PV wafer prices to slump further in 2012

Photovoltaic wafer prices dropped dramatically in the first quarter of 2012, falling over 70 percent in a year,

IMS Research points out that the sharp drop was a symptom of a heavy global oversupply, and in turn, it has forced module suppliers to consider buying in their wafer supplies from third parties rather than in-house. This is in stark contrast to 2010 and 2011 where a significant chunk of the suppliers were working on bolstering in house wafer capacities. Wafer prices have dropped by roughly $0.70/W to reach record lows.

Compared to the first quarter of 2011, when average wafer prices were over $1/W, at the beginning of 2012 they were just $0.30/W. The solar industry is big business, and an enormously competitive market place – caused by capacity expansions that outweighed 2011’s demand – forced an oversupply which lead to the cost reductions.

IMS Research noted that global PV wafer capacity grew 50 percent to reach a total of 50 GW by the end of 2011. Installation demand, however, grew 35 percent to reach 26.9 GW, a clear split.

Polysilicon, cell, and module prices fell throughout 2011, declining by 48 percent, 57 percent, and 44 percent respectively in the first quarter of 2012 compared to 2011.

Rather than taking a beating, suppliers have been focusing intently on how to cut costs to achieve profits. Senior market analyst at IMS, Sam Wilkinson, said that the large Chinese PV module suppliers were looking for 100 percent vertical integration in 2010 and 2011, so expanded their in house wafer capacities. Now, though, many suppliers have figured out it’s cheaper to buy wafers than producing them at their own facilities.

Because of this change in manufacturing strategies, and by making the most of low wafer prices, a lot of suppliers have actually improved their cost structures. For  example, Wilkinson points out, Chinese tier-1  supliers managed to improve cost structures by $0.05/W – not a number to be sniffed at considering the industry’s climate. “With many suppliers renogatiating their polysilicon sipply contracts and also improving their polysilicon purchase costs, suppliers will certainly need to remain flexible in their manufacturing operations in 2012,” Wilkinson said.

Prices for both wafers and polysilicon are expected to drop even further throughout the year. IMS predicts that the average wafer price will have fallen by 25 percent by the end of 2012, compared to the same quarter in 2011. Polysilicon prices will fall at a faster rate, dropping by 33 percent by 2012’s end.