By Kari Williamson
IMS Research's analysis of the solar PV polysilicon, wafer, cell, module and inverter industries found that that falling prices throughout 2011 will cause gross margins for the whole solar PV industry combined to slide by 17 percentage points to just 12.4% in Q4’11.
Margins increase
IMS Research has found that despite this worrying news, margins and profit will actually increase sequentially in Q4’11 as much of the collapse in margins had already happened earlier in 2011.
Ash Sharma, Senior Research Director for PV, says: “Gross margins will stabilise somewhat in Q4’11; in fact total industry profit will increase by 10% compared with the third quarter. However, margins will of course be considerably lower than a year ago and industry profit will be 70% lower in the fourth quarter compared with the last year”.
Despite solar PV module suppliers feeling the brunt of the price collapse that has blighted the industry in 2011, IMS Research found that they still hold the lion’s share of solar PV component profits.
“The rapid fall in module pricing and the demise of many if its suppliers has been well documented. However it’s important to note that these same suppliers will still generate more than 50% of industry profits in 2011,” Sharma notes.
Polysilicon has higher margins, lower profits
The report found that within the solar PV module supply chain, polysilicon suppliers currently enjoy some of the highest margins but their profits are still less than half those generated by module suppliers.
”Although polysilicon suppliers had average gross margins above 30% in 2011- which was more than double that of module suppliers - polysilicon suppliers will only generate 19% of industry profits due to their relatively lower revenues,” Sharma adds.
Inverter suppliers see higher margins
Of the five industries studied, IMS Research found that solar inverter suppliers now enjoy the highest gross margins, despite the recent oversupply and price reductions that the industry has suffered.
Despite accounting for a relatively small part of solar PV system hardware costs, the research found that inverter suppliers will generate 17% of total industry profits in 2011.
“One reason for the inverter industry’s relatively robust margins is that Chinese suppliers have so far failed to gain a significant foothold in this market. Unlike the module market, in which Chinese suppliers account for roughly half of all shipments and revenues, Chinese-branded inverters accounted for just 3% of industry revenues in 2010. This is likely to change however now that the domestic market in China is starting to take off. More than 1.5GW will be installed in China this year and the vast majority of projects will be using Chinese inverters,” Sharma says.
Continued gloom
Despite a slight uptick in margins in Q4’11, IMS Research predicts further gloom for the industry and forecasts that margins will slide further in 2012 and will reach just 10.4% in the first quarter of next year.