Last week, I was very fortunate enough to be able to get into a conversation with Dr. Robert N. Castellano, president of The Information Network, based in New Tripoli, USA. It all started with a column, which he writes regularly in “The Street.” One of the recent colums of Dr. Castellano touched upon –- What could make solar hot again?
How to rectify the solar cell oversupply?
He said: “The problem will rectify itself when demand catches up with supply, which will take several years. Until then, suppliers are faced with lower prices and margins. I was the first to point out on March 5 2008, in my blog on Seeking Alpha in an article entitled “Contradictions in the Solar Industry” that “The solar industry is faced with a huge oversupply of solar panels planned for production in 2008, but no one seems to notice… or care. Shares in many solar companies such as Evergreen Solar), First Solar SunPower, and Suntech Power have surged with the booming solar market.”
Six reasons for cloudy solar skies
1. With oil at $60 a barrel, who cares about alternative energy? It is a short sighted view, but with the credit market crunch, who can get a loan to build solar plants anyway?”
Have companies been overlooking inventory problems?
Dr. Castellano said: “The solar companies were benefiting from the low price of polysilicon as a result of excess inventory in that sector. They were renegotiating contract prices with the poly suppliers and dropping prices. With money in place, they continued to build capacity well into 2009. All the factors discussed above took everyone by surprise (witness the stock market crash) and the recession has lasted much longer than initially forecast.
Where does this place a-Si solar cell makers?
“The issue is the economics in a solar farm where they are installed. The installation price is the same as a polycrystalline panel. Since the efficiency is lower and it takes more panels to reach the same wattage as polycrystalline, it also takes more hook-ups and frames during installation.
“If the panels move, there is another factor in the motors to move them. However, the production cost is lower than the polycrystalline panels. Oerlikon, expects its lines will deliver a cost of 70 cents per watt by the end of 2010 and has achieved an initial conversion efficiency of 11 percent, which comes out to about 9.5 percent of stabilized efficiency.”
Crystalline vs. thin film capacity
Dr. Castellano said: “Until last year, Germany had been the world’s largest solar market thanks to its feed-in tariffs, which require utilities to buy all the solar energy produced at premium, government-set prices. As a result, analysts now expect Germany, which doesn’t have an annual cap like the one in Spain, to become the biggest market again in 2009.Germany installed 1.35 gigawatts of solar energy systems in 2008, and it could add another 1.5 gigawatts in 2009.
“Spain took the lead last year, but the government has since reduced the subsidies and capped the amount of energy that could be sold under the subsidy program. The financial market crisis has made it difficult for developers to line up financing for solar power projects. Spain, which added a few gigawatts of solar in 2008 alone, now has a 500-megawatt cap for 2009. All of these forces have led to an oversupply of silicon panels.
“As governments — Germany and Spain were a driving force – in the solar industry’s run-up, they were a factor in the downturn. Once the recession is over and liquidity returns, they will mitigate the overcapacity, particularly as prices are so low and there is pent-up demand for new installations.”
Impact of Q4 on overall prices and industry
Dr. Castellano said that silicon used to sell for more than $300 per kilogram on the spot market and $150 per kilogram for long-term contracts a few years ago. Silicon prices have since fallen significantly over the past year. In fact, the long-term contract price has dropped about 50 percent, close to the spot market price of $67 per kilogram, or about $0.50 per watt.
“Polysilicon panels are selling at $2.25 to $2.50 per watt from $4.17 in Q2 2008. We expect prices to decline further throughout the remainder of the year,” he noted.
The results of India’s 15th General Elections are nearly all out! The people’s verdict — voting Dr. Manmohan Singh and Indian National Congress (INC) led United Progressive Alliance (UPA) to a second successive term!
Undoubtedly, this is a vote for stability, continuity and good governance. It is hoped, the nation will have good governance that can be devoid of external pressures of coalition partners. In some ways, the verdict is a vote in favour of the economic policies of the Indian government leading to continued liberalization as well.
This ‘pleasantly surprising’ result of India’s latest general elections has been welcomed overwhelmingly by leaders in India’s IT/ITeS, telecom and semiconductor industries.
Dr. Ganesh Natarajan, vice chairman and CEO, Zensar Technologies and former chairman, NASSCOM, says: “We welcome the results of the election, which are indicative of a stable government at the Centre. In the current global economic environment, it is important that India has a stable and progressive political environment that can focus on long-term policies for the sustainable development of the country, even as it takes decisive steps to immediately put the economy back on a high-growth trajectory.
“The Indian IT-BPO sector is both an engine and a catalyst for the development of the Indian economy and we are confident that the government will continue to partner with this sector for leveraging the benefits of IT for India’s domestic economy and through international trade. We also look forward to working with the government to promote inclusive growth and social benefits through the innovative use of IT. It is noteworthy that the biggest electoral process in the world — the globally-admired Indian elections — is through the use of EVMs, itself symbolic of the significance of IT for the country.”
According to Dr. Pradip Dutta, corporate VP and managing director, Synopsys (India) Pvt Ltd: “There is an element of decisiveness in the election results this time, which bodes well for the industry. An anxiety around a fractured and short-lived coalition has been replaced by a confidence that the new mandate will provide a government capable of delivering sustainable long term benefits for both economy and business.”
Jaswinder. S. Ahuja, corporate vice president and managing director, Cadence Design Systems (I) Pvt. Ltd, and former chairman, India Semiconductor Association (ISA), adds: “I am encouraged by the result. It is pro-progress. Also, the fact that Congress has a clear mandate should ensure that they can do the right things and make the bold moves that are needed at this time in order to ensure that India can claim its rightful place on the global stage, unencumbered by the compulsions of a fractured coalition.”
