PV component profits are set to fall by 70% year-over-year in the fourth quarter of 2011 (Q4'11), according to new analysis from IMS Research.
The company's analysis of the polysilicon, wafer, cell, module and inverter industries found that collapsing prices throughout the year will cause gross margins for the whole PV industry combined to slide by 17 percentage points to just 12.4% in Q4'11.
Despite this worrying news, overall industry margins and profit will actually increase sequentially in Q4'11, as much of the collapse in margins had already happened earlier in the year, IMS Research adds.
‘Gross margins will stabilize somewhat in Q4'11,’ predicts Ash Sharma, senior research director for PV at IMS Research. ‘In fact, total industry profit will increase by 10 percent compared with the third quarter.
‘However, margins will, of course, be considerably lower than a year ago, and industry profit will be 70 percent lower in the fourth quarter compared with the last year,’ Sharma continues.
Despite PV module suppliers' feeling the brunt of the price collapse that has blighted the industry this year, IMS Research found that they still hold the lion's share of PV component profits.
‘The rapid fall in module pricing and the demise of many if its suppliers has been well documented,’ Sharma says. ‘However, it's important to note that these same suppliers will still generate more than 50 percent of industry profits in 2011.’
The report found that within the PV module supply chain, polysilicon suppliers currently enjoy some of the highest margins, but their profits are still less than half those generated by module suppliers.
‘Although polysilicon suppliers had average gross margins above 30 percentÂ in 2011- which was more than double that of module suppliers – polysilicon suppliers will only generate 19 percent of industry profits due to their relatively lower revenues,’ Sharma says.
Of the five industries studied, IMS Research found that inverter suppliers now enjoy the highest gross margins, despite the recent oversupply and price reductions that the industry has suffered. Despite accounting for a relatively small part of PV system hardware costs, inverter suppliers will generate 17% of total industry profits in 2011.
‘One reason for the inverter industry's relatively robust margins is that Chinese suppliers have so far failed to gain a significant foothold in this market,’ Sharma notes. ‘Unlike the module market, in which Chinese suppliers account for roughly half of all shipments and revenues, Chinese-branded inverters accounted for just three percent of industry revenues in 2010.
‘This is likely to change, however, now that the domestic market in China is starting to take off,’ he continues. ‘More than 1.5 GW will be installed in China this year, and the vast majority of projects will be using Chinese inverters.’
Despite a slight uptick in margins in Q4'11, IMS Research predicts further gloom for the industry and forecasts that margins will slide further in 2012 and will reach just 10.4% in the first quarter of next year.