The expansion of PV module, cell and wafer manufacturing capacity will slow dramatically throughout the rest of 2011 and the first half of 2012, according to the latest quarterly report from IMS Research.
Production capacity has been added at a frantic pace for the last two years – and almost 30 GW of capacity has been added since the start of 2010 – but expansions have finally slowed in response to slowing demand in many key regions and a severe oversupply of PV products.
IMS Research estimates that over 50 GW of global PV module manufacturing capacity will be in place and operating by the end of 2011 – an increase of over 54% since the start of the year. This increase occurred even though annual global demand grew only by 19% to 23 GW.
However, wafer, cell and module production capacity expansions are now forecast to dramatically slow in response to a huge oversupply of products throughout the supply chain and uncertainty over future demand in major markets such as Italy, Germany and the U.K., and capacity will expand by less than 10% in 2012, according to the report.
The report reveals that as suppliers cut back and delay expansion plans, many of the largest suppliers – as well as smaller tier-three Chinese suppliers – are stopping production altogether.
‘A number of manufacturers have recently announced suspended production or closure of production facilities,’ says Sam Wilkinson, report author and senior research analyst at IMS Research. ‘As well as a number of high-profile bankruptcies, German and Norwegian manufacturers Conergy and REC Group, have also announced that they will shut cell and wafer lines, whilst other suppliers, such as Photowatt are reducing production.’
IMS Research also discovered that several suppliers that are not obliged to publicly reveal details of their operations have made similar moves.
‘In contrast to the rush towards vertical integration that we've observed for last few years, we are now seeing vertically-integrated module suppliers reduce or suspend production of cells and wafers,’ Wilkinson says. ‘With the supply of these products exceeding demand by such a margin, top-tier branded cells and wafers are available at incredibly low prices, and many suppliers are favoring purchasing cells and wafers on the spot market over manufacturing them internally.
‘Similarly, we have also seen suppliers willing to accept significant charges to cancel long-term supply contracts in preference of the flexibility allowed by purchasing on the spot market in today's difficult conditions,’ he continues.
IMS Research predicts that manufacturing capacity will continue to increase over the coming quarters, but at a far slower rate than the industry has previously seen. In addition, much of the new capacity over the next year will be added by start-ups executing their market entry plans, rather than existing suppliers expanding their capacities.
The company forecasts that PV module manufacturing capacity will increase by just 6% during the first half of 2012, despite having increased by over five times this amount in a similar six-month period one year ago.