N.K. Goyal, president, Communications and Manufacturing Association of India (CMAI), chairman Emeritus, TEMA, chairman, CTIA, and vice chairman, ITU APT India, notes: “The country has given a clear message that it wants development and growth, and has rejected the approach of divide, religion, caste, etc. The long awaited liberalization agenda will get a boost now. The industry is sure that there would be stimulus in economy, growth in manufacturing and sustained policies for economic uplift.
“Infrastructure development will also get encouragement. India’s GDP growth will surpass 10 percent within the next three years. The telecom sector will see deeper penetration in rural areas, and broadband will match voice subscribers. We can expect 500 millions Internet connections by 2012.”
S. Uma Mahesh, co-founder CEO of Indrion Technologies, points out that UPA’s win is attributable to the following reasons:
* Rural support — unemplyment program (though it had more party orientation), and loan waiver (though it didn’t quite address all loaned people);
* Defocussed campaigning by other parties;
* Local factors (like ‘poor campaigning’, divided votes in AP);
* A ‘seasoned-company’ like approach by Congress that has to be commended, and the media support (similar for Democrats in US);
He adds: “Now the UPA has a chance of a lifetime — with no excuses. They should be able to do ‘real reforms’, and provide ‘real governance’ over the next four years at least, before getting into elections mode again. This should include — insurance reforms, labour laws, legal reforms, more liberal FDI, media reforms, and not to forget the rural sector, as well as the infrastructure.”
Quite correct! I am very sure that the new UPA government, which should be sworn in quite soon, will take all of the necessary steps to boost India’s IT/ITeS, telecom, semiconductor and solar photovoltaic sectors. There are several solar photovoltaic and semiconductor fab proposals that, I believe, need clearance as well.
Bundeep Singh Rangar, chairman, IndusView Advisors Ltd, the India-focused cross-border advisory firm, said in a statement today: “The government will have its task cut out with more than $700 billion worth of investments to be channeled in to India’s infrastructure, power, telecom and pharma sectors over the next five years to provide the country a strong foundation to achieve the aspirational growth of 10 percent.”
I would really like to see industry folks set their expectations before the new government at the center. If I can play a small role in carrying their messages, it would indeed be an honour!
Recently, iSuppli came out with a study on whether the current solar downturn will lead to a more mature photovoltaic industry! According to iSuppli, severe downturn in the global PV market in 2009 could actually have a more positive outcome for the global solar industry, yielding a more mature and orderly supply chain when growth returns.
Worldwide installations of PV systems will decline to 3.5 Gigawatts (GW) in 2009, down 32 percent from 5.2GW in 2008. With the average price per solar watt declining by 12 percent in 2009, global revenue generated by PV system installations will plunge by 40.2 percent to $18.2 billion, down from $30.5 billion in 2008.
“For years, the PV industry enjoyed vigorous double-digit annual growth in the 40 percent range, spurring a wild-west mentality among market participants,” said Dr. Henning Wicht, senior director and principal analyst for iSuppli.
“An ever-rising flood of market participants attempted to capitalize on this growth, all hoping to claim a 10 percent share of market revenue by throwing more production capacity into the market. This overproduction situation, along with a decline in demand, will lead to the sharp, unprecedented fall in PV industry revenue in 2009,” he added.
What about new entrants?
I quizzed Dr. Wicht how this downturn would lead to a more mature PV industry and what about the new entrants?
Dr. Wicht said: “We expect that the solar industry will invest more softly. The years 2007/2008 were special. Each of the hundreds of suppliers were ready to invest to reach 10 percent market share. This is not likely to repeat.” Interesting! “Also, the new entrants will invest more modestly and closely linked to fixed customer orders,” he added.
Role of FIs in solar
Are financial institutions paying that much importance to solar, especially in places such as India? This is an issue that was also raised and discussed at the recently held SEMI India solar/PV paper launch.
According to Dr. Wicht, the financial investors are definitely looking into solar, mainly in Europe and US. “PV in India is still at the very beginning. From my experience, there is not yet much attention of financial investors for PV in India,” he noted.
Off-grid or grid connected apps?
Turning the discussion to off-grid vs. grid connected applications, I sought Dr. Wicht’s advice on the route that should be followed. Again, this topic was discussed during the SEMI India meet early this month. Hence, the interest for India in this field is significant!
Dr. Wicht highlighted: “Installations for the off-grid remains a small portion in terms of the sold modules (MW), about 5 percent. The off-grid system selling might be a good way to start in places such as India. For cell and module production, on-grid is where the volumes are needed.” Hope the Indian solar photovoltaics industry takes note of this valuable advice — and it holds good for other regions as well.
I also asked him regarding a good low carbon growth strategy for developing countries. Dr. Wicht said that depending on the place, it could be a combination of wind, solar and biomass.
Compensating for Spanish whiplash!
According to iSuppli’s study, the single event most responsible for the PV market slowdown in 2009 was a sharp decline in expected PV installations in Spain. Also, beyond Spain, the PV market is being adversely impacted by the credit crunch.
Therefore, why won’t attractive investment conditions in other some countries compensate for the Spanish whiplash?
Dr. Wicht said: “The investigated countries start from a low level of installations and show long, administrative procedures, limits of feed-in tarifs and reduced capital access. They simply cannot compensate the 2.6GW of Spain in 2008.”
Finally, what is likely to happen after the shakeout or fall in the coming years? He added: “System demand will grow stronger from H2-2010, absorbing the inventory, which has been built up in 2009 and 2010. From 2011, demand for modules will rise. It might pick up quickly. Then, companies, which are able to supply on short notice/(flexibility) can gain market share.”
