February 17, 2011 - Prices will continue to fall sharply throughout the crystalline silicon (c-Si) supply chain for at least the next few months, largely because installations are slowing as key regions adjust their incentive schemes, says IMS Research.
The firm tracks a -7% dip in pricing across the board -- polysilicon, wafers, cells, and modules -- and a further decline in 2Q10. Polysilicon spot prices sunk -10% in 4Q10 (contract ASPs were down just -2%), just a quarter after high demand and supply shortages kept Tier 2-3 firms happy on the spot market. Both contract and spot prices will fall about -4% in 1Q11, the firm projects. Reduced incentive rates will press on module suppliers' prices, who will pass that along to their upstream suppliers, translating to lower prices for cells and wafers and polysilicon.
|Prices for polysilicon, wafers, cells, and modules. Polysilicon price/W is
calculated using average polysilicon conversion rate (g/W). (Source: IMS Research)
As usual, severe price declines will hurt most the smaller suppliers, who took advantage of high demand and larger competitors' sellouts to increase shipments and prices. (Chinese Tier 2 suppliers in particular, notes IMS Research PV Group research analyst Sam Wilkinson, gained market share in this way.) But weakening demand at the end of 2010 swung the balance back to Tier 12 suppliers, who now have product available again, so smaller players will have to drop prices accordingly. (Those Chinese Tier 2 c-Si module suppliers are now cutting prices by -10%, he notes.)
The problem: while prices are falling, costs are not. Efficiency improvements and still-relatively-high utilization rates are helping keep costs low in general throughout the supply chain, but gross margins are starting to tighten up, notes Wilkinson. By midyear some suppliers' margins could be half what they were in 3Q10, he predicts.
Nevertheless, the overall outlook for the c-Si industry is positive: nearly 20% growth to ~$8B, IMS predicts.
|Polysilicon prices and supplier gross margins. (Source: IMS Research)|