Declining Incentives Could Affect PV Equipment Spending in 2011

Following a year when global photovoltaic (PV) market demand grew 139 percent, PV cell manufacturers have embarked upon aggressive expansion plans in support of ambitious shipment guidance for 2011. Consequently, the scale of expansions announced would create a $15.2 billion revenue opportunity for PV equipment suppliers during 2011, an increase of 41 percent 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 percent, thin-film spending would grow by an incredible 71 percent. Underpinning this thin-film growth is a resurgence of investments in a-Si and CIGS technologies, which account for 78 percent of planned thin-film capacity expansions.

Tier 1 expansions remain dominated by aggressive 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 3GW, Trina Solar to 1.9GW, Neo Solar Power to 1.8GW, and Jinko Solar to 1.5GW. In the past 12 months, manufacturers in China and Taiwan accounted for 82 percent of the $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 percent between 1Q11 and 1Q12, as the second thin-film investment cycle draws to a conclusion. Within this period, an incredible 65 thin-film expansion phases are projected to be implemented, with a combined nameplate capacity of 4.8GW.

Finlay Colville, Senior Analyst at Solarbuzz, said, “Fab investments during 2011 are providing opportunities for the PV equipment supply-chain, reflected in tool backlogs at the $1 billion level reported during 1Q11 by equipment leaders Applied Materials, Centrotherm, GT Solar and Meyer Burger. While suppliers of choice to tier-1 manufacturers have been forced to increase monthly tool shipments, tier-2 c-Si and thin-film investments are offering significant revenue upside for emerging equipment suppliers.”

Capacity expansions are consistent with leading cell manufacturers guiding 2011 shipment growth rates of 55 percent. However, market demand is forecast to increase by only 12 percent 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 2H11. With tool lead times typically three to six months, the full impact of these changes will be felt hardest during 2012.

Equipment spending downturn ahead
During 1Q11, PV equipment spending reached another quarterly high of $3.7 billion. The current PV spending cycle will peak in 2Q11, followed by a sharp decline from 4Q11, as the industry resets its expansion plans to meet the pending market downturn in 2H11. For leading equipment suppliers aligned with tier-1 expansion phases, this will translate to an immediate decline in new order intake.

However, new opportunities will then emerge for equipment suppliers of next-generation fab tools, as high-efficiency roadmaps are reprioritized. Q-Cells recently announced plans to upgrade their 1.1GW of cell capacity during 2H11 with front- and rear-side enhancements, providing an early indicator of roadmap deliverables. High-efficiency c-Si variants are forecast to comprise 35 percent of all c-Si cell capacity by 1Q12. 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 Semiconductor Equipment Associates.

As existing backlogs are shipped during 1H11, strong 1Q11 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 upon 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 2H11, new challenges will emerge for tool suppliers. This is most vividly captured within the $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 at a top-10 cell producer, and Orbotech’s subsidiary OLT Solar prepares to deliver its first beta-site tool in 2Q11.

Solarbuzz