When Will Global PV Supply and Demand Re-balance?

by Toby Liu, SEMI China

At the end of November 2012, module prices dropped to a record low value of US$0.7/W in the Chinese PV market while no sign of a stable module price emerged. All of the PV module manufacturers have been struggling with lowering the cost of modules by all of the methods that can be imagined. However, only a few Tier 1players can cope with the drastic drop in pricing as shown in Fig. 1. Under such circumstances more and more PV module manufacturers have rushed into the downstream market to develop power plants. Thanks to the continuous drop of module and BoS price, utility scale PV system prices also saw consequent decrease and can be expected to keep this trend in the following several years(as seen in Fig. 2).  As a result, an average margin of 10% can be achieved for PV power projects developers right now in China.

Figure 1 – China Module All-in Price

Figure 2–China Utility Scale PV System Price

Source: SEMI China 

When will the global PV industry re-balance? This may be answered by Fig. 3, which shows the PV installations, PV module manufacturing capacity and PV module production for both global and China. The CAGR of PV installation was 130%, 67% and 11% in 2010, 2011 and 2012, respectively. At the same time, the manufacturing capacity increases with the CAGR of 68%, 45% and 13% in in 2010, 2011 and 2012, respectively. An over capacity was seen for the whole time range covered in this figure, and the gap between manufacturing capacity and installation arrives at peak in 2012 with an absolute value of 39.2GW. That’s why we have seen such a downturn in PV industry from 2011 and worse condition in 2012 and much more probably 2013.

When will the global PV industry re-balance? This relies on how fast and to what extend mergers and acquisitions happen in the PV industry. Also, of course, this relies on how fast the global PV application market grows. Both topics above are the coming themes of a series of events hosted by SEMI China in 2013, most notably SOLARCON China 2013 and the co-located CPTIC conference.

When will the global PV industry re-balance? It can be forecasted that 2013 will see a decrease in module manufacturing capacity as the result of M&A and new increasing needs from emerging markets like China, Japan, the U.S. and Australia. It is hard to predict the exact time for supply/need re-balance, but at least 2 more years is required when you take into account the support from government and flexible capacity. It is more meaningful for the PV industry players to learn lessons from what happened in the past few years and other more mature industries such as the semiconductor industry.

Figure 3 – PV Market Supply and Demand Balance Forecast

Source: SEMI China

SEMI, The Grid, December 2012