The collapse in equipment spending – coming immediately after Y/Y revenue growth rates of 84% in 2010 and 33% in 2011 – is a consequence of ambitious c-Si cell/module and thin-film capacity expansions committed during 2010 and 1H’11 by tier 2 and tier 3 PV manufacturers. Coupled with market oversupply and strong inventory build through 2H’11, this capacity-demand imbalance will usher in a significant cell manufacturer shakeout phase during 2012 to 2014.
Equipment spending for Q2’11 reached $3.6 billion, declining 3% Q/Q and representing the first negative growth rate for PV equipment spending since Q2’09, indicative of an inflection-point within the current PV capital equipment spending cycle. The PV book-to-bill ratio also dipped below parity in Q2’11, continuing its sequential Q/Q downward trend from a high of 1.74 posted back in Q2’10, as new order intake reflected the slowdown in capacity planned for 2012.
Finlay Colville , Senior Analyst at Solarbuzz, said: “Strong double-digit bookings and revenue growth through 2010 created a misleading picture for PV equipment suppliers. This was caused in part by aggressive expansion plans of second-tier c-Si manufacturers, and by the quantity of new thin-film fabs that were financed through the recent thin-film investment cycle. An artificial peak in equipment spending was created during 2010 and 2011, providing a short-term pull on equipment that was out-of-sync with the long-term requirements of the industry.”
Equipment suppliers to the c-Si cell/module segment will be the hardest hit, with Q/Q revenue declines of 21%, 12% and 37% forecast from Q4’11 to Q2’12. Thin-film spending declines will follow a similar downward trend, as the second thin-film investment phase draws to a close during 2H’11. Only c-Si equipment suppliers with an established upstream product portfolio and strong market shares (e.g. GT Solar, Meyer Burger, Applied Materials, and Jinggong) have been sheltered from the drop-off in equipment bookings during 1H’11.
Expansions across all tier categories will provide 51 GW and 66 GW of annualized capacity during 2011 and 2012, accumulated from more than 300 manufacturers. However, by filtering out the manufacturing capacity that is both cost-competitive and market-leading, the true significance of these capacity levels becomes apparent. Tier 1 cell manufacturers will account for 24 GW and 34 GW of capacity in 2011 and 2012, more than sufficient to meet global demand over this time period.
The cell manufacturer shakeout is a key factor driving the scale of the revenue reset and the phasing of equipment spending during the 2012-2015 period. Equipment spending from tier 2 and tier 3 PV manufacturers is forecast to decline 60% Y/Y in 2012. By 2015, tier 1 companies will account for more than 70% of all PV equipment spending.
“Tool suppliers will increasingly focus on securing preferred-supplier status with tier 1 manufacturers,” added Colville. “Additionally, competition will intensify ahead of the next spending upturn as suppliers from adjacent market segments (e.g. semiconductor and display) exploit the opportunity to enter the PV equipment supply-chain.”
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