The prospect of increased revenues being reported by c-Si module manufacturers is becoming more of a challenge as the revenue-to-shipment (R:S) ratio (revenue per MW shipped) continues to decline. In fact, the R:S ratio has been declining steadily for some time, having peaked above 4 back in the second quarter of 2008.
While case-by-case variations apply to each c-Si module manufacturer, total PV revenues are (typically) a function of the average selling price (ASP) of modules and the shipment volume in a given time period. Previously, for the market-leaders, it was possible to increase quarterly revenues even as ASPs were declining. This was due mainly to end-market demand that was growing considerably faster than ASPs were declining and market-share gains as competitors exited the industry.
In fact, the lure of steadily-increasing industry revenues (and positive operating margins) was a key factor behind the explosion in new PV manufacturers and investments during 2010 and 2011. And – of course – this then became the source of the overcapacity, oversupply and sales competition that subsequently caused ASPs and margins to collapse.
Yet, despite the increase in manufacturing capacity, most leading tier 1 module manufacturers were able to increase shipments at a faster rate than ASP declines, thereby achieving greater revenues (albeit with lower R:S ratios). In fact, this trend continued until early 2011, when declining ASPs and (lower than expected) module shipments combined to push revenues down. However, for the first time, increasing total shipments Q/Q did not equate to increasing total revenues.
c-Si Module Revenues and Shipments (Q1'08 to Q1'12).
Source: Adapted from Solarbuzz Quarterly
The second quarter of this year was the fifthconsecutive quarter in which total industry module revenues declined for c-Si manufacturers. This trend is likely to continue as ASPs decline further during the remainder of 2012.
While end-market demand and module ASPs are factors that are (predominantly) outside the control of PV manufacturers, strong market-share gains can play a factor in slowing down the rate of quarter-on-quarter revenue declines. Indeed, with many of the existing lower tier manufacturers experiencing the ‘double-whammy’ today of decreasing shipments and declining ASPs, the shakeout of these uncompetitive players will leave a greater fraction of the shipment ‘pie’ to the market-leaders.
It will then be a case of accelerating cost-reduction programs in order to ensure that margins stay in positive territory as ASPs decline further in the years to come. In fact, cost reduction has become the key deliverable not just for module manufacturers, but across the whole PV value-chain.
Recent findings from the Solarbuzz Polysilicon and Wafer Report of July 2012 highlight these trends for upstream polysilicon and wafer manufacturers also. However, at this point for module manufacturers, the PV industry should begin to exhibit a more predicable operating environment, despite being one that may ultimately be characterised by R:S ratios below 1.