Let me see if I can convince Dr. Wicht to visit India and share his insights with the Indian solar/PV industry. Last, but not the least, thanks Jon!
The severe downturn in the global Photovoltaic (PV) market in 2009 actually could have a positive outcome for the worldwide solar industry, yielding a more mature and orderly supply chain when growth returns, according to iSuppli Corp.
Worldwide installations of PV systems will decline to 3.5 Gigawatts (GW) in 2009, down 32 percent from 5.2GW in 2008. With the average price per solar watt declining by 12 percent in 2009, global revenue generated by PV system installations will plunge by 40.2 percent to $18.2 billion, down from $30.5 billion in 2008.
The figures present iSuppli’s forecasts of global PV installations in terms of gigawatts and revenue.
“For years, the PV industry enjoyed vigorous double-digit annual growth in the 40 percent range, spurring a wild-west mentality among market participants,” said Dr. Henning Wicht, senior director and principal analyst for iSuppli. “An ever-rising flood of market participants attempted to capitalize on this growth, all hoping to claim a 10 percent share of market revenue by throwing more production capacity into the market. This overproduction situation, along with a decline in demand, will lead to the sharp, unprecedented fall in PV industry revenue in 2009.”
However, the 2009 PV downturn, like the PC shakeout of the mid 1980s, is likely to change the current market paradigm, cutting down on industry excesses and leading to a more mature market in 2010 and beyond.
“The number of new suppliers entering and competing in the PV supply chain will decelerate and the rate of new capacity additions will slow, bringing a better balance between supply and demand in the future,” Wicht said.
Blame it on Spain
The single event most responsible for the 2009 PV market slowdown was a sharp decline in expected PV installations in Spain. Spain accounted for 50 percent of worldwide installations in 2008. An artificial demand surge had been created in Spain as the time approached when the country’s feed-in-tariff rate was set to drop and a new cap of 500 Megawatts (MW) loomed for projects qualifying for the above-market tariff. This set a well-defined deadline for growth in the Spanish market in 2009 and 2010.
While the Spanish situation is spurring a surge in excess inventory and falling prices for solar cells and systems, this will not stimulate sufficient demand to compensate for the lost sales in 2009. Even new and upgraded incentives for solar installations from nations including the United States and Japan—and attractive investment conditions in France, Italy, the Czech Republic, Greece and other countries—cannot compensate for the Spanish whiplash in 2009.
The Spanish impact will continue into 2010, restraining global revenue growth to 29.2 percent for the year. Beyond Spain, the PV market is being adversely impacted by the credit crunch.
“Power production investors and commercial entities are at least partially dependent upon debt financing,” Wicht noted. “Starting in the first quarter of 2009, many large and medium solar-installation projects went on hold as they awaited a thaw in bank credit flows.”
After the fall
After 2010, the fundamental drivers of PV demand will reassert themselves, bringing a 57.8 percent increase in revenue in 2011 and similar growth rates in 2012 and 2013.
“PV remains attractive because it continues to demonstrate a favorable Return on Investment (RoI),” Wicht said. “Furthermore, government incentives in the form of above-market feed-in-tariffs and tax breaks will remain in place, making the RoI equations viable through 2012. Cost reductions will lead to attractive RoI and payback periods even without governmental help after 2012.”
Furthermore, lower system prices will open up new markets by lowering incentives and subvention costs. The lower the PV system prices are, the lower the incentives will have to be. Developing regions will be big the beneficiaries of these lower prices and thus will grow faster than the global average, Wicht said.
Source: iSuppli, USA
Now then, this will make a very interesting read! Back in October 2007, I had discussed the timing and the need for a silicon wafer fab in India, in-depth, with Anil Gupta, managing director, India Operations, ARM.
We have come a long way since then! There was all the hype last year about SemIndia’s fab, which never really did happen, and eventually, BV Naidu moved on! Then came the rush to solar fabs. Recently, when I blogged on how a Qimonda buy could be good for India, I am told that it is really outrageous. No problem, it is merely a suggestion.
At times, I have got the feeling whether the Indian semiconductor industry is losing its way! However, when I see all around, it is hale and hearty, and business as usual — fabs or no fabs!
It was interesting to meet up again with Anil Gupta of ARM, and to find out what he thought about what I thought!
Starting with an old question, whether India has the capability to sustain or even build a product development ecosystem? Gupta said: “We need the following for this:
* Entrepreneurs committed to product development and willing to take that risk.
* Investors willing to take risk on product development companies.
* Consumption (this will happen as the economy improves any way).
* Deep enough technical/technological knowledge/know-how to put reasonably competent end products together (It exists. Examples like Sukam, Tejas and other are there).
Indian fab story dead and buried
Turning focus on fabs, is the Indian silicon wafer fab story completely dead and buried now? Gupta notes: “When TSMC says they are running at only 38 percent capacity, one can imagine what the rest of the fabs must be going through. In any case, the Indian fab story was a longer term story and the current economic climate actually makes it further and further remote. So yes, it is dead and buried now!”
Wow! India probably flattered to deceive! However, I am an optimist, and hope that one day, India will have its own silicon wafer fabs!
Gupta adds: “What worries me now is the glut of the solar/PV fabs. By the industry estimates, solar/PV is a viable option only when the price of oil is >$100 per barrel (oil is at $40 per barrel now). This means, there would be challenges for the solar cell industry too! One can only hope that the economy picks up growth soon enough and sends the price of oil higher so that solar becomes a viable option.”
