EnergyTrend estimates that the total PV demand worldwide for 2016 will reach 69.5GW. The installation rush in China during the year’s first half and significant market growth in the U.S. and India have been driving this year’s demand.
The outlook of the PV market for 2017, however, is generally negative. Not only demand growth for next year will be flat with the annual rate at almost zero, prices across the supply chain may swing sharply downward in the year’s second half due to the severity of the oversupply situation. Prices of PV modules are expected to fall by over 10% during the year on average, while prices of polysilicon, silicon wafers and PV cells may also sink to new lows. In order to survive in the depressing market, PV enterprises will need to focus on lowering their costs as much as possible.
Weakening demand in major markets will cause profits to fall in all sections of the supply chain next year
Major regional markets will simultaneously experience slowing demand in 2017. The installation rush in the U.S. will subside a bit, while China’s demand will be affected by the annual installation target, which is lower than this year’s level. Japan’s PV market will also be impacted by the reduction in feed-in tariff rates. According to EnergyTrend, India might replace Japan as the world’s third largest PV market in 2017.
However, the demand growth in India will not be enough to offset the demand decline in the major markets. To keep up shipments and maintain market shares, first-tier module manufacturers could take their quotes to new lows. The global average selling price of modules are projected to fall from US$0.38/W at the start of 2017 to US$0.33/W by the end of that year. Due to the fierce price competition, first-tier module manufacturers will have difficulty to maintain their gross margins around the usual 15% and above. Companies in the upstream and midstream sections of the supply chain will also incur heavy losses on account of the price downtrend. Hence, the entire industry in 2017 will see profits much lower compared with the 2016 standard.
Production capacity growth in Southeast Asia will narrow price gaps among markets worldwide
Since the U.S. imposed antidumping and countervailing duties on PV exports from China and Taiwan in 2014, module and cell makers have established production facilities in Southeast Asia. From there, they can sell products to the U.S. without tariff. While this strategy of setting up production centers abroad initially allowed PV enterprises to maintain healthy profits, prices are under increasing pressure as first-tier Chinese manufacturers continue to massively expand the production capacity of their overseas factories.
The U.S. and Europe recently have seen spot module prices falling sharply even as their governments have raised the barriers on PV trades. Excluding transportation fees, spot module prices in these two regional markets are now roughly the same as in China. As price differences among different markets for modules shrink, having more production capacity abroad does not confer additional advantages to product manufacturers. Instead, manufactures will have to use their overseas factories to produce high-efficiency mono-Si or mono-Si PERC solutions that can help them differentiate themselves in the market.
Corrine Lin, assistant research manager of EnergyTrend, pointed out that overseas production centers might actually become operational liabilities for PV enterprises, especially those from Taiwan. “Taiwanese PV companies are mostly cell suppliers, so their profits are being eroded by the falling module prices in foreign markets,” noted Lin.
Industry outlook for 2017 finds PERC supply to expand significantly and global market share of mono-Si products to exceed 32%
EnergyTrend’s analysis on global PERC production finds that this year’s shipments of PERC products worldwide totaled less than 4.5GW even though the global PERC production capacity has reached 13GW. However, the supply of PERC products is expected to double in 2017 because the technology has significant advantage in terms of cost to performance. Moreover, PERC demand in China will keep rising with the implementation of the Top Runner program.
As for mono-Si products, EnergyTrend estimates that their global market share will grow from this year’s 23.5% to next year’s 32%. In China, mono-Si solutions are estimated to represent nearly 80% of the 5.5GW Top Runner program that will be completed by next year. Also, the market share of mono-Si in China is forecast to grow to almost 40% by the end of next year. “Both mono-Si and PERC solutions have benefitted from China’s domestic demand and will steadily expand into overseas markets in 2017,” said Lin.
Multi-Si product suppliers will have to rely on diamond-wire wafer slicing to lower cost and reduce the impact of declining prices
The most pressing challenge for multi-Si product suppliers in 2017 will be to integrate diamond-wire wafer slicing with black silicon in the manufacturing process. As prices are expected to decline rapidly and the market share of mono-Si solutions continues to grow, manufacturers of multi-Si products will certainly incorporate diamond-wire wafer slicing into their manufacturing process. EnergyTrend also expects most multi-Si product suppliers to choose wet etching or additive methods to create black silicon products. As multi-Si product suppliers have limited cash supply, they are likely to forego other more expensive but also more effective methods of fabricating black silicon.
Prices of PV products will register large declines through 2016 and 2017 due to the massive expansion of supply and wide price fluctuations in the end market. Therefore, product manufacturers have to adopt advanced manufacturing technologies and methods. These include PERC and black silicon that will further lower production cost and raise product quality.
At the same time, companies in different sections of the supply chain will need to make adjustments to their business models and product portfolios so that they can remain competitive during the difficult period. “To align with market trends, they can allocate more of their capacity to make mono-Si products,” said Lin. “Manufacturers can also adopt diamond-wire wafer slicing and combine it with black silicon fabrication, or they can expand into the downstream market and distributive generation businesses. Most importantly, PV enterprises must position themselves clearly in the market in 2017 as to avoid being sidelined by aggressive competitors.”
