing polysilicon and producing them in-house, which is a significant amount in todays industry climate. With many suppliers renegotiating their polysilicon supply contracts and also improving their polysilicon purchase costs, suppliers will certainly need to remain flexible in their manufacturing operations in 2012."
By the end of the year, the company believes that average wafer prices will have declined 25 percent, compared to Q4 2011, while polysilicon prices will fall 33 percent.