Again, this is a concern I have as well. The rush toward solar is good, but then, is this what the Indian semiconductor industry really needs? Where’s all that talk of developing silicon and product companies? You simply cannot equate the two — semicon and solar! You can’t have a policy, and then ignore the main crux either, and simply go for the ones that are easily attainable! It does not project a good impression, or maybe, I am somehow wrong in my assessment. Hence, my feeling that the industry could be losing its way somewhere!
However, Gupta feels that’s not really the case! What has been working until now, still continues to work!! “Our strengths are design and verification. We will continue to be in demand for that. The other pastures we explore, there are a lot of uncertainties,” he adds.
“The challenge is to pick the right pasture where the grass remains green even in the summer. This is not easy to find and does require that we bet on some of them and learn through the experience,” he advises.
How can India really buzz?
What now needs to be done to get the semiconductor industry in India really buzzing? Surely, local consumption is key. Local consumption would hopefully foster electronic product innovation just like products by two-wheeler manufacturers and the Tata Nano.
“The current initiatives in the industry for rural applications are also quite interesting. I am optimistic that some good offerings will come out of this. While these may not be specifically from a “semiconductor” perspective, at least at the “system” level these would make sense,” says Gupta.
What India NOW offers to semicon world?
What does India NOW offer to the semicon world, in these times of a global recession?
The Indian economy is still mostly internal consumption oriented, as opposed to exports oriented. This is very different from the economies of island nations like Taiwan, Korea, and Japan, which are very heavily export oriented.
In a recession like the current one, these predominantly export-oriented economies experience a far greater crunch than the others. Thus, as long as products are being sold in Indian markets at the right price points, there would be consumption.
Gupta says, “This time around, the world would come out of recession mainly driven by Asian countries, India being one. People in the industry that I talk to tell me that as the worst is over in this crisis, and as things begin to pick up, India will once again be the beneficiary of a lot of work moving here. However, my personal view is somewhat different.
“I believe that the last round did witness this phenomenon mainly because it was the honeymoon period. But by now, the honeymoon period is over and the India centres of these companies are working hard to reach a level where they become “mission critical” to the businesses of their companies.
“The journey hasn’t been very easy for multiple reasons. And by now, the cost differentials also do not look as attractive as they did before. Hence, what work comes here would come only after a careful assessment and very selectively (not by leap of faith).”
I did blog about how Qimonda could be a good buy for starting a memory fab in India. You have all the facts in front of you! My question to the Indian semiconductor industry is: should we revive the call for having a silicon wafer fab in India, post SemIndia and post recession?
I was very fortunate to attend a webinar on solar PV a couple of days back, thanks to iSuppli, USA. The webinar looked at:
* Polysilicon — what is going on in the market?
* Cells and modules — where will the prices go?
He said: “We believe that solar is a fantastic market. It has been growing over the last four years by revenue. It will continue to grow! There are not many industries with a growth path like that! However, in last the 18 months, the supply has been disconnected from demand.”
This is exactly the point iSuppli addressed in its webinar. Dr. Wicht was accompanied by Stefan de Haan, senior analyst, photovoltaics, iSuppli.
iSuppli’s recent findings are:
* Severe supply chain imbalances exist at polysilicon/wafer and cell/module levels.
* Short term polysilicon and module prices will decrease significantly.
Polysilicon: What’s going on with supply and pricing?
If you looked at the global solar PV industry, many plants are under construction, and there are huge capacity expansion plans. There has been a dramatic decrease in production. In 2008, iSuppli estimated total production of solar PV at 60,000 metric tons. In 2009, about 100,000 metric tons will be produced!
What are the reasons for this supply situation? In 2005-06, the high margins of this industry attracted several newcomers. The cycle time to ramp up a polysilicon plant is 24-36 months, and including another 12 months to get finance, it takes about four years.
He said: “The decisions taken in year 2005-06 are coming to the market now. This is also why we see the big ramp in 2009-10. This is also the reason why the industry will have big difficulties to react on a short term notice. The polysilicon industry is a big super tanker, which has difficulties to maneuver on short term.”
Looking at the demand side of things, iSuppli showed a graph where the two curves — polysilicon supply and polysilicon demand meet, or rather cross, in early 2010. From that point on, the supply line passes the demand line. “That means, from that time onward, we definitely see prices for polysilicon decreasing,” he said.
What will happen in 2009?
The key point to note is that the ramping rates of polysilicon and solar cells are completely different! The ramping rate of polysilicon is much steeper, than on the cell side. Polysilicon is more than doubling, while the cell industry is growing at 34 percent.
According to Dr. Wicht, the gap between demand and supply is already shrinking fast in 2009, which will lead to a price decrease in 2009.
Coming to prices, the polysilicon market boasts two kinds of prices — long term and spot market. According to Dr. Wicht, the long term prices are already decreasing from around $100/kg in 2008, and it is expected to be around $80/kg in 2009.
On the other hand, the spot market price peaked in 2008 at around $400/kg. Now, it has already dropped. It will continue to drop, far beyond today’s long term contract price, which will then, from 2010 onward, make up another round of discussion. This is because companies might tend to get out of their long term contracts to secure their silicon on the spot!
Summarizing, he said that polysilicon production will increase heavily. Next, supply will pass demand from 2010 onward, and then the industry will enter the oversupply situation for the next three to four years. The polysilicon industry will also react. In fact, iSuppli anticipates a recent announcement from a solar PV company to expand production capacity would be the last for quite a while!
What about projects on the way? These projects have to come on to the market and many of those will! This is precisely the reason why the industry will see silicon passing solar cells in capacity over the next few years.
