According to IHS, global wafer production increased to 61.9 GW in 2015, up from 47.6 GW in 2014. The report says close to 40% of total wafer supply volume comes from vertically integrated players, such as Trina solar and Yingli Green Energy, which use all of their wafer production for in-house production; therefore, a very significant part of the wafer supply is not available to the wafer merchant market.
The report says the top three independent wafer producers (i.e., those not using wafer production for internal capacity) are GCL-Poly, Xi’an Longi silicon and Green Energy Technology (GET). Together, they comprised one-third of total wafer market share in the last two years, including internal wafer capacity from vertically integrated players. The report says these three players have an even stronger position in the merchant wafer market close to 60% market share in 2015), which places them on an even stronger negotiating position.
Due to strong demand, GCL, GET and other Tier 1 manufacturers are outsourcing part of their manufacturing to Tier 2 partners in China, the report continues. The report says these agreements for several hundreds of megawatts are not only punctual, but also intended to be long-term agreements, using equipment condition, wafer quality, and the financial situation of Tier 2 companies as their main criteria for the selection of original equipment manufacturer (OEM) partners.
Most vertically integrated players have for a long time opted to not increase in-house wafer capacities and outsourcing manufacturing via long-term contracts with minimum fixed volumes and prices adjusted on monthly basis. Given this strong wafer demand and shortage situation, the report says, wafer manufactures do not want to lock in the price of these contracts, although final pricing is usually linked to payment conditions.
The report says that with current wafer capacity and market growth demand in a near future, wafer supply will continue to be tight in 2016. IHS estimates an 83% utilization rate for all suppliers and 88% for Tier 1 suppliers, which is the highest utilization level registered since 2010. With capacity expanding year-over-year, Tier 1 wafer suppliers are forecast to reach a high average utilization rate of 85% in the following three years.
Currently, the report continues, the average sales price (ASP) for multicrystalline spot wafers is $0.88 per piece. Some suppliers are expecting to further increase their selling price to more than $0.90 per piece. IHS expects continued stability in multicrystalline wafer pricing throughout 2016. With the continued decline in polysilicon prices, average wafer gross margin will reach 20% in 2016.
Monocrystalline wafers are expected to increase share of market in 2016, due to the increasing share of rooftop installations. In fact, the report says monocrystalline wafer production will increase to 26% of total wafer production in 2016 – up from 24% in 2015. Considering that monocrystalline wafer ASP has been declining for the last 12 months, IHS says the pricing gap between monocrystalline and multicrystalline wafers is becoming increasingly narrow. Monocrystalline wafer ASP will not fall lower than multicrystalline wafer ASP, and the pricing of monocrystalline wafers should stop declining faster than multicrystalline wafers this year. Overall, IHS forecasts a blended wafer ASP of $0.20 per watt in 2016, a decline of nearly 1% over 2015.
