Photovoltaic market strong, but could undo inept companies says iSuppli

The analyst forecasts that new pv installations worldwide will rise to 14.2gigawatts this year, up 97.2% from 7.2GW in 2009. Stefan de Haan, analyst at iSuppli, said: "Passing the 10GW threshold should be viewed as a real triumph, as the industry seeks to broadly deploy the technology for converting solar power into direct current electricity. Various factors support this year's upbeat forecast, including greater visibility into project pipelines, a clearer picture of the feed-in-tariffs subsidising the market and overflowing advanced orders being booked by suppliers." However, de Haan believes such rapid expansion could be derailed by potential pitfalls, including public budget problems of debt ridden, pv-active countries like Greece and Spain; currency headaches linked to material costs incurred by a weakening euro against the strong yuan from China, home to many pv suppliers and the inventory management of modules—a challenge that defies easy handling. de Haan continued: "While inventory in the pv channel spent all of last year being whittled down from almost six months of supply to below 80 days, the forecast this year reveals a more troubling W-shaped pattern—a mode of economic recovery normally associated with a double-dip recession, in which the beginning of an upturn is followed by a relapse into decline. "True, the overall pattern for this year takes into account the seasonality of pv installations, marked by a slow winter and robust summer. More importantly, however, the pattern reflects the gold rush mentality prevalent in Germany—the world's largest pv market—stirred up by feed-in-tariff cuts taking place in the middle of 2010 and the beginning of 2011." According to iSuppli, a similar movement happened in late 2009 when installations peaked in the fourth quarter, racing ahead to beat the reductions in feed-in-tariffs scheduled to occur this year. As a result of such factors, pv channel inventory piled up during the end of the first quarter of 2010—a pattern that iSuppli says will occur again in the third quarter, although to a lesser extent. Inventory, meanwhile, has stabilised in light of the summer German feed-in-tariff cuts as well as price drops adopted by installers to preserve market volume during this time of the year. "All told, concluded de Haan, "inventory management of the channel presents real challenges. Unlike the mature supply chain of the electronics space, in which the bulk of inventory is held by upstream suppliers such as semiconductor suppliers, most pv inventory piles up in the later stages of market flow, ending up among sites and installers, contributing to bloat and inefficient operations. "For pv companies throughout the supply chain, a gaffe at this point could be potentially fatal. While sunny profits and growth await the successful entity, an opposite fate lies ahead for the inept company— or even one that simply botches up the job. Those unfortunate enough to make a misstep at this point can find themselves left behind, iSuppli believes, relegated to a permanently smaller market position from which recovery is unlikely."