The recovery of the photovoltaic (PV) industry is uneven across different segments of the supply chain. Currently, vertically integrated PV manufacturers are reaping the most benefits. The second-quarter results from the four largest PV companies—Yingli, Sharp, Trina Solar, and Huihui Energy—showed that their performance in Q2 outperformed the same period last year. Except for Sharp, the other three companies reported a rise in quarterly profits.
Signs of recovery are becoming more evident across the industry and among manufacturers. Although Yingli and Trina Solar are still operating at a loss, their losses have narrowed to -3.8% and -5.4%, respectively. One key driver of this improvement is the increase in c-Si PV module prices. After hitting a low of $0.53 per watt in 2013, China’s c-Si PV module prices rebounded to €0.56 per watt in June and July of this year.
Rising shipment volumes have helped boost manufacturer profits, which in turn has led to higher capacity utilization. Some companies have even exceeded their production capacity.
**Battery Production**
With the shift toward vertical integration, many PV manufacturers are now producing their own battery cell wafers for use in photovoltaic modules. As the only large-scale solar cell manufacturer in China, JA Solar has seen improved performance in recent quarters. However, this improvement is largely due to increased sales of PV modules. Like Yingli and Trina Solar, JA Solar hasn’t yet invested heavily in new production lines, but its Q2 loss has dropped to -2.1%.
Taiwan-based PV manufacturers appear to be in a better position, as Chinese firms are purchasing duty-free solar cell components from Taiwan for export to the U.S. market.
Large silicon wafer manufacturers, on the other hand, continue to struggle with low prices. The largest wafer producer, Saiwei, remains in deep financial trouble despite high shipment volumes. Analysts believe the only way to avoid bankruptcy is through bank loan support.
In recent years, several manufacturers have exited the polysilicon business. Companies like REC and ASA sold their polysilicon production lines in Norway in 2011 and 2012, respectively, and shifted their operations to vertically integrated production in Singapore.
**Polysilicon Prices Continue to Fall**
Despite a modest rebound in the first half of the year, polysilicon prices remain under pressure. While companies such as WackerChemie, Hemlock, and REC have maintained profitability, the overall market remains weak. The main demand for polysilicon continues to come from China.
China's high tariffs on U.S.-based companies like Hemlock and REC have put them at a disadvantage in the market. Additionally, overcapacity in the polycrystalline silicon sector suggests that Chinese polysilicon prices are unlikely to rise sharply in 2013.
It’s worth noting that China has historically struggled to compete with Western-produced polysilicon. However, LDK, Daqo, and ReneSola have recently completed upgrades to their hydrochlorination processes, improving their competitiveness.
Because OCI has a very low tariff rate, it is in a strong position to benefit from these markets. The company also saw an increase in overall profit in Q2 2013 after two consecutive years of decline.
**Photovoltaic Manufacturing Equipment**
The manufacturing equipment sector remains sluggish. Industry data for the second quarter has not been released yet, but order shipments have remained below cost for eight consecutive months. The order volume fell to $174 million.
MeyerBurger has seen an increase in orders, while Applied Materials’ PV equipment revenue remains very low. Its order-to-bill ratio is still weak. Centrotherm has not released its second-quarter data, but reports suggest the company canceled a $380 million contract with Algeria.
Although the days of polysilicon equipment manufacturers seem to be getting better, especially those targeting the Asian market, where there is a need for upgrades, the chlorination upgrades by Chinese PV manufacturers have helped GT Advanced Technologies see a revenue recovery.
According to IHS, investment in the photovoltaic manufacturing sector is expected to increase by 30% in 2014, and Bloomberg analysts agree. However, Solarbuzz believes that Tier 1 manufacturers will not expand capacity but instead take advantage of the capacity utilization of smaller competitors. This strategy mirrors what we've seen in the semiconductor industry.
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