The solar PV system segment is one of the most profitable segments in the solar supply chain,especially for firms with stable cash flow.Nevertheless,some firms have not been able to enter the segment due to lack of capital.
From upstream polysilicon firms to downstream solar module players,companies have been experiencing losses.Contrary to the period when there was a shortage of material supply,currently,upstream firms are seeing relatively larger net losses compared to downstream peers.The continuous decline of product prices means end market solar PV system firms should have higher gross margins.However,the deep incentive cuts implemented by governments in Europe have curbed the market's interest in investing into solar PV system projects.
In 2010,China-based solar firms began to invest into solar PV system projects and enjoyed strong monetary support from the government.On the other hand,Taiwan-based solar firms have not been investing into solar PV systems due to lack of funds.Nevertheless,as the oversupply conditions continue in the solar market,firms in China and Taiwan have been looking to hoard cash by reducing production costs and cutting investment projects.
A successful solar PV system firm needs to have a good credit line and reputation in order to sell projects in a short period of time after completion.
For some solar firms in Greater China,managing solar PV system projects is not easy since the firms have been facing difficulties maintaining cash flow.Many China-based solar firms were only able to obtain limited funding from banks,and in order to finance projects,many firms have used their own capital.During the time needed to locate buyers,firms without strong cash positions are usually at risk of facing bankruptcy.Even when projects were financed by government subsidies,the internal rate of return(IRR)is often too low for firms to make a profit or receive a return on investment.