The State of the PV Manufacturing Equipment Segment – Rebound Remains a Challenge

Critical time for equipment manufacturers to maintain customer relationship; focus on core strategic competencies and technological progress

By Melody Song, SEMI

Following a successful 2010, many PV equipment suppliers achieved another good year of revenue growth in 2011. However, as PV manufacturers along the supply chain faced difficult market conditions, especially during the second half of 2011, a wave of pessimism and uncertainty moved upstream and soon the storm reached equipment suppliers.

As reported in the recent SEMI Worldwide PV Equipment Market Statistics Report, the worldwide PV manufacturing equipment Book-to-Bill ratio rose to 0.53 in the fourth quarter of 2011 after bottoming at 0.35 during the previous quarter.  However, the higher Book-to-Bill ratio should not be interpreted as a sign of improving market conditions. A close look at the numbers behind the ratio reveals a continued challenging market environment for equipment suppliers.

Figure 1: PV Equipment Billings and Bookings

Figure 1 shows the aggregate equipment billings and bookings reported by companies participate in the Worldwide PV Equipment Market Statistics Program.

Figure 2: Billings and Bookings Quarterly Growth

Figure 2 presents the quarterly Book-to-Bill ratio and the quarterly growth rate of the aggregate equipment billings and bookings.

The most recent quarterly data shows that both billings and bookings extended previous quarter’s decline, reaching the lowest levels since the first quarter of 2010. During the fourth quarter of 2011, billings experienced the sharpest decline since the start of data collection (Q1’10), down 44% for the quarter, and down 60% from the peak reached in Q4’10. Bookings on the other hand, experienced negative growth for the fourth consecutive quarter, down 14% quarter over quarter, after declining 70% in the previous quarter. Comparing with its peak reached in Q4’10, bookings fell more than 80%.

Clearly, the improved Book-to-Bill ratio is not a sign of recovery. Rather, it is the result of a much more moderate decline in bookings than billings. Low levels of net booking activities indicate weakness in near-term equipment spending. Capacity expansions taken up by PV manufacturers during the past two years have caused manufacturing capacity to significantly exceed demand, and a combination of uncertain market demand and overcapacity has led to significant cuts to capital spending by PV manufacturers. 

Figuring out exactly how much capacity there is along each segment of the PV supply chain is a complex matter, and overcapacity is a major discussion topic for the industry, as is industry consolidation and capacity rationalization. Even though a large amount of ineffective capacities have already been taken off line, many of these capacities are not eliminated permanently; this is especially the case in China. The existence of these idle capacities will not only continue to depress prices, but will also dampen PV manufacturers’ confidence in new equipment spending.

In spite of the current challenging market conditions facing the industry, PV market is expected to continue its growth trajectory. Fast-decreasing system prices have improved PV’s competitiveness with other renewables and even with conventional energy sources.  However, it is uncertain when the end market demand growth will warrant another round of equipment spending. For equipment suppliers, this is a critical time to maintain sustained customer relationships, focus on core strategic competencies, and continue technological progress  that enable customers to deliver competitive advantages.

2012 is likely to be the most difficult year for the PV equipment sector. But it appears that the segment is sitting at a trough and the recovery is near. Meyer Burger expects demand for production equipment to increase again substantially from 2013 onwards.  NPD Solarbuzz forecasts strong segment growth from 2013-2016. Regardless of the timing of the recovery, PV equipment suppliers are technology enablers, and they will play an increasingly important role in achieving the goal of a global PV industry that sustains long-term growth and profitability.

About the SEMI Worldwide PV Equipment Market Statistics Report

The worldwide PV equipment billings and bookings data is gathered jointly by SEMI and the German Engineering Federation (VDMA) from about 50 global equipment companies that provide primary data on a quarterly basis.

The Worldwide Photovoltaic Equipment Market Statistics Report is available by subscription. Each subscription includes four quarterly reports and each quarterly report includes three parts:

• Quarterly Worldwide Billings and Bookings Data Report (Excel)
• Highlights and Analysis (PDF)
• Billings and Bookings Database (with all historical data starting with 1Q’10, in Excel pivot table format).

Reporting Categories:

• Market Region:  Americas; Asia (China, Taiwan, Japan, Korea, Rest of Asia); Europe; Rest of World
• Supply Chain Segment: Poly/Ingot/Wafer; Crystalline Silicon Cell; Crystalline Silicon Module;  Thin Film
• Equipment Type: Component; Single Equipment; Equipment Lines

For more information on equipment coverage, reporting categories, data collection methodology, sample report, and how to subscribe, please visit www.semi.org/en/node/38716, or contact SEMI customer service at 1.877.746.7788 (toll free in the U.S.) or 1.408.943.6901 (International).

SEMI PV Group, The Grid – May 2012