Having suffered a weak first six months in 2014, researchers at IHS Technology expect solar supply chain revenue to increase by as much as 24% in the second half of the year as installation volumes surge globally.
Supply chain revenues in the first half of the year reached a combined $23.1 billion, but IHS expect that figure to rise to $28.7 billion in the second half of 2014 as revenues for PV polysilicon, wafer, cell and module increases enjoy the fruits of increased installations.
Year-on-year, supply chain revenues were up 1% for the first half of 2014 when compared to the same January-June period last year, and IHS expects the year to finish some 36% up on last year, with the wafer sector enjoying a 35% expansion, cells growing by 18% and modules up by 17%.
"PV solar installations have been decelerating in the first half of 2014 because of a slow start to the year in China," said IHS PV analyst Jessica Jin. "However, installations are expected to gain major momentum in the second half, mainly driven by increases in China, Japan, the U.S. and the U.K. Double-digit growth in these countries will more than offset major declines in once-hot markets like Germany, Italy and Greece, resulting in a 24% global increase in MW installed for the year."
Welcome back, profitability
This welcome increase in revenues will benefit the entire supply chain, with the leading manufacturers in each sector set to enjoy robust bottom-line profitability in the final two quarters of the year, says IHS PV Integrated Market Tracker Q2 2014 report.
Favorable pricing conditions will propel higher profit margins, with average selling prices (ASPs) for wafers, cells and modules set for only modest falls in the second half of the year, stabilizing in conjunction with rising end markets.
Polysilicon prices, which began the year at relative highs, are set to flatten over the remainder of the year, with Jin noting that such conditions will "result in significant revenue growth for the upstream PV supply chain in the second half of 2014."
Farther ahead, IHS forecasts an even sunnier outlook for the PV supply industry as demand between 2015 and 2018 surges by between 10-15% per year. By 2018, believe the analysts, global PV markets are expected to surpass 70 GW for the year, from an anticipated 47 GW this year.
Significant capacity expansions will be required to meet this increasing demand, which could trigger a new capital spending cycle before the year is out, says IHS. Global operational polysilicon capacity will grow by approximately 95,000 metric tons over the next four years, Jin says, with module, wafer and cell capacity also expanding to 23 GW, 28 GW and 27 GW respectively.
"Having run their facilities at high utilization rates for the past several months, the big PV suppliers now have enough cash to start preparing for the next phase of growth," added Jin. "Their profit situation is bolstering confidence in sustainable market development and propelling capital expenditures. Moreover, R&D efforts of the leading manufacturers will drive down production costs faster than prices decline in the upstream PV supply chain.
"Therefore, IHS expects the industrys average gross margin to remain in the double-digit range."