PV Revenues Rebound but Margins Fall
According to a comprehensive new report from Young Market Research, revenues in the photovoltaics industry rebounded last quarter, but profit margins continued to drop. North America was the most profitable, thanks to First Solar, but Chinese companies show the most promise in Q3.
Aaron Hand, Executive Editor -- PV Society, 9/24/2009
Revenues in the photovoltaics industry rebounded last quarter, but profit margins continued to drop, according to a comprehensive new report from Young Market Research (YMR, Austin, Texas). Other findings detailed in the analysis reveal that North American suppliers grew the fastest and were the most profitable during this period, but Chinese companies show the most promise in the third quarter.
YMR has released the first issue of its Weekly PV Supply Chain Health Report, which pulls together data and insights released by publicly traded PV supply chain companies in their quarterly earnings reports, stock exchange filings, press releases and conference calls, along with analysis and historical data.
As noted in the first issue, PV industry revenues rebounded last quarter by 18% to $4.65B after falling 44% from Q3 2008 to Q1 2009. However, the gains are not being shared equally, with cell and module suppliers growing faster than polysilicon/wafer suppliers (18% vs. 5%). Polysilicon prices fell faster than cell/module prices, and cell/module shipments outpaced polysilicon/wafer shipments.
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PV industry revenues rebounded last quarter by 18% to $4.65B after falling 44% from Q3 2008 to Q1 2009. (Source: Young Market Research) |
Despite increasing revenues, profit margins continued to decline from the first to the second quarter because of lower prices along with slower-than-expected demand, which made it difficult for manufacturers to sell their high-priced polysilicon/wafer inventory. Some cell and module manufacturers, stuck in long-term, fixed-price contracts, were not able to take advantage of the rapid decline in polysilicon spot prices, or reduced shipment volumes prevented them from turning over their expensive polysilicon or wafers. Cell/module manufacturers again outperformed polysilicon/wafer suppliers, with gross margins of 19% vs. 8% because of large inventory write-downs at wafer manufacturers.
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Despite increasing revenues, profit margins continued to decline from the first to the second quarter because of lower prices along with slower-than-expected demand. (Source: Young Market Research) |
Unlike all other regions, North American suppliers' revenues rose from Q3 2008 to Q2 2009 - up 11% over the period, including 25% growth in Q2 alone. In addition, only North American suppliers were profitable when aggregated by region, with average gross profits of 38%, operating margins of 19% and net margins of 17%.
North America owes its success largely to First Solar's cost leadership, rapid capacity growth and high utilization. However, as the thin-film PV manufacturer's crystalline silicion competitors close the cost gap, and to spur demand in a weak financing environment, First Solar has implemented a rebate program in Germany that it expects to cost $40M-$60M in the second half of 2009. This, along with slower capacity growth, implies slower Q/Q growth for the leading North American company.
Chinese cell/module manufacturers saw the biggest drop in revenues (61%) from Q3 2008 to Q1 2009, but then grew 32% in the second quarter. Despite experiencing the fastest growth in Q2, Chinese manufacturers are still down 48% from their Q3 2008 results. They improved their gross margin performance from 10% to 16% and had positive operating margins, but experienced -8% net margins because of write-offs from Solarfun and Yingli. Excluding the charges, all Chinese suppliers had positive operating margins. Chinese companies are expecting rapid growth in Q3, with some even expecting to reach full utilization.
German manufacturers, not fairing as badly as their Chinese counterparts in the long run, had revenues rise 11% in Q2 2009, but are still off 33% from Q3 2008. German companies had the second highest gross margins at 24%, but experienced negative operating margins because of write-offs from Bosch Solar and Q-Cells, which experienced a surge in inventories and negative operating profits. The market favors more vertically integrated companies because of their greater visibility into end-market demand and greater control over their cost structure.
Unlike Chinese suppliers, which are expecting considerably increased capacity utilization in Q3, European companies are actually reducing capacity utilization or taking capacity offline because of excessive inventories from slower-than-expected first-half demand. Bosch is reducing utilization to 50%, Q-Cells is taking 360 MW of capacity offline, and REC is taking 35% of wafer capacity offline, according to YMR.
Taiwan suppliers, which are all cell-only suppliers, had the worst gross and operating performance in both the first and second quarters of 2009, which is indicative of the lack of leverage cell-only manufacturers have in today's PV market, YMR said. All the Taiwan suppliers experienced negative operating margins in Q2, and revenue increased only 1% in the quarter. Since Q3 2008, they are tied with Chinese manufacturers for the largest decline, down 48%. Taiwanese companies are hoping to return to profitability in the second half of the year.
Worldwide, Q3 looks to be the strongest quarter of the year because of seasonality, but the development of the U.S. and Chinese markets could mean a strong Q4 as well, YMR predicts. Some manufacturers are expecting Q3 to be exceptionally strong because so many projects were deferred from the first half of the year. Project developers were waiting for prices to fall further, and were looking to finish projects before the end of the year, fearing budget reductions and lower subsidies/feed-in tariff rates.
YMR's financial and industry data covers more than 100 different metrics, and is incorporated into a pivot table, which makes it easy to compare by company, country, technology, level of integration, etc. The results are also aggregated to provide industry and financial metrics and trends on a weighted average. The report is available as a single issue from SEMI or as a single issue or weekly subscription from YMR.
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