Stefan de Haan added that the output of the PV modules industry will grow. The total module prod will likely grow to 11GW this year and to 20GW in 2012. Thin film modules will continuously gain market share and it probably account for 1/3rd of the total market by 2012. Production of crystalline cells will run in parallel. It is likely to reach 9GW for 2009 and 18GW for 2012.
Commenting on the competitive landscape, he added that many new players would be entering production in 2009, especially in the thin film business. “However, the current leaders — QCells, Suntech and First Solar — will increase their edge over the competition in terms of absolute production volumes,” he said.
In general, it is a good thing that the industry is growing and that all of this capacity is coming online. However, this raises the question: can demand can keep up with the supply?
According to iSuppli, in 2009, the installation market will be flattening. In the sense, iSuppli projects that 4.2GW will be installed this year, or about 10 percent growth. However, this growth is much smaller in comparison to the previous years. Some of the reasons for slower growth in 2009 include changes in sustained feed-in tariffs and the global economic slowdown.
Hann added, “In H2-2010, module demand will probably return to the previous growth rates, of more than 20 percent per year.”
Combining demand and supply, there is a massive oversupply of modules that has already been building up since early 2008. Back in 2008, this did not impact on the module prices as there was short term heavy demand from countries like Germany and Spain, from project developers and installation companies, etc. So, this was not noticeable earlier. However, in 2009, the oversupply situation is quite serious!
As a consequence, many suppliers will not be able to react to this situation in the short term. They will still need to run their factories to try and generate some revenue and satisfy the industry. Many had bet on some strong demand coming from USA and also China.
This year, the module prices will decline. Consequently, the declining prices will also create some additional demand. However, for the next two years, this fundamental oversupply situation will not change.
How far will prices drop?
So, what are the message for 2009? First, crystalline module prices will drop to about $2.50 per watt, and second, cost is going to be the differentiating factor! This was a point emphasized strongly by the iSuppli analysts.
Further, how should companies manage this situation, where supply is disconnected by demand? According to Dr. Wicht, there is 11.1GW of module supply vs. 4.2GW of installations. “We do not see that the demand is elastic and that everything will be good after the end of 2009. The gap is too large between demand and supply, and will last till end of 2010.”
Installation capacity will surely become a bottleneck. There will be falling prices for silicon, as well as solar cells and modules. Also, the demand is not that elastic enough to absorb all modules produced.
Therefore, given this situation, what are the options for success, rather, what are the ideas to re-orient the solar PV business?
The first option could be to shut down 50 percent of production till price recovers. However, this is not a realistic option. Another could be to put expansion plans on hold. Yet another option for producers would be to become the best in class in production cost, an option, which is excellent, but difficult!
Probably, the best option would be for makers to integrate downstream. This includes new demand simulation in established markets as well as developing new markets.
Dr. Wicht said: “Anticipating bottlenecks are key for solar. The next bottlenecks are the bureaucracy and installation capacity. The production capacity would not be influential. Production cost and downstream integration are key.” He advised solar PV producers to monitor their PV market demand and supply situation regularly.
Greetings, dear readers and friends, in the new year. May you all have all the success and prosperity in 2009!
An eventful year in semiconductors has passed by us. For me, personally, it has been a tremendous 2008, ending with Electronics Weekly of UK selecting my blog (Pradeep Chakraborty’s Blog) as the world’s best in the Electronic Hardware category.
Lot of people have asked me since, how it feels to be a world champion! Well, I do feel elated! However, one point, more of the congratulatory notes have come from overseas, than from India. Perhaps, it is an apt indicator of how semiconductors is perceived in India — though, I may be wrong.
Friends have also asked me how I’ve managed to blog on such a difficult subject sitting in India. Simply put: It has not been easy!
First, I’m just a simple person, and not some brand name. Second, my blog does not represent any large, well known media house, or a big brand semiconductor magazine. Hence, maintaining a semicon blog, with the help of contacts from all over the world has been tough, at times. Why, some folks, with whom I wished to speak with, never even responded to my emails and requests. Quite understandable!
Third, I’ve only managed to blog, when I have the time, unlike many other great bloggers who post regularly (or daily)! Fourth, there have been several instances, where my location has been my weak point. I was unable to blog on several instances simply because I had no way of reaching people whom I wished to speak with, while sitting in India. And, as I said, I did get cold snubs on several instances! :) As a result, I could not present my views at specific instances, even though I dearly wanted to!
However, the unconditional and loving support and encouragement of my family, friends, well wishers, industry leaders and loyal readers such as you have helped overcome all of these deficiencies. It is only because of these people that I’ve managed to come this far! I hope each one of you continues to have faith in me. I shall try my best to provide you with the best information (hopefully) the global semiconductor industry has to offer.
To start off the new year, may I present, what I feel, are the top blog posts on semiconductors during 2008, as a review for the past year.
Being indisposed at the start of 2008, I only managed to pick up speed from April onward. As the year progressed, the Indian fab story with SemIndia started worsening, before finally disappearing, even as fabless India held on sttong, as did the fortunes of the global semiconductor industry, which incidentally, did look quite good till September last year.
I have arranged the blog posts, from January to December 2008, so they will present a better picture of how 2008 behaved! These posts are set in no particular order or preference, otherwise. Some of you may have your own favorites, so kindly let me know, in case those haven’t made the list.
Power awareness critical for chip designers
LabVIEW 8.5 delivers power of multicore processors
NXP India achieves RF CMOS in single chip
VLSI as a career in India
Using ‘semicon’ simulation for drug discovery
New camps promise exciting times ahead in memory market
Indian design services to hit $10.96bn by 2010
Staying ahead of clock a habit at Magma!
