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2009 proved the solar industry can be highly cyclical. After averaging 15 per cent between Q1 06 and Q4 08, profit margins for a group of 14 leading cell and module manufacturers suffered a precipitous drop to -10 per cent in Q1 09 and remained negative in Q2 09. The significant losses were caused by the capping of Spain's Feed-In-Tariff (FIT), the worldwide economic crisis and tight credit markets. Excess manufacturing capacity and oversupply throughout the supply chain during the first half helped push average photovoltaic (PV) system prices down more than 25 per cent. These lower prices, somewhat easier financing, diversification of the demand base and positive incentives in multiple regions helped push demand and most leading producers into the black in Q3 09. Incentives impact Incentives are designed to increase demand by improving the economics of installing a PV system. But on the other hand, fear of incentive reduction can also push demand, as users rush to install systems before benefits expire. Expectations that the new government in Germany will further lower FIT rates is one the most important current demand drivers. Changes or new incentives in Germany, Italy, Japan, America, France, China and other regions are now forecast to cause demand to grow more than 40 per cent in 2010. Solar cell and module makers should see average profit margins increasing in Q4 09 and towards 20 per cent in 2010. In 2010 solar cell manufacturers will continue to focus on cost reduction as they try to push PV towards grid parity while simultaneously maintaining margins. Key methods for reducing costs include using less expensive silicon, using less silicon or not using silicon at all.
Besides increasing the scale of conventional Siemens-based p-Si production, new refining technologies, such as Fluid Bed Reactor (FBR) and Upgraded Metallurgical Grade (UMG) silicon, have been developed as lower cost alternatives. Interest in these technologies has waned with the collapse of p-Si pricing, but they still may offer greater savings in the future. Thinner wafers Adopting thinner wafers consumes less p-Si and reduces the total cost of PV modules. Cell manufacturers have transitioned from 300µm wafers used in the year 2000 to 150µm at leading-edge fabs today, reducing Si content by 50 per cent. Wires used to slice wafers off ingots are not much thinner than the wafer itself, so as much as half of the silicon is lost as kerf. Applying thinner wires and new slurries or diamond coated wires all can further reduce kerf loss and continue to enable thinner wafers. One hundred microns is often assumed to be the limit to conventional wafering, but alternative slicing techniques, such as Silicon Genesis' Polymax technology, can cleave mono-crystalline silicon foils down to only 20µm. There are multiple iterations of amorphous silicon (a-Si), cadmium telluride (CdTe) and copper indium gallium selenide (CIGS), the main thin film PV cell technologies, but all target lower costs by eliminating the use of crystalline silicon absorbers. However, typically there is trade-off of lower conversion efficiency. Due to the proliferation of turn-key fab vendors, a-Si has ramped from just 296MW of capacity in 2007 to 1.6GW in 2009 and is forecast to reach more than 3GW in 2010. Much of this capacity is being run at low utilization rates now as a-Si struggles to remain competitive in an era of much lower than previously expected p-Si prices. CIGS based solar cells have long offered the hope of both relatively high conversion efficiencies, similar to crystalline silicon levels, and potentially a very low cost structure. However, the technology has proven very hard to ramp. CIGS accounted for only three per cent of total solar cell capacity in 2009, and actual production on that capacity is quite limited. Even so the appeal of CIGS remains. An additional 415MW of new CIGS capacity is planned to be built out in 2010. And in the near future large 500MW or even 1GW CIGS fabs are being planned by companies like Solyndra and Showa Shell Solar. CdTe, as manufactured by First Solar, is by far the cost leading PV technology. In Q3'09 the company is manufacturing modules at just $0.85/W. Not surprisingly, First Solar has a large backlog and will add 424MW of capacity in 2010 to help fulfill strong demand. And because of that, the company is forecasting 2010 earnings per share between $6.05 and $6.85! First Solar is a role model for other module manufacturers, but to date no other CdTe companies have been able to replicate its success.
