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Crystalline solar PV margins and prices in decline

Prices are falling sharply throughout the solar photovoltaic (PV) crystalline supply chain, according to IMS Research.

By Isabella Kaminski

Solar polysilicon, wafer, cell and module prices will fall 7% on average in the first quarter (Q1) of this year, according to the latest quarterly report by market research firm IMS Research, and will continue to decline in the second quarter. This is largely due to cuts to solar incentive schemes in key markets causing installation growth to slow.

Average polysilicon contract prices fell by 2% in the Q4 of 2010 but spot prices declined by nearly 10%, reversing the rapid increases that had occurred in the previous quarter when Tier 2 and 3 suppliers had been able to sell solar grade silicon at inflated prices on the spot market due to high demand and a shortage in supply.

The report predicts that both contract and spot prices will continue to decline in the Q1 of 2011, falling by 4% on average over the previous quarter. Similar price declines are predicted throughout the supply chain.

IMS Research says that as reduced incentive rates have placed increased pressure on solar module suppliers’ prices, manufacturers are transferring this pressure to their upstream suppliers and forcing down solar cell, wafer and polysilicon prices.

Furthermore, smaller solar module, cell and wafer companies are likely to suffer the most severe price declines, says the report. High demand throughout 2010 meant that their larger competitors were largely sold out, and these suppliers were able to capitalise on the situation and increase their shipments and prices quickly.

Sam Wilkinson, PV Market Research Analyst at IMS Research, says: “Efficiency improvements and relatively high utilisation rates are helping to continue the lowering of manufacturing costs throughout the supply chain. However, costs are not being reduced as quickly as prices, and gross margins are beginning to tighten. IMS Research predicts that by mid-2011, some polysilicon and wafer suppliers will see their gross margins fall to half of what they peaked at in Q3 [of 2010].”

Despite declining margins for most in 2011, IMS Research predicts that the overall outlook for the solar PV industry is positive and the polysilicon market (for PV applications) will grow by nearly 20% this year to reach nearly US$8 billion.

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