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Consolidation likely in solar cell manufacturing to control oversupply, and, lessons for India!

August 12, 2009

Thanks to Jon Cassell and Debra Jaramilla, I was able to get in a conversation with Stefan de Haan, senior analyst, iSuppli Corp., regarding the global solar PV industry. Recently, iSuppli had provided guidance on how “Half of all solar panels made this year won’t be installed in 2009!”

Correcting solar cell manufacturing oversupply
Previously committed capacity expansions have caused solar cell manufacturing oversupply. Why and how can this be corrected?

According to Stefan de Hann, the cell suppliers are already reacting, i.e., cutting back on production and delaying expansion plans. Nevertheless, a consolidation will take place, since prices won’t recover. Production cost is the key to be among the survivors. However, 2009 will see the peak of the cell/module oversupply. From 2010 on, the situation will ease slowly.

If that were the case, weren’t the companies doing enough to check all of this during the downturn of Q4-08?

de Haan added that at the end of last year (record year 2008!), everybody still expected continuous strong demand. “It took most companies longer to realize that their enormous growth expectations were not realistic. We were the first to predict the current scenario already in summer 2008, but the nearly all the companies I talked to at the PVSEC in September 2008 didn’t share this view at all.”

So, therefore, they probably weren’t checking their market carefully enough, after all!

Failure of a-Si thin film solar cell makers?
Is all of this setting the stage for the failure of multiple cell manufacturers, particularly those pursuing a-Si thin film solar cells?

According to the iSuppli analyst, those suppliers relying on standard a-Si thin film lines [AMAT/Oerlikon] will definitely face problems for several quarters. “Collapsing polysilicon prices incease the pressure on these manufacturers. There will be not only excess crystalline cell production, but also excess a-Si production,” he added.

There is also a huge amount of solar cell manufacturing capacity in crystalline silicon solar cell, rather than thin film. When will this start changing and why?

de Haan advised that both crystalline and thin film production (and installation) will continue to grow for the next years. Due to lower production costs, thin film will increase its market share gradually. In iSuppli’s current projection, it sees a thin film market share of 35-40 percent in 2013, up from 15 percent in 2008.

Lessons for India?
With consolidation likely to happen in the global solar cell manufacturing industry to control or combat oversupply, where would it all leave the the talk of building new capacity in India? As we know, back home in India, various companies are betting big on this sector.

In this regard, what are the lessons to learn for the Indian solar PV industry? Bear in mind that India is a “wild card” as far as solar demand is concerned.

According to de Haan, Companies hope for huge investments in the coming years and want to be prepared. However, in the current oversupply situation, the comparatively new Indian cell and module manufacturers will suffer from dropping prices.

He advised: “For them it is important to stay flexible with regard to polysilicon and wafer purchase. These prices won’t recover either, no need for long-term commitments. Most importantly, they need to develop their domestic market. If I was an Indian module manufacturer, I would integrate downstream and enter the installation business.”

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