Mid-sized German firms face peril in PV shake-up, says report

The PV industry will continue to post robust annual growth for the foreseeable future – but only a select list of the strongest companies will be around to enjoy it, according to Bank Sarasin.

Analysts have been predicting a shakeout in the PV industry for years. Yet despite a number of significant changes, from the industry’s centre of gravity moving decisively towards China, to the recent deluge of layoffs at European manufacturers, there have been few instances of mergers or bankruptcies among Tier 1 players.

But with even the fittest manufacturers and systems-integrators swallowing heavy losses – and most governments in no mood to expand support for the technology – the long-touted industry crack-up may finally be in the offing, says a report published by Switzerland's Bank Sarasin.

The PV sector currently has about 50GW of production capacity, but the global market will only install 21GW-25GW this year.

Having performed the equivalent of a “stress test” on a number of PV manufacturers, the bank singles out six Tier 1 module makers as likely to withstand the coming winter – Suntech, Trina and Yingli from China; First Solar and Total-owned Sunpower in the US; and SolarWorld of Germany.

All of those companies have well-developed consumer brands and at least some level of vertical integration.

In contrast, many “medium-sized players with comparatively modest growth prospects” – including Q-Cells, Conergy, Solar-Fabrik and Sunways, all from Germany – may not be around to see the industry rebound.

European, and particularly German companies appear to be especially vulnerable given the likelihood of their domestic markets stagnating or shrivelling in the coming years – even as demand in the Americas and Asia blossoms.

“Small and uncompetitive companies which are inadequately financed will not survive,” the report says. “In contrast, companies that are internationally diversified and vertically-integrated – allowing them to cover several production stages autonomously – have a very good chance of emerging stronger.”

Given the relative immaturity of the thin-film sector, scale and the backing of large corporations is even more important.

The report notes that at least 50 thin-film players have disappeared over the past year, and that by 2013 all the top 10 companies will have at least 500MW of production capacity.

Given those realities, Bank Sarasin singles out First Solar, Sharp, Solar Frontier (backed by ShowaShell), Prime Star (backed by GE) and Hanergy as the thin-film sector’s “front runners”.

For those companies that do survive, the rewards may be bountiful. The report predicts the global PV market will grow 18% a year through 2015, and significantly faster in some markets – including India, where the growth rate will be in excess of 100%.

IMS Research recently said Italy is on track to overtake Germany as the largest PV market this year, likely adding just under 7GW of new capacity. The researcher believes 20 countries will put on more than 100MW this year, up from 14 countries in 2010.