Consolidation Crucial to Resolving PV Industry Crisis

Large-scale consolidation of the industry within the next two years

By SEMI Taiwan

PV Taiwan 2012 came to a successful conclusion in early October - more than 8,000 visitors from 60 countries around the world visited the exposition. In addition, the exhibition generated strong business opportunities with a total of 119 one-on-one trade meetings among the 40 buyers that visited Taiwan, and an estimated US$120 million in immediate and future business deals.

At the CEO and market development forums, held on the first day of PV Taiwan 2012, over 300 attendees including 50 worldwide industry heavyweights gathered to discuss challenges from industry consolidation and potential market in the future, as well as solutions and strategies for improving efficiencies, demand and business.  Here is a summary of the discussions:

Industry Consolidation is Inevitably Ongoing

The CEO forum morning session chaired by Dr. P.H. Chang, CEO of Motech (and chairman of SEMI Taiwan PV committee) included executive speakers Hua Shu, CEO of GCL, Jifan Gao, chairman of Trina Solar, Quincy Lin, Chairman of Neo Solar Power, Hur-lon Lin, CEO of Green Energy Technology and Walt Cheng, director of Dupont Electronic Microcircuit Materials for Greater China.

Signs of Recovering

Hua Shu at GCL pointed out that the world economy is still in poor shape and the rates for PV power are being decreased as well. In the short-term, over-supply will remain the rule in the PV market and prices will continue to fall. Jifan Gao at Trina Solar also noted that prices have decreased at a rate of 10-15% per quarter since last year and shows no signs of recovering.

Emerging Market Installations Jump

There are still some spots of sunshine. With emerging markets taking a greater interest in solar power and costs continuing to fall, the number of installations is expected to grow significantly. By 2013 the emerging market will surpass the traditional European market with the growth from China expected to be particularly strong. With China's announcement of the "12th 5-Year Plan for the Solar Photovoltaic Industry," by 2015 China's installed PV capacity will grow beyond 21GW and generate at least 25 billion KWH.

Despite the rosy outlook, the challenge for the industry right now is to survive the current ice age. Gao said that the PV industry in China is now on the verge of bankruptcy and the top 10 companies have debts of up to 11 Billion RMB. Faced with such a difficult situation, all of the guests in attendance agreed that further industry consolidation will be necessary and is in fact crucial to solving the crisis.

From Vertical to Horizontal Integration

Quincy Lin, chairman of Neo Solar Power, said that the poor market conditions will inevitably put the vertical integration business model under pressure. As every part of the industry is now faced with losses, vertically integrated enterprises will have to abandon some parts in order to focus on the parts where they perform well. This trend means the industry must pay more attention to technology R&D than before. Walt Cheng of Dupont stated that based on past experience, once an industry develops to a certain point a "weeding-out" process becomes inevitable. The survivors will always be companies that emphasize R&D and management.

Hur-lon Lin, CEO of Green Energy Technology, also said that supply is currently almost double that of demand. Taiwan's PV wafer capacity is also just 1/10 that of China. Horizontal integration will therefore be necessary and may even end up consolidating down to one single wafer fab.

Industry Consolidation to Occur Within 2 Years

The consensus at the forum was that industry consolidation will be inevitable. So when will this consolidation happen? Jifan Gao said that the market conditions over the last two years in China has led to the government, banks and industry taking a more reasonable approach to evaluating the development of the PV industry. This should lead to large-scale consolidation of the industry within the next two years. There are of course many companies that are holding on by the skin of their teeth because they believe that things will only get better. Industry consolidation may therefore be delayed until three years later.

Hua Shu, CEO of GCL generally agreed with Gao's opinion but he felt that the guidance provided by China's 12th 5-Year Plan may see industry consolidation happen sooner than later. On this topic, P.H. Chang, CEO of Motech said that industry consolidation will remove excess and useless production capacity and restore the PV industry to good health.

About PV Taiwan 2013 and PVSEC-23

PV Taiwan 2013 will be held October 30 to November 1 in conjunction with PVSEC-23 (October 28 to November 1) – making this combined event the largest international conference for photovoltaic research and technologies, industries and applications in Asia. A combined conference and exhibition, PVSEC-23 and PV Taiwan 2013 will provide a professional platform for world’s PV industry players to scout the latest trends, identify market opportunities, connect to business partners and purchase high-quality PV products. It will also give visitors a comprehensive overview of the entire industrial cluster—from photovoltaic materials to systems—and from project development to deployment.

The PVSEC-23 call for papers is now open.  Please go to http://www.pvsec23.com for more information.

 SEMI, The Grid - November 2012