The fall is forecast to put pressure on suppliers according to the latest quarterly report from IMS Research.
As a result of continued price pressure and highly competitive market conditions throughout the PV industry, gross profits are forecast to continue to fall further to just seven cents per watt by the end of 2012.
IMS Research reveals that following a year of rapid price declines, when average crystalline PV module prices fell by nearly 50 percent, industry gross profits fell below $500 million in Q1’12, the lowest level since 2008 and more than 75 percent lower year-on-year. The cause of this rapid deterioration is simply due to costs not falling as quickly as prices. Whilst average crystalline PV module prices fell by 67 cents per watt in 2011, average costs per watt reduced by just 42 cents.
“Profit margins have been the victim as suppliers have been forced to engage in a fierce price war and have reduced prices faster than they have been able to reduce their costs,” commented IMS Research’s Senior Market Analyst Sam Wilkinson. “High inventory levels, weak demand and reduced government support for PV have all contributed to a rapid downward spiral for PV module prices.”
The narrowing gap between prices and costs has resulted in the average gross profit per watt of crystalline modules falling from 39 US cents to just nine cents in one year. One key reason that suppliers have been unable to reduce their costs quickly enough is that average polysilicon prices have not declined as quickly as module prices.
“Although spot prices for polysilicon have quickly fallen over the last year, a large proportion of polysilicon is purchased under long-term agreements, and it has taken some time for suppliers to cancel or renegotiate supply contracts in order to reflect these reductions in spot prices. If we consider this mix of spot and contract prices, on average polysilicon prices fell far