PV module manufacturers face tough time in 2011

Firms making photovoltaic modules (PV) face a tough time in 2011 with increased production capacity in direct opposition to significant slowing of growth in PV installations.

PV module production increased by almost 70 percent in 2010 meaning that record levels of 30GW of capacity were reached by the end of the year, according to figures provided by IMS Research.

The growth of production capabilities in forecast to continue increasing at a high rate, with IMS Research predicting that within the first half of the year the global capacity will reach 35GW.

This is despite the fact that the actual installations of PV modules is estimated to slow considerably to 20 percent in 2011, compared to the 100 percent increase seen in the record levels of 2010.

The massive growth came as a result of financial incentives for feed-in-tariff rates, particularly European countries such as Germany, Italy and Czech Republic, the three largest markets of the 2010.

While it is normal for governments to reduce the feed-in-tariff rates at the end of the year, causing a spike of demand just before they take effect and a lull immediately after, it is due to the impressive growth in production compared to demand for installation is expected to be problematic for many Tier-2 PV manufacturers.

It is said that regardless of slowing installations, most suppliers, many of which remained capacity-constrained throughout 2010, are proceeding with aggressive capacity expansions.

It is expected that the increase to 35GW of production capacity in the first half of 2011 will in fact be met by installations of no more than one fifth of that amount, leading to tougher competition.  This in turn will lead to an expected 10 percent decrease in PV module prices.

“Leading module suppliers with healthy gross margins, proven products, and large contracted sales for 2011 remain optimistic, and can perhaps afford to be,” commented Sam Wilkinson, Research Analyst at IMS Research.

“However, in the short term, there is not sufficient demand to support the whole industry’s planned capacity expansions and IMS Research predicts that many smaller Tier-2 suppliers may face difficult times in 2011.”

“These suppliers experienced high demand for their products throughout much of last year and were able to capitalize on many larger companies being sold out.”

Wilkinson also commented that this is not likely to be the be the case for smaller firms in 2011, with demand increasing at a far slower rate and Tier-1 suppliers, who are typically favored by investors, bringing significant new capacity online.

Wilkinson told TechEye it is thought that conditions will however improve towards the end of the year: “IMS Research predicts that price declines will slow in the second half of 2011 as demand increases due to the usual seasonal rush to complete systems before further incentive reductions at the end of the year.”