By Isabella Kaminski
The latest quarterly analysis by IMS Research, PV Cells & Modules – Supply & Demand Quarterly – Q2 11, found that a period of highly competitive pricing from PV module suppliers led to a decline in gross margins by over 25% in the last 6 months.
The report reveals that suppliers have reduced prices by around 15% in the last six weeks in order to compete in an industry that is currently plagued by oversupply.
Average crystalline PV module prices had been close to US$1.80/W in the first quarter of 2011 but a sudden change in market dynamics has resulted in sharp price declines and the same modules are now being consistently priced below $1.40/W.
According to IMS Research, rapid reductions in the price of cells and wafers have helped to offset PV module price declines and ease the impact on suppliers’ margins. However, while polysilicon spot prices have fallen by over 30% since the end of 2010, contract prices have held relatively stable so the average prices have fallen at a far slower rate. Average polysilicon prices remaining above $50/kg have limited the ability of downstream suppliers’ to reduce their costs.
Sam Wilkinson, Senior Market Analyst at IMS Research, says: “Vertically integrated Chinese Tier-1 suppliers of crystalline PV modules have some of the most competitive cost structures in a wide field of manufacturers, and had been producing with gross margins in the high twenties in 2010. Margins have already fallen from their peak in Q3 10. Current pricing levels are putting huge pressure on these suppliers’ margins; we believe their average gross margins could fall below 20% by Q3 11, with Tier-2 suppliers’ margins even lower.”