The following is an excerpt from the May 2011 issue of PVNews. Subscribe to PVNews now for comprehensive global cell and module production data.
After a relatively sober 2009 where installations grew by ‘only’ 24% (admittedly in the midst of a global recession), the global PV market roared back to life in 2010, where the 17.5 GW of installations exceeded the previous years’ 7.2 GW by a staggering 141%. In large part, this can be traced to three factors – (i) the continued strength of European feed-in tariff markets - most notably Germany (7.3 GW), Italy (3.9 GW), and the Czech Republic (1.2 GW), (ii) component prices drops that until now, have kept pace with subsidy cuts (tier 1 Chinese crystalline silicon module prices declined from around $2.20/Wp on average in 2009 to $1.75/Wp in 2010), and (iii) the availability of sufficient supply of polysilicon, wafers, cells, and modules due to the rapid expansion of manufacturing capacity, especially in the low-cost regions of China and Taiwan. However, demand in the second and fourth quarters of 2010 outpaced the ability of suppliers to keep up despite this still-ongoing capacity build-out; component shortages (especially for wafers, cells, and inverters) were a recurring feature of 2010, with most cost-effective top-tier manufacturers being sold out well before the first half of the year. It is conceivable that installations could conceivably have crossed 20 GW absent capacity constraints for competitive suppliers. Given this state of affairs, it is not surprising that 2010 was a year to remember for suppliers. Global PV cell and module production clocked in at 23.9 GW and 20.0 GW respectively, representing annual year-over-year growth of around 110%. Bankable, low-cost suppliers such as Trina Solar and Yingli Green Energy recorded gross margins of over 30% for the year, and even smaller, less established players and higher-cost manufacturers enjoyed high utilizations and healthy profit margins.
Technology Trends: Crystalline Silicon PV Gains Share; Thin Film Expanding Beyond First Solar
In terms of module technology, crystalline silicon cell production in 2010 was 19,768 MW, an increase of 128% over 2009; this does not include the 920 MW of “super” monocrystalline cells produced by firms utilizing non-standard technology such as SunPower (all back-contact) and Sanyo (heterojunction with intrinsic thin film layer). Overall, c-Si made up 83% of 2010 cell production (87% including super mono c-Si), an increase from 77% (83%) in 2009. Notably, 2010 marked the first time since 2005 that thin film market share declined (from 17% in 2009 to 13% in 2010). Reasons for this included the following: (i) only a moderate increase in production by First Solar (26%), by far the most competitive thin film producer in the space, (ii) rapid c-Si capacity expansion by Chinese and Taiwanese manufacturers, (iii) lower thin-film capacity growth than in previous years (38% compared to 99% in 2009), as most thin film manufacturers adopted a cautious approach in 2010 and prioritized utilizing available capacity over expanding further, and (iv) a stable polysilicon price environment which drove superior efficiency-adjusted manufacturing cost for most Chinese c-Si manufacturers relative to most thin film manufacturers.
It is important not to read too much into the decline in thin film market share, as overall thin film production increased substantially, reaching a volume of 3,212 MW in 2010 (63% over 2009’s output of 1,974 MW), and thin film producers made significant progress on several important fronts over the course of the year. These included manufacturing cost reductions, improvements on technical parameters (efficiency, yield), and production ramp-up. The growth in production is all the more impressive considering that the industry’s leading player, CdTe-based First Solar, increased output by only 26% (1,111 MW to 1,400 MW). First Solar’s share of overall thin film production (44%) dropped to its lowest since 2006, signifying that at long last, the hopes of this set of technologies no longer rest on the shoulders of a sole supplier.
