Electronics Production | September 20, 2011

Solar industry revenue grew 23%

Solar Industry Revenue Grew 23% Y/Y in 1H11, according to Custer Consulting Group.
So far, 2011 has seen a global slowdown in year over year rate of growth in all industries as uncertainty causes unpredictable gyrations in demand expectations, commodity prices and stock valuations despite Italy and the U.S. approaching record solar photovoltaic installations and unprecedented opportunity and support for renewables to replace high-risk nuclear energy in Japan, parts of Europe and China.

Second Quarter Beat Expectations

Average 2Q11 solar photovoltaic revenues grew 14% y/y and 9% q/q based on a sample population of 60 publicly traded companies with collective annual revenues exceeding U.S. $50 billion.

A monthly composite of  revenues from 17 Taiwan-based manufacturers shows a slight recovery from a six-month free fall and the 3/12 rate of growth entering contraction in the middle of the year.

The global 3/12 rate of change demonstrates that the solar industry has become more aligned to cyclical business patterns with the exception of supply chain imbalances that are typical for a fast growing industry with limited historical data and safe guarded communication.

Polysilicon price drops have made crystalline based cell pricing competitive against thin film despite thin film’s competitive efficiency gains. The global thin film sector’s average annual revenue fell 9% y/y in 2Q11 and net income entered negative territory for the first time after four years of profits. In addition, thin film process equipment and materials contracted 11% y/y.

Polycrystalline semiconductor process equipment and materials expanded 123% y/y in the 2Q11 and assembly process equipment revenues grew 28% y/y as manufacturers continued to add capacity, especially in China, which produced 46.4% of world’s PV cells in 2010. China has already exported more than 7.77 gigawatts (3.53 GW in 1Q and 4.24 GW in 2Q) according to government statistics.

Crystalline cells, modules and panels and installations segments had an average annual revenue growth of only 3% and 2% respectively as pricing competition devoured profits and forced several players out of the industry. 2Q revenues for vertically integrated companies faired the best with 33% y/y growth as they benefitted from supply chain management.

The industry’s year-over-year growth rate has tapered down in comparison to 1Q11 and previous year .  Inventory/sales ratio based on the same composite of 60 publily traded companies marginally declined in 2Q as some manufacturers idled capacity.

Possible Economic Slowdown Could Bring More Stimulus

World purchasing managers indices, which are 3-6 month leading indicators to regional markets, are pointing toward further contraction in most regions. Semiconductor shipments lead the solar photovoltaic industry by several months and are also showing prolonged contraction into 3Q.

This anticipated cooling down period could be beneficial to solar makers as they work through pipeline of planned installations which has grown to 17 GW (Between now and 2015) in the U.S. alone according to SolarBuzz. Commodity and shipping cost reductions can boost margins and government stimulus packages have been providing capital for R&D, expansions, integrations and demand incentives.
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