The booming demand for solar worldwide that has seen manufacturers start the year wth renewed optimism is yet to feed through into orders for solar manufacturing equipment, according to the latest quarterly update from Applied Materials.
In a familiar tale for the U.S. semiconductor giant, rising sales in ist core business concealed further losses from its Energy and Environmental Services (EES) division, which includes solar.
As the company’s US$29 billion merger with Tokyo Electron nears, Applied Materials’ future in solar looks less certain than ever, with the EES division blaming the company’s sole operating loss on an ongoing global solar manufacturing overcapacity that means solar and wafer makers are reluctant to invest in new plant.
With the U.S. company also citing the uncertainty caused by solar trade wars and the tightening of access to capital for solar developments as negative factors, Applied’s priorities were further hinted at in the full analysis of the first quarter figures released to the U.S. Securities and Exchange Commission (SEC) on Thursday.
"Applied has taken certain actions, including workforce reductions and re-prioritization of existing spending to enable increased funding for investments in technical capabilities and critical RD&E programs that address profitable opportunities in current and new markets with a focus on semiconductor technologies," said the report.
A small consolation
The one bright spot from Applied’s solar figures is that the segment’s operating loss has come in despite falling orders, thanks to cost reduction efforts, lower inventory charges and restructuring activities hardly news to set investors’ pulses racing though.
Among the company’s exhaustive list of risk factors, Applied’s report refers to "the filing of regulatory unfair trade proceedings against solar PVs from China, where most of Applied Materials’ solar equipment sales are concentrated." And that consolidation of the Chinese PV manufacturing market is part of the problem for Applied, with three of its solar customers cornerning 20% each of the company’s total solar manufacturing equipment sales and the situation expected to worsen as a result of ‘challenging industry conditions.’
With Applied also citing the "complexities associated with government-affiliated entities as customers, for example in China," the company’s need to diversify its solar custmomer base is starkly illustrated.
Quarterly orders for the EES division, which includes glass and web coating technology as well as solar wafer and cell manufacturing equipment, were flat at $40 million with net sales down 9% to $40 million for an operating loss of $11 million.