When looking at individual thin film technologies, CdTe (almost all First Solar) made up 45% of total thin film production in 2010 (1,438 MW), with thin film silicon (amorphous and tandem-junction technology) and CIGS comprising 42% (1,349 MW) and 13% (426 MW) respectively. CIGS was the fastest growing technology segment of PV cells, generating annual growth of 178% (albeit off a small base of 153 MW) as a number of firms moved into mid-level (60 to 80 MW) production in 2010 after years of endless hype about its promise and disruptive potential. Still, at only 2% of the overall market, it has a long way to go before these claims can eventually be justified. Meanwhile, despite constant proclamations of its imminent demise, thin film silicon production continued to grow strongly, from only 198 MW in 2007 to 1,349 MW in 2010, and maintaining a steady overall share of 5-6% across this time. Whether this technology will ever establish a leading position in the market is questionable (especially given its existing efficiency ceiling), it is far too early to write off the prospects of the more than 50 active producers in the market (most based in China and Taiwan) any time soon.
Regional Trends: China and Taiwan All the Way
The increasing price-sensitivity of PV markets in 2009 and 2010 and the continuing commoditization of c-Si technology have played to the strengths of producers in low-cost regions such as China and Taiwan, allowing them to expand production rapidly and consolidate market share substantially over this time. Total cell production from the China/Taiwan region increased from 5,630 MW in 2009 to 14,193 MW in 2010, representing a year-over-year increase of 152%, and a market share of 59%, up from 50% in the previous year. Central to this has been the availability of vast reserves of low-cost capital from Chinese state banks, which have allowed players from this region to scale up capacity and lower manufacturing costs to levels well below their peers. Fears over the quality of Asian modules vis-à-vis Western and Japanese products have been all but banished; in fact, a growing number of American, European, and Japanese firms now employ Chinese module producers in an OEM or tolling capacity and sell these modules under their own high-profile brand names, often without making this information public.
In close conjunction with the rise of China and Taiwan as manufacturing centers has been the decline of Europe and Japan as production centers for PV components. Although production growth from these two regions was still more than healthy in 2010 (49% and 45% respectively), this lagged overall market growth considerably. Few producers expanded the capacity of their European facilities by any notable degree in 2010, choosing either to utilize existing capacity or relying on contract manufacturing or offshore production to serve their demand; from comprising 54% of global cell production in 2007, Europe and Japan made up only 22% of the 2010 total. Production growth was more robust growth in North America and the rest of the world (RoW) region, coming in at 93% and 118% respectively. North America continues to have a disproportionately larger share of thin film production compared to the global average, with 45% of total production being thin film-based; the bulk of North American c-Si cell production came from just two firms (Solarworld USA and Suniva). However, module production in the U.S. (1,556 MW in 2010) was far less consolidated, with the rise of the domestic market creating opportunities for a number of small-to-mid size c-Si pure-play module assembly players. Cell production in the RoW region was dominated by gargantuan facilities owned by Western firms, including Singapore (REC), the Philippines (SunPower), and Malaysia (Q-Cells, First Solar). Going forward, South Korea is also expected to be a region of interest, particularly for c-Si cells, as producers in these regions (Shinsung Holdings, Millinet, Hyundai Heavy Industries, Samsung) have planned significant investments in cell manufacturing for 2011 and beyond.
Top Producers: Entering the Gigawatt Era
As one would expect, the list of top PV cell producers is dominated by names from China and Taiwan: nine of the top fifteen cell producers are based in this region. After coming in at number two in 2009, Suntech Power takes the honors in terms of largest production output for both cells and modules in 2010. China-based JA Solar comes in at second place for cells, followed by First Solar, Yingli Green Energy, and Trina Solar: all but First Solar are China-based, and have a high degree of vertical integration. The rest of the list is made up of the next tier of Chinese producers (Hanwha SolarOne, Canadian Solar, Neo Solar), Taiwanese pure-play cell producers (Motech, Gintech), and vertically integrated Western/Japanese firms (REC, SunPower, Kyocera, Sharp). As in previous years, First Solar and Sharp’s tandem-junction facility are the only thin film representatives on the list. In total, the top fifteen cell firms produced 13,151 MW of cells, 55% of the 2010 total. Six producers (seven, if CIGS producer Solibro is counted towards Q-Cells’ output) produced over 1 GW in 2010, compared to only one in 2009, indicating that PV manufacturing is as much a business of industrial-scale manufacturing as technology innovation.
