PV Module Manufacturers Were Confronted by Increasing Inventory Levels

During the third quarter of 2012, leading PV module manufacturers were confronted by increasing inventory levels (from 66 to 79 days outstanding) and declining shipments (down 7%, quarter-to-quarter). This occurred because PV manufacturers have been boosting production levels in expectation of a traditional second-half boom in PV shipments. However, end-market demand during the third quarter has yet to support the higher production levels. In the first half of 2012, global demand was approximately 13 gigawatts (GW), while demand in the second half of the year is projected to reach only 16GW. As a result, leading module manufacturers have been compelled to decrease guidance for full-year 2012 shipment growth, from 30% guided at the end of the first quarter of 2012 to approximately half that level today. Demand in the fourth quarter of 2012 is now expected to be in the range of 8.5GW-to-9.5GW and NPD Solarbuzz predicts the most likely demand forecast scenario for 2012 to fall just short of 30GW. An upside of 25% remains possible, but is strongly dependent on a late surge in shipments to China and India, in addition to a strong recovery across European markets. Signs are now emerging that 2013 will provide an opening for leading PV manufacturers to accomplish market-share gains. Supply rationalisation will be an essential component of this, with leading module suppliers being able to increase production at the expense of legacy competitors. This stabilisation phase during 2013 will be characterised by increasing consolidation and liquidation of lower-tier PV manufacturers, many of whom have suspended production or are simply unburdening inventory today. As supply and demand continue to stabilise, a slower quarter-to-quarter average selling price (ASP) decline and a lower risk of inventory build during 2013 will result. This will allow upstream module manufacturers to maintain higher inventory levels as there will be less risk of any dramatic devaluation of stock-on-hand due to rapid end-market fluctuations. Although attention has previously focused on the shakeout of European and US-based PV manufacturers, the next set of exits from the PV industry will likely come from underperforming Chinese tier 2 and 3 manufacturers. Source: GlassInChina