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SMA cuts 1,000 jobs as PV's woes catch up with inverter sector

The financial tsunami sweeping over the PV industry has finally hit the inverter segment, with global leader SMA Solar announcing plans to cut more than 1,000 temporary and permanent jobs as it forecast a “severe” sales decline in 2013.

SMA says the seismic forces reshaping the global PV business mean it will likely record sales of just €900m-€1.3bn ($1.2bn-$1.7bn) next year – down from the €1.3bn-€1.5bn it expects to bag this year.

“In the best-case scenario, we expect a balanced operating result for 2013, says chief executive Pierre-Pascal Urbon. “At present, we cannot exclude the possibility of a loss.”

Shares in the German company tumbled more than 15% on the news and then continued downward the following day, leaving it with a market capitalisation of about €711m by mid-morning today.

Shares in rival companies such as Power One also fell sharply, in sympathy with SMA.

SMA’s announcement is the clearest signal yet that the inverter sector – which has largely been spared the painful consolidation that hit makers of wafers, cells and modules, and later PV production equipment – is in for a rough ride of its own.

Earlier this week US-based inverter maker Satcon, a minnow compared to SMA but nevertheless a top 10 producer, filed for Chapter 11 bankruptcy protection.

After a tepid 2011, in which sector-wide revenues fell 15% to €4.4bn, 2012 has appeared healthier for the inverter sector thanks to surging demand in new Asian markets.

However, incumbent manufacturers like SMA, PowerOne and Fronius still face steep price declines – with average sales prices by the second quarter of 2012 already down 20% year-on-year.

More importantly, a rash of new competitors is taking root in key markets of the future, particularly Asia. Of the top 10 PV inverter suppliers last year, eight were based in Europe, and two in the US – painting a stark contrast with most other rungs of the PV supply chain.

SMA says it will essentially hit the reset button on its gold-standard portfolio, spending €100m in 2013 to develop “completely new product platforms that should reduce production costs significantly by 2014”.

One of the major focuses will be on inverters serving the “self-consumption” market in Europe and the US – a segment many believe will grow dramatically as feed-in tariffs and other legacy support schemes are wound down.