IMS Research’s latest quarterly report on the industry reveals that suppliers have reduced prices by around 15% in the last six weeks in order to compete in an industry that is currently plagued by oversupply. Average crystalline PV module prices had been close to $1.80/W in the first quarter of 2011; however, a sudden change in market dynamics has resulted in sharp price declines, and the same modules are now being consistently priced below $1.40/W.
Rapid reductions in the price of cells and wafers have helped to offset PV module price declines and ease the impact on suppliers’ margins. However, whilst polysilicon spot prices have fallen by over 30% since the end of 2010, contract prices have held relatively stable so the average prices have fallen at a far slower rate. Average polysilicon prices stubbornly remaining above $50/kg have limited the ability of downstream suppliers’ to reduce their costs.
“Vertically integrated Chinese Tier-1 suppliers of crystalline PV modules have some of the most competitive cost structures in a wide field of manufacturers, and had been producing with gross margins in the high twenties in 2010,” commented Sam Wilkinson, Senior Market Analyst at IMS Research. “Margins have already fallen from their peak in Q3’10. Current pricing levels are putting huge pressure on these suppliers’ margins; we believe their average gross margins could fall below 20% by Q3’11, with Tier-2 suppliers’ margins even lower.”
IMS Research estimates that the total gross profit generated by the global PV module supplier base, which had averaged around $2.5 billion per quarter in 2010, declined sequentially by close to 40% in the first and second quarter of 2011, due to reduced margins and declining shipments. A rebound in demand is predicted in the second half of 2011, which will help suppliers’ profits to recover. IMS Research predicts that total PV module supplier gross profit will grow once again in Q3 and Q4’11.
Detailed analysis of supply and demand dynamics in this market is available from IMS Research’s quarterly PV cell and module report.