Dubai — an emerging silicon oasis
Developers, go parallel, or perish, says Intel
Think AND not OR; Altera first @ 40nm FPGAs
Top 10 global semicon predictions — where are we today
Semicon to grow 12pc in 2008
India’s growing might in global semicon
10-point program for Karnataka semicon policy
Has the Indian silicon wafer fab story gone astray?
Semicon half year over, what next now?
EDA as DNA of growth
Semicon is no longer business as usual!
Cadence C-to-Silicon Compiler eliminates barriers to HLS adoption
Practical to take solar/PV route: Dr. Atre, Applied
What India brings to the table for semicon world! And, for Japan
NAND update: Market likely to recover in H2-09
E Ink on every smart surface!
RVCE unveils Garuda super fuel-efficient car
Indian fab policy gets 12 proposals; solar dominates
90pc fab investments for 300mm capacity: SEMI
Synopsys’ Dr Chi-Foon Chan on India, low power design and solar
Magma’s YieldManager could make solar ‘rock’!
Motion sensors driving MEMS growt
BV Naidu quits SemIndia; what now of Indian fab story?
Top 20 global solar photovoltaic companies
IDF Taiwan: Father of the Atom an Indian!
TI Beagle Board for Indian open source developers and hobbyists
Cadence’s Virtuoso vs. Synopsys’ Galaxy Custom Designer!
Synopsys’ Galaxy Custom Designer tackles analog mixed signal (AMS) challenges
Solar, semi rocking in India; global semi recovery in 2010?
No fabs? So?? Fabless India shines brightly!!
AMD’s roadmap 2009 provides lots of answers… now, to deliver!
Embedded computing — 15mn devices not so far away!
FPGAs have adopted Moore’s Law more closely!
My blog is the world’s best!
Semicon outlook 2009: Global market could be down 7pc or more
Altera on FPGAs outlook for 2009
Solar sunburn likely in 2009? India, are you listening
Outlook for solar photovoltaics in 2009!
I found it difficult to select the Top 10 posts. If any one of you can draw up such a list, it’d be great!
Friends and dear readers, this is my last blog post for 2008! Indeed, what a year this has been!!
Let me bid this year goodbye with a general outlook on the global solar photovoltaics industry for 2009.
iSuppli had recently put out a report on solar eclipse coming in 2009! I had blogged about the possible solar sunburn ahead, as well, earlier last week!
Another point that has interested me is: what happens to the top 20 global solar photovoltaic companies, based on iSuppli’s analysis! This blog post has perhaps been the most popular in recent times.
I was very lucky to re-associate with Dr. Henning Wicht, Senior Director, Principal Analyst, iSuppli Deutschland GmbH, in Munich, Germany, for this discussion, thanks to the efforts of Jon Cassell and Debra Jaramilla!
How bad is solar?
The first and the most obvious question: how bad is the global solar market right now and why?
According to iSuppli, bringing an end to eight consecutive years of growth, global revenue for photovoltaic (PV), panels is likely to plunge by nearly 20 percent in 2009, as a massive oversupply causes prices to drop!
Worldwide revenue from shipments of panels will decline to $12.9 billion in 2009, down 19.1 percent from $15.9 billion in 2008. A drop of this magnitude has not occurred in the last 10 years and likely has not happened in the entire history of the solar industry.
Dr. Henning Wicht says that the upstream part of the solar business (cell, module, etc.) will suffer from price decline due to strong oversupply. The downstream side will benefit (installation, end-user, investor, etc.) by lower system prices.
Therefore, what can the solar players do to get over this coming bad phase in 2009? Well, three things: improve the cost structure, improve the sales side, and diversify downstream… These points hold strong for all fully integrated and non-integrated solar panel suppliers as well. By the way, fully integrated solar panel suppliers are likely to suffer less severe losses than non-integrated competitors.
There must be some way around to to bring about some balance within the current imbalance in the demand and supply situation. While Dr. Wicht agrees this is a difficult one to answer this early, he adds that supply and demand are diverging heavily. “With the current trajectories even in 2012, 100 percent more modules are produced than installed,” he says. I promise to discuss this question again with the good Dr. in another six months time.
Word of wisdom
There are various support programs in place, and it is important to know whether they will continue to remain beneficial, both to support markets to become independent sustainable and to develop the regional industry.
Dr. Wicht believes the support programs are still required and beneficial. “If China, India, Mexico and other sunny regions would start to support solar installations, that could change the picture drastically,” he notes.
A note of warning for new entrants in the solar photovoltaic space! Be aware that this warning has been earlier highlighted in the global semiconductor outlook for 2009! In tune with what the various analysts have maintained earlier, iSuppli also forsees newcomers in the solar photovoltaic line having problems in getting the required credit for their projects.
What next for Europe, emerging regions?
According to iSuppli, the short-term boost in demand from Spain and Germany has kept the installation companies busy, and solar orders and module prices high. But this boom is over. So, what’s next for European players?
According to Dr. Wicht, Germany and Spain should continue their leading role as solar installation regions, even after the boom. France, Italy and Czech Republic are attractive, but still much smaller markets, he maintains.
iSuppli has also mentioned that the race to larger manufacturing scale comes to an end when the production is not sold anymore! In that case, what’s the case for the emerging nations, like China and India? Aren’t there buyers in such places?
Dr. Wicht says: “Demand in the traditional solar markets is not elastic enough to absorb all of the solar production. Potential new markets, for example, China and India, do not yet have installation capacities and administration to significantly change the global solar demand short term.”
iSuppli also feels that the newer Chinese and Taiwanese suppliers will be hit particularly hard during 2009. The reason being, many suppliers have expanded their production capacities heavily without securing equally the sales/downstream part.