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Because higher efficiency equals lower cost, whether thin film or c-Si, there will be in 2010 a renewed emphasis on improving conversion efficiencies. Centrotherm, a leading German equipment company, states that an efficiency gain of 0.5 per cent translates to a cost reduction of about three per cent. After going through its first significant "solar cycle" in the first half of 2009, the majority of the PV supply chain has quickly recovered. With demand increasing and costs coming down, most segments of the industry are looking forward to a bright 2010 where average profit margins head towards 20 per cent. That should hold for at least the 1H 10; after that, incentive policy decisions will determine the timing of the next cycle. - Charles Annis VP Manufacturing Research DisplaySearch LLC |
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Solar sector presents new EMS opportunities The electronics industry was not spared in the recent worldwide recession, and it is expected to recover by 2010 along with the global economy, which is anticipated to grow by three percent driven by Asia, mainly China and India. Global recessions are times of pent-up demand; as soon as things look up, companies and people start buyingnew electronic devices and replacing old ones. This will drive the production of OEMs. Consequently, the EMS industry will experience higher volume requirement from OEMs. The global solar industry, arguably a sunrise industry in light of the shifting values toward clean and renewable energy sources, also faced its greatest challenges in 2009, when Spain cut government support for further expansion. This dragged price levels further, falling by more than 30 percent since 2008. Early this year, 2009 global demand was projected to reach only about 3.5 GW, a drop of around 35 percent from 2008. In mid-2009, Germany capitalized on the oversupply trend and the falling costs by filling the gaps left by Spain. The lingering oversupply in the global solar industry may yet help the market return to its normal growth path by 2010 as global demand reaches 8.34GW. After Spain's decision to put a 500MW cap on their installations for the year, Germany has taken over the reins and is poised to lead Europe's solar market. By 2010, Germany, Spain and Italy are projected to claim an 83-88-percent combined market share in Europe. Elsewhere, the United States, led by California, is fast growing and is estimated to have the largest market for small solar energy installations by 2011. China will likewise lead as the manufacturing hub of solar cells and will account for 32 percent of global production by 2012. Both China and India will eventually become market hotbeds as they capitalize on available land in the next five years. Clean power The use of solar (photovoltaic, or PV) cells suggests a decreased dependence on fossil fuels, thus helping cut back greenhouse gas emissions. For many years now, solar energy has been the power supply of choice for industrial applications, where power is required at remote locations. Solar energy also makes it possible for on-site and local generation of electricity at point-of-use, that is, the electricity need not be distributed across large distances, hence reducing transmission and distribution losses. It is also frequently used on transportation signaling e.g., offshore navigation buoys, lighthouses, aircraft warning lights on pylons or structures, and increasingly in road traffic warning signals. It powers satellites used for communication, television, and GPS. Solar energy's great benefit is that it is highly reliable and requires little maintenance. The production of solar power systems can also create new jobs in manufacturing, distribution, installation and maintenance. Their wide dispersal will create jobs in addition to industrial centers. The EMS opportunity EMS companies have a golden opportunity to capture value in the solar market by applying existing expertise to solar module assembly. Although development into solar can seem daunting, it is becoming clear that the future of solar will involve electronics manufacturers. This connection between EMS and solar has been validated through several precedent transactions over the past year. Leading the charge is Jabil, with at least three contracts to assemble solar modules with Day4 Energy, Sunpower, and BP Solar. Flextronics also secured a contract with one of the largest manufacturers of solar micro-inverters. These trends are being driven both by EMS businesses that recognize the similarities between module assembly and existing electronics manufacturing processes, and existing solar companies that recognize the value of outsourcing that part of their business. Integrated Microelectronics Inc. (IMI) recently forged a strategic partnership with SVTC, a San Jose, California-based leader in offering independent technology services to the semiconductor industry, and Renewable Energy Test Center (RETC), a Freemont, California-based engineering services, test and certification provider for PV and renewable energy products. The partnership aims to offer complete PV services encompassing solar wafer development, panel prototype, certification, and mass production. By providing IP-secure, shared access to PV equipment and services, SVTC lowers development costs and accelerates time-to-market and time-to-revenue for new solar products. - Arthur R. Tan President & CEO Integrated Microelectronics Inc. |
