PV equipment spending at risk from market downturn

Following a year when the global photovoltaic (PV) market demand grew by 139%, PV cell manufacturers have embarked on expansion plans for 2011.

The scale of expansions announced would create a US$15.2 billion revenue opportunity for PV equipment suppliers during 2011, an increase of 41% Y/Y, according to the latest Solarbuzz PV Equipment Quarterly report.

While Y/Y growth for c-Si equipment spending (including ingot, wafer, cell and module stages) in 2011 would amount to 31%, thin-film spending would grow by 71%. Underpinning this growth is a resurgence of investments in a-Si and CIGS technologies, which account for 78% of planned thin-film capacity expansion.

Tier 1 expansions remain dominated by schedules announced by publicly listed Chinese c-Si producers, followed by cell producers in Taiwan and thin-film leader First Solar. Examples of revised year-end nameplate capacity targets include JA Solar to 3 GW, Trina Solar to 1.9 GW, Neo Solar Power to 1.8 GW and Jinko Solar to 1.5 GW.

In the past 12 months, manufacturers in China and Taiwan accounted for 82% of the US$3.6 billion revenues allocated to new c-Si cell equipment worldwide.

Adding to the c-Si expansion activity, thin-film manufacturing capacity is scheduled to grow by 70% between Q1’11 and Q1’12, as the second thin-film investment cycle draws to a conclusion. Within this period, 65 thin-film expansion phases are projected to be implemented, with a combined nameplate capacity of 4.8 GW.

Capacity expansions are consistent with leading cell manufacturers guiding 2011 shipment growth rates of 55%. However, market demand is forecast to increase by only 12% this year, as incentive tariff cuts are implemented across major European markets. This imbalance will have a profound impact on the equipment supply chain, starting with a reset of capacity growth plans during 2H’11. With tool lead times typically 3-6 months, the full impact of these changes will be felt hardest during 2012.

During Q1’11, PV equipment spending reached another quarterly high of US$3.7 billion. The current PV spending cycle will peak in Q2’11, followed by a sharp decline from Q4’11, as the industry resets its expansion plans to meet the pending market downturn in 2H’11.

For leading equipment suppliers aligned with tier-1 expansion phases, this will translate to an immediate decline in new orders.

However, new opportunities will then emerge for equipment suppliers of next-generation fab tools, as high-efficiency roadmaps are reprioritised.

Q-Cells recently announced plans to upgrade its 1.1 GW of cell capacity during 2H’11 with front- and rear-side enhancements, providing an early indicator of roadmap deliverables.

High-efficiency c-Si variants are forecast to comprise 35% of all c-Si cell capacity by Q1’12. Accelerating next-generation concepts will facilitate adoption rates of new tool types, such as ion implanters being championed today by semiconductor-equipment market leader Varian Associates.

As existing backlogs are shipped during 1H’11, strong Q1’11 revenues will be announced shortly. However, the leading indicator will be new orders received, as PV producers review their plans for 2012. Further expansion by thin-film entrants will depend on the success of initial fabs ramped up in 2011 and 2012.

However, a long queue of hungry investors eyeing up the PV industry will likely keep this fragmented segment financed for some time.

As the equipment spending cycle approaches its downturn in 2H’11, new challenges will emerge for tool suppliers. This is most vividly captured within the US$750 million segment for PECVD tools used to deposit passivation layers and anti-reflecting coatings during c-Si cell formation.

Meyer Burger’s proposed takeover of Roth and Rau comes ahead of a likely drop-off in PECVD order intake as Centrotherm increases its market share, Jusung Engineering is buoyed up following a significant win as a top-10 cell producer and Orbotech’s subsidiary OLT Solar prepares to deliver its first beta-site tool in Q2’11.