Global top 20 rankings to change?
Now to the most interesting part! Most of you have read about the top 20 global solar photovoltaic suppliers. Following the iSuppli warning of a ‘solar eclipse’ in 2009, there is every likelihood that there will be changes in that table!
Dr. Wicht adds, “However, the top 10 companies are typically better placed than the competition regarding their cost structures, downstream integration and vertical integration.”
Obama’s solar plans!
Now on to yet other interesting point! The US President-elect, Barack Obama’s, New Energy for America plan could well have a significant impact on the US solar industry.
The plan’s provisions include:
• A federal renewable portfolio standard (RPS) that requires 10 percent of electricity consumed in the US to come from renewable sources by 2012.
• A $150 billion investment over 10 years in research, technology demonstration and commercial deployment of clean energy technology.
• Extension of production tax credits for five years to encourage renewable energy production.
• A cap-and-trade system of carbon credits to provide an incentive for businesses to reduce greenhouse gas emissions.
Dr. Wicht says: “We all know that Obama is in favor of renewable energy. However, he will not change a 160 percent oversupply of solar panels in 2009.”
Bumpy ride to grid parity?
On another note, and a pretty favorite one: Is it going to be a “bumpy road” to grid parity? How will the subsidies be kept going?
Dr. Wicht notes: “Subsidies will continue. It will always be a bumby road because the ramping cycles differ heavily among silicon, cells, modules and the installation capacity. Please remember that the installation business will now benefit from low module prices. It will recover some of the margins it has lost in the last years due to high module prices.”
Also, up to when will polysilicon constraints last? iSuppli had earlier indicated PV strategy changes. According to Dr. Wicht, the polysilicon prices are coming down already. “Our indication from October 2008 seems to be fairly good,” he says.
Lastly, will iSuppli be still sticking by solar, semicon investments being equal by 2010?
Dr. Wicht says: “Please let me cite again our interview in October: The investments for solar production raising up to several hundreds of Mio USD, up to 1 Bio $ per production site. That is coming close to a semiconductor fab. The total capex of semiconductor is still 10 times larger than PV. However, PV is rising much faster.”
That will be all for this year, folks!
Look forward to sharing much more captivating moments in semiconductors, electronics, solar photovoltaics, telecom, etc., in 2009!
Wishing all of you a very happy, prosperous and successful 2009. Be safe and look after yourself! See you next year!! :)
Recently, the India Semiconductor Association (ISA) held an educative briefing session on the potential of the solar PV market in India, which was conducted by Rajiv Jain, Director, Government Relations, ISA.
This meeting was held well before iSuppli issued a warning that there could be global solar sunburn in 2009! I am sincerely hoping that most of the points mentioned by ISA’s Jain still hold good in the coming year, and that India really does well and takes off in solar photovoltaics.
The ISA’s vision: To help make India an attractive global destination for PV manufacturing and a world leader in solar energy.
Starting with the basics of photovoltaics, he said that it is a package of solar cells used to convert energy from sun to electricity. In simpler words, photons from sunlight knock electrons into higher state of energy, thus creating electricity. The electricity can be used to power equipment or recharge a battery. A typical PV system mainly consists of a PV module, battery, inverter, controller and junction box.
Focusing on the technological landscape, he touched upon the two key technologies for solar: crystalline and thin film.
Crystalline silicon is said to be the most mature Si wafer technology, with the largest market share. Though, high on cost, it has a typical efficieny of 14-18 percent. Crystalline silicon is said to suitable for rooftop applications.
Thin film is nothing but thin layers of photosensitive materials on glass. It is currently on high growth due to silicon shortage, and very low on cost due to low material consumption. The efficiency is about 6.5-8 percent.
A third technology, nanotechnology, is the future technology for cost reduction. It is more in the R&D space as of now.
Present scenario for solar
So what’s the present scenario? In 2007, of $71 billion invested in new renewable energy (RE) capacity globally, 30 percent was in solar PV. It is the fastest growing area in the energy sector, with a CAGR of 47 percent over the last five years.
Grid-connected solar PV has been high growth market segment in 2007 (50 percent increase). Also, 86 percent of the PV installations are largely in four countries, with Germany at 47 percent being the outright leader.
Market drivers are said to be attractive feed-in tariffs, national PV market development and acceptance, RE obligations through solar PV, access to cheaper mode of finance, manufacturing incentives as well as strong R&D.
Why solar for India
I have addressed this in an earlier blog post. Here’s what Jain had to say, and it is mostly in line with the earlier discussions.
First, India has among the highest solar irradiance globally. It also has the best quality reserves of silica in Orissa and Andhra Pradesh. India has also established itself low cost producer and assembler of solar PV cells and modules.
The major challenges include attaining scale and integration for cost reduction, and, R&D for development of the industry.
Solar insolation in India
To start with, the daily average solar energy incident varies from 4-7kWh per m2. Next, we have multiple sites with solar irradiation >2000 hours per year. In contrast, Germany has 900-1,200 hours per year. Further, most parts of India have 300-300 sunny days in a year translating into a potential of 600GW. Also, potential in some states like Rajasthan is 35-40 MW per m2.
It is well known that the Indian semiconductor policy of 2007 has triggered off the now well publicized efforts in solar initiatives. The government of India has received 16 applications with investments envisaged at app Rs. 1,55,000 crores.
The investments in solar PV manufacturing exceed Rs 1,25,000 crores. Generation based incentives (GBI) are going to be key.
Potential market segments in India
There are quite a few, actually. In rural electrification, the government of India’s target is to achieve ‘Electricity for all by 2012′. About 18,000 remote villages will likely be electrified through RE. About ~25 percent of the remote villages, i.e., 4,500 villages, form a very viable market.
