Tough Times Ahead For Solar Inverter Suppliers

Solar inverter capacity will be ramped past 30 GW this year, and inverter production may exceed actual demand by more than 2 GW in the fourth quarter of this year, according to a new report from IMS Research. The result will be a large inventory build, reversing the earlier inverter shortage seen in the first half of this year.

Based on the expansion plans of more than 30 top suppliers, capacity is set to grow another 40% in 2011. However, significant double-ordering occurred in the first half of this year, when customers panicked to secure inverters as the German market boomed. Now that German demand is slowing, these additional orders are starting to be canceled and warehouses are filling up with unwanted inverters, IMS Research says.

‘Although inverter shortages were evident in the first half of this year due to a bottleneck in component supply, an oversupply of inverters is now very possible, and inventory is starting to build at customers,’ says Ash Sharma, PV research director at IMS Research. ‘Suppliers continue to ramp capacity and production at an alarming rate, given that market demand is now starting to wane.

‘Installation demand is predicted to be 13 percent higher in the second half of the year compared to this first half,’ he continues. ‘However, planned inverter production is forecast to be 56 percent higher.’

According to IMS Research, the future for inverter companies is bleak in the short term. Production capacity has been massively increased, with all leading suppliers expanding facilities and many new entrants joining the market. This increasing supply, however, is likely to meet falling, or at best, stable demand in 2011, and a large fall in prices seems likely as a result.

Therefore, inverter suppliers will need to brace themselves for a sharp fall in profits in the first quarter of 2011, with IMS Research predicting the lowest level in seven quarters. A major fall in demand, coupled with intense pricing pressure and additional costs of expanding capacity, will undoubtedly cause a slide in supplier gross margins, according to the report.

SOURCE: IMS Research

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