China's photovoltaic manufacturing base saw a major setback in the first and second quarters of this year, says IMS Research (recently acquired by IHS) in a new report. The severe slump in exports prompted the government to step in and further raise its PV installation target.
Tough competition in the global marketplace, vast oversupply and falling prices have put Chinese manufacturers' balance sheets under huge pressure, and China's government has responded by more than doubling its long-term installation target from 20 GW to 50 GW by 2020.
Chinese PV suppliers have continued to suffer along with the entire global supplier base amid highly competitive market conditions, IMS Research says. Challenging conditions in the first half of this year and a bleak outlook in many major markets following incentive revisions and an ongoing trade war in the U.S. and Europe have caused production to stall.
Although a small number of manufacturers have been able to maintain reasonable utilization levels, a large number of polysilicon fabs remain closed, meaning that average polysilicon production utilization in China fell below 50% in the second quarter of this year, according to the report.
Cell production also fell, largely affected by the U.S.' recent decision to impose import tariffs on cells manufactured in China, which caused many suppliers to increase the number of cells they source from Taiwan and other locations outside mainland China.
Prices also continued to fall during the quarter, with module prices falling by a further 7%, bringing more bad news for China's suppliers – whose profit margins are already under huge pressure.
China's new solar deployment target is intended to both bolster confidence in the country's domestic manufacturing base and help China meet its ‘phenomenal energy requirements,’ notes Frank Xie, senior market analyst at IMS Research.
‘This highly aggressive target could be achieved given the rate of deployment that China has already managed to achieve in the relatively short amount of time since its national [feed-in tariff] was launched, and provides a clear message that China will strongly support its PV industry in the future,’ Xie says.
According to IMS Research's report, the huge potential of the Chinese PV market is attracting the attention of more than just the domestic supplier base and resulting in a diversifying range of products being sold into the market.
‘Large megawatt-scale turnkey inverter solutions are forecast to increase their share of the Chinese PV market in 2012, driven by their highly competitive up-front cost, and ease of installation and maintenance,’ adds Xie.
Inverter solutions larger than 1 MW are forecast to double their share of the market over the next two years. IMS Research also forecasts that China will follow a similar trend seen in the European PV inverter market and begin to employ an increasing amount of small three-phase inverters in its fast-growing rooftop installation.
The company predicts that PV installations in China will be a key driver in the growth of the global PV market. Installations are forecast to grow quickly in the second half of the year, with over 10 GW installed over the next two years.