Next comes telecom back-up power! PV is a cost effective alternative to diesel generators (DG) for back up power for shorter duration, as DG based systems suffer from several disadvantages.
Another key market could be grid connected solar PV based generation. Current tariffs do not provide attractive IRR to developers. Decreasing system prices are however, likely to improve the economics.
Finally, roof based BIPV is said to be an alternative to reduce the cost of power procured by commercial buildings.
The ISA has also made salient recommendations via its report on the industry. These include areas such as manufacturing: with an aim to encourage companies investing in ‘Scale and integration’, provision of capital subsidy to larger number of units, availability of funds at a cheaper rate, and an emphasis on R&D.
Also, the ISA has recommended that GBI be given for a tenure of 20 years, with the present period being 10 years. Further, it has suggested an accelerated depreciation along with the GBI scheme, and the availability of GBI for an unlimited capacity for a period of five years. The ISA has recommended an enactment of the RE Law requiring utilities to progressively increase power purchase from RE.
On its part, the ISA has been working with the government of India and various state governments as well. It has a sound rapport with concerned ministries – MNRE, DIT and NMCC.
The ISA has also assisted in the technical evaluation of solar PV proposals received in Fab City, Hyderabad. It has also drafted a semiconductor policy for the government of Karnataka, which should be out early next year, hopefully. The ISA is also working with several other state governments to promote the industry in their states.
The second ISA Solar PV Conclave is scheduled for November 2009 at Hyderabad.
Very good intentions, all of these! Now, for the Indian industry and the government to deliver, and walk hand in hand!!
Those following the EDA industry are well aware that its been an industry in some trouble right through this year.
If you visited EDA Consortium’s web site, this becomes clear. In Q1-08, the global EDA industry revenue for Q1 2008 declined 1.2 percent to $1,350.7 million compared to $1,366.8 million in Q1 2007.
Later, the EDA industry revenue for Q2 2008 declined 3.7 percent to $1357.4 million compared to $1408.8 million in Q2 2007, as reported by the EDA Consortium.
I am still waiting to see how the Q3 results shape up. My guess is, it would be even lower than Q2, unless there are a few surprises!
The EDA market in India, as per the ISA F&S Report 2005, was US$110m. The latest figures are not yet available, though I would believe the Indian EDA industry is likely to do better than the global industry, unless, there have been some slowdown effects here as well.
I had an interesting discussion with Jaswinder Ahuja, Corporate Vice President and Managing Director, Cadence Design Systems (I) Pvt. Ltd and Chairman, India Semiconductor Association (ISA), on the (dipping?) fortunes of the EDA industry lately.
According to Ahuja, 2008 has been a challenging year. The global financial crisis has impacted several industries and the EDA industry was no exception. Due to the overall downturn in the economy, companies are being more cautious and are delaying purchase decisions, a move that is impacting the overall EDA industry.
Coming to the drivers for EDA in India this year, there are a few key ones! First, the design centres have gained expertise and are now doing cutting-edge designs out of India. They have moved up the value chain from doing block-level design to increasingly owning up end-to-end design and design starts.
Second, several Indian design services companies have made significant acquisitions, showing that their businesses have not just taken root, but also flourished. MindTree Consulting’s acquisition of TES PV and Wipro’s acquisition of Oki’s wireless chip design arm are cases in point, added Ahuja.
He said: “The Indian EDA industry has been growing and we will see more technology adoptions and proliferations in India Design Centers. Also, the rapidly growing local market is unfolding new opportunities.”
EDA outlook 2009
Going forward, market pressures and design complexities are just some of the issues design teams face today. Cadence’s customers, for instance, would like to plan in the context of IP selection, run analysis around power, performance and cost perspectives. Design predictability will be a priority, said Ahuja.
The key focus areas for the EDA industry will be new design for manufacturing technologies as designs move to advanced nodes; verification and verification IPs and multicore processing support for EDA flows as a result of increased integration.
Also, SaaS is likely to gain traction as companies are compelled to consider flexible engagement models to access state-of-the art design environments that help design teams reduce risk and cost, yet increase time-to-productivity.
Are there any opportunities for EDA folks in solar? Ahuja disclosed that in a recent poll by ISA, to the question ‘Solar PV has potential in India’, almost 90 percent of respondents replied Agree or Strongly Agree.
With the worldwide focus on alternative energy systems, India has witnessed several companies announcing investments in PV segment. This is good news for the Indian semiconductor ecosystem.
Cadence has a broad portfolio of technologies that addresses the needs of different players in the ecosystem.
Low power initiatives
Low power has always been a key focus area in semiconductors. According to Ahuja, power efficient design is gaining importance across the design chain and EDA companies will have to look closely at ‘green’ technologies.
Energy efficiency at the system and application level for wired and wireless products will be one of the focus areas. Emerging technologies that allow applications and systems developers to evaluate how their programs use power both individually and in a dynamic, multi-application model of the end system will help expand the role of EDA into system-level design.
The Power Forward Initiative (PFI), an industry alliance comprising of companies across the semiconductor design chain will work towards a more systematic, integrated approach to low-power design.
With the new year about to start in less than a week’s time, the impact of the financial crisis will see an increased demand for mid-range product technology as consumers shift spend toward ‘essential’, rather than ‘desirable’ electronic products.
As per Ahuja, globally, semiconductor companies are focusing on their core strengths, consolidating and realigning resources. Across sectors, they will look for systems that marry functionality with cost efficiencies.
“Growth for semiconductor companies will come from energy related and low-power technologies that are able to drive market share shifts,” he noted.