A continuing oversupply of photovoltaic modules, in excess of demand by an average of 325 GW per year over the next three years; combined with low-cost silicon, pricing wars, pullbacks on government funding, and a level-off in demand will lead to a consolidation that has been expected since 2009 and which we have already begun to see in the past year.
The analysts forecast that about 180 existing module manufacturers will either expire or acquiesce to acquisition by 2015. The largest number (88) of casualties will exit high-cost manufacturing markets in the United States, Europe, and Canada, according to the new study, "Global PV Module Manufacturing 2013: Competitive Positioning, Consolidation and the China Factor."
"Its the devil or the deep blue sea for the majority of these high-cost firms," said Shyam Mehta, senior analyst at GTM and the reports author. "Manufacturing costs for firms in Europe, the United States. and Japan are currently over 80 cents per watt. The cost for their Chinese competitors is between 58 cents and 68 cents per watt. The writing is on the wall; these companies will either take what they can get via acquisition or they will bow out."
Bonn-based SolarWorld, one of the major forces worldwide in 2011, both in terms of industry clout and sales, will be a prime target for acquisition, GTM predicts. Others that represent "low-hanging fruit" include Conergy of Germany, and Isofoton and Solaria Energy of Spain.
While part of the reports consolidation analysis focuses on companies operating in high-cost PV manufacturing markets, the question of Chinese module manufacturers, their strategies in the face of U.S. and potentially European import tariffs, as well as their domestic demand, debt and diversity are explored extensively in the report. The report estimates that 54 of the 180 ill-fated firms will come from China.
Most of these are so-called "solar zombies" companies with manufacturing capacities of less than 300 MW that have operated with the advantage of government. Chinas number of ill-fated firms could be much higher if not for an aggressive downstream build-out that will prop up select domestic suppliers. The countrys recent announcement that it would increase its cumulative 2015 solar target from 15 GW to 21 GW will most likely provide captive demand for firms such as Alex Solar, LDK Solar and Astronergy, the analysts believe.
In addition, as evidenced by the municipal loan to LDK Solar in July 2012 and the China Development Banks renewal of its pledge to support 12 selected domestic suppliers, GTM Research anticipates that the Chinese government will continue to provide financial support to established firms with large workforces, in order to cover near-term debt obligations, or possibly encourage diversified Chinese industrial conglomerates to acquire these companies. Potential beneficiaries of these strategies include Trina Solar, Yingli Green Energy, Suntech Power, JA Solar, Jinko Solar and Renesola companies which comprise more than 20% of existing global module capacity.
"To date, the consolidation in the PV manufacturing space that has occurred has done very little to relieve the industry of the ongoing problem of overcapacity," said Mehta. "Profitability in the PV supply chain will continue to be extremely challenged until and unless there is significant capacity rationalization in China. For numerous reasons, we do expect this to start taking place in 2013."
Combined with the exit of most firms in higher-cost locations and a stronger end-market, 2014 should see a more stable balance between supply and demand, which will position a select group of suppliers for sustained profitability.
"However,"Mehta added, "the road ahead will be strewn with casualties: Between 2012 and 2014, we estimate that nearly 60 percent of existing PV suppliers will be forced to exit the market."
Among those most likely to hit the chopping block, according to the report, are:
- Siliken (Spain)
- Bosch Solar (Germany)
- Photowatt (Canada, France)
- Hevel Solar (Russia)
- Advanced Solar Photonics (USA)
- Helios (Italy)
- Martifer Solar (Portugal)
- OpSun (Canada)
- Helios USA (USA)
- Mage Solar (USA)
- Motech (USA)
- IsolTech (USA)
The GTM researchers forecast that the ranking leading global module manufacturers by 2015 will include the following (in alphabetical order):
- Canadian Solar, a Guelph, Ontario-based manufacturer of PV cells and modules, with the majority of its operations headquartered in China;
- First Solar, the leading (CdTe) thin film PV manufacturer and the first worldwide to reduce its manufacturing cost to $1 per watt, with headquarters in Tempe, Arizona;
- Hanwha Group, a manufacturer of PV cells and panels based in Qidong, China (and as of August, the new owner of Q.Cells);
- JA Solar, a producer of monocrystalline solar cells with headquarters in Shanghai;
- Jinko Solar, of Haining, China, a manufacturer of solar PV cells and wafers;
- SunPower, with headquarters in San Jose, California, a producer of manufactures PV roof tiles and solar panels based on a silicon all-back-contact solar cell invented at Stanford University;
- Talesun, a premium quality solar PV manufacturer with production facilities in China and headquarters in San Francisco;
- Trina Solar, based in Changzhou, China, and a manufacturer of monocrystalline and multicrystalline PV modules; and
- Yingli Solar, a monocrystalline and multicrystalline PV module producer with headquarters in Baoding, China.
Although it is difficult to say which of the above predictions will come true, one thing that is certain is that the industry will continue to shift to high efficiency in order to reduce costs and some solar technologies will vanish completely, along with the companies that produce them, as the shakeout dictates winners and losers.