Solar photovoltaic firms seeking profitability

Financial challenges are forcing solar photovoltaic companies to shift focus from seeking market share to instead prioritising a return to profitability, finds NPD Solarbuzz’s latest Solarbuzz Quarterly report.

Global demand is projected to grow 6% in 2012, so market declines in Europe will be offset by 43% growth outside that region. Therefore, solar companies will face the challenge of rebuilding margins during a period of increasing diversity in end solar market mix.

In 2012, the top priority of PV companies will be to improve their financial position after losses across the industry in 2011 that were caused by overproduction, excess inventories and collapsing market prices.

Cell manufacturers are poised to hold production flat in 2012, but Q1’12 is still forecast to drop 5% Q/Q as manufacturers manage inventory during seasonal weakness.

As a first step on this road, manufacturers have cut 4.9 GW from their previous goal of 28.2 GW of module shipments in 2011. With the industry now projected to benefit from a modest 12% increase in 2011 demand over previous estimates, global module inventories will be reduced to 7.3 GW by year end, down from NPD Solarbuzz’s previous forecast of 8.6 GW.

Faster than expected growth in China and Britain helped to raise the latest 2011 global PV market forecast to 23.6 GW, up 22% Y/Y. The Chinese market development comes at an opportune time for domestic manufacturers, as the environment in the US market has become more uncertain since SolarWorld filed anti-dumping charges with the US Department of Commerce and International Trade Commission.

Downstream companies, particularly in Europe, acted aggressively in Q3’11 to cut inventories, making a reduction of 19 inventory days, with a further 45-day drop projected by the end of Q4’11. However, the 17% reduction in module prices in Q3’11 contributed to inventory write-offs of over US$300 million in the quarter.