The list of top module producers is much the same as cells, given that there is a definite trend towards vertical integration (wafers-cells-modules) in the industry: nine companies figure in both lists. The main difference is the absence of the Taiwanese cell producers and the emergence of large, previously pure-play Chinese wafer firms (Renesola, LDK Solar), companies that were not even in the top 50 in 2009 in terms of module output. Recognizing that module assembly is a low-IP process with little capital investment required (especially in China, where much of the work is carried out manually), these firms have leveraged their industry-leading wafer costs and relationships with cell customers to enter the module business (particularly as OEM manufacturers), with much success given the capacity-constrained nature of the more established firms. Whether they can hold on to their spots during more challenging periods, is, however, up for debate.
First Solar aside, the scale of top thin film producers in 2010 pales in comparison to their crystalline silicon brethren; only three other firms (Sharp, Trony Solar, and United Solar) produced more than 100 MW during this period, and the firms occupying slots two to ten made up only 852 MW production in total. Still, compared to previous years, the numbers are impressive. Six of the names on the list are thin film silicon producers, mostly tandem-junction based, while three CIGS firms (Solibro, Solar Frontier, and Solyndra) figure in this list. China/Taiwan presence is much more muted compared to c-Si, with only three firms (Trony, NexPower, Auria) based there. The next two years will be critical in terms of gauging the prospects of these producers, as a more challenging demand environment will put their competitive positioning on all fronts to the test.
2011 Outlook: Challenges Ahead for a Resilient Industry
While 2010 witnessed unfettered growth and lucrative profits for the industry, 2011 and 2012 are widely expected to be much more challenging years, with policymakers attempting to reign in demand by imposing significant cuts in all key feed-in tariff-driven markets. Already, news from the first four months of the year indicates that demand has softened considerably, although given the seasonal nature of PV demand, the months of greatest demand (June and December) are yet to come. While further demand growth in 2011 is certainly possible, its magnitude will likely be substantially lower (GTM Research estimates 2011 installations at 20.8 GW, implying 19% growth), and 2012 could be even tougher given the probability of further cuts and market caps. At the same time, cell and module manufacturers have been expanding relentlessly; cell and module capacity are set to increase by another 54-57% in 2011; Chinese and Taiwanese manufacturers alone are adding 14 GW in cell capacity this year. This points to the very real possibility of an oversupplied market in the second half of 2011 and 2012, with capacity utilization suffering and consequent component price drops through the value chain required to stimulate elasticity in uncapped markets such as Germany and the U.S. While the best (i.e. bankable, low-cost) producers should be able to drive demand by reducing their prices (while still maintaining healthy margins), the rest of the pack will experience renewed pressure, and the already ongoing process of consolidation and transformation the industry has gone through in the last two years (geographic focus, downstream integration, vertical integration, contract manufacturing, offshore production, market exits from thin film players) is likely to accelerate during this period. However, the PV industry has proven to be surprisingly dynamic and resilient in the face of such prophecies in the past; overall, consolidation has certainly not occurred at the pace that many pundits previously predicted, as companies have made rapid adjustments in their capacity planning, technology investment, and business models to deal with existing market dynamics. Given this, it would be wise to stay away from any doom-and-gloom prophecies despite the many challenges ahead.
The results above are based on PVNews and GTM Research's 27th annual global data collection for PV cells and modules. Data on 2010 production and manufacturing capacity, as well as the outlook for manufacturing capacity for 2011 was collected for all major global manufacturing facilities through a combination of surveys and other means of primary research. A listing of top producers by region can be found in the May 2011 issue of PVNews, which can be purchased here. For a complete listing of facility-specific production from 2007 to 2010, contact GTM Research at email@example.com.