PV Module Manufacturers’ Profits Plummet To Lowest Level Since 2008


Average gross profits of crystalline PV module manufacturers fell to just $0.09/W in the first quarter of this year, putting huge pressure on suppliers, finds a new report from IMS Research.

As a result of continued price pressure and highly competitive market conditions throughout the PV industry, gross profits are forecast to continue to fall even further, to just $0.07/W by the end of this year.

Following a year of rapid price declines – when average crystalline PV module prices fell by nearly 50% – gross profits fell below $500 million in the first quarter – the lowest level since 2008 and more than 75% lower than in the first quarter of 2011.

This rapid deterioration is due to prices falling faster than costs. While average crystalline PV module prices fell by $0.67/W in 2011, average costs per watt dropped by just $0.42.

"Profit margins have been the victim, as suppliers have been forced to engage in a fierce price war and have reduced prices faster than they have been able to reduce their costs," explains senior market analyst Sam Wilkinson." High inventory levels, weak demand and reduced government support for PV have all contributed to a rapid downward spiral for PV module prices."

According to IMS Research, the narrowing gap between prices and costs has resulted in the average gross profit of crystalline modules falling from $0.39/W to just $0.09/W in one year. One key reason why suppliers have been unable to reduce their costs quickly enough is that average polysilicon prices have not declined as quickly as module prices.

"Although spot prices for polysilicon have quickly fallen over the last year, a large proportion of polysilicon is purchased under long-term agreements, and it has taken some time for suppliers to cancel or renegotiate supply contracts in order to reflect these reductions in spot prices," Wilkinson says." If we consider this mix of spot and contract prices, on average, polysilicon prices fell far less than modules in 2011."

Gross margins are forecast to stabilize at 9%, on average, in the second half of this year, with further price declines offset by significant improvements in non-silicon processing costs and continued declines in blended silicon purchase prices, which are projected to reach $25/kg in the third quarter, the report adds.

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