SMA, long one of the global market leaders in solar inverter hardware, had some good news and some less-than-good news in its first-half 2016 earnings announcement. (This season's earnings calls in the solar industry have been a bit strained, and stock prices have suffered. See our coverage of SunPower, Enphase, First Solar, Vivint and SolarEdge.)

SMA first-half 2016 financials

  • Sales grew 15.1 percent year-on-year to $550.3 million
  • SMA had consolidated earnings of $21.6 million -- driven largely by the utility solar sector  
  • International share grew to 91.1 percent 

Yesterday, SMA told Reuters that its July earnings were nearly as good as those garnered in the entire second quarter.

Strong price pressure and 'consolidation of production locations'

SMA confirmed its forecast for fiscal year 2016, expecting sales of between $1,058 million and $1,169 million and a year-on-year increase in EBIT.

However, in anticipation of "further intensification of price pressure in 2017, [SMA] is announcing the closure of the production locations in Denver, USA, and Cape Town, South Africa," according to the company.

SMA noted in a statement, “The acceleration of price pressure in the solar industry has been unexpectedly strong in recent weeks. We therefore immediately initiated measures to lower our break-even point even further. The closure of our production locations in Denver and Cape Town was extremely difficult for us. However, this step is unavoidable if we are to lastingly counteract the persistent price pressure and to achieve better production capacity utilization in China and Germany in the future. The American market remains highly important to us."

Scott Moskowitz, GTM Research analyst, notes, "On one hand, it's not major news. Consolidating manufacturing into China and Germany gives SMA better scale. Simple explanation. But the story is that inverter market pricing continues to fall rapidly and will continue to do so. The market has been consolidating, but is still not mature enough for pricing to level out. Growing international presence of leading Chinese vendors is resulting in exceptional pricing pressure in typically higher priced markets like the United States."

According to GTM Research’s latest report, The Global PV Inverter and MLPE Landscape 2016, global shipments of solar PV inverters will reach 90 gigawatts (AC) and more than $7.1 billion by 2020. This represents an average annual growth rate of 11 percent between 2016 and 2020.

GTM Research forecasts inverter prices to decline 10 percent to 12 percent annually across most product segments through 2020.