Solar supply chain burned by disappointing demand, oversupply

7/30/2009 7:20:18 PM

The solar market will suffer the pains of uneven supply and demand through 2009, according to a recent report from iSuppli Corp.

The market research company reported that massive oversupply of solar modules, combined with disappointing demand, has caused average inventories throughout the solar supply chain to soar by 64.3%, forcing major oversupply and price erosion.

Further, iSuppli reported that average days of inventory among solar module and cell makers, polysilicon and wafer suppliers, and vertically integrated companies that provide all these items surged to more than 121 days in Q1, up from 74.2 days during the same period in 2008.
 
“The worldwide solar industry for the first quarter added the equivalent of one-and-a-half months of excess inventory in just one year,” said Henning Wicht, iSuppli's principal analyst for photovoltaics (PV) research, in a statement. “With new polysilicon capacity coming online this year, the PV industry will suffer further price erosion, at all nodes of the value chain.”

According to iSuppli estimates, the spot price per kilogram for polysilicon will drop to $50 by the end of 2009, down by 72% from $180 per kilogram at the beginning of the year.

Meanwhile, on the demand side, the solar market is facing a "demand sinkhole" that was left after Spain’s PV demand collapsed, iSuppli said. "Despite this, solar-cell makers are still compelled to take deliveries from their polysilicon suppliers due to their long-term contractual obligations," the company said. "On the supply side, polysilicon providers recently invested billions in new facilities, forcing them to produce in order to cover these new fixed costs."
 
ISuppli noted that some of the most-burned entities in the PV industry have been the fully integrated players, including REC, Yingli, and SolarWorld, which have operations in all three polysilicon, wafer, and cells nodes of the supply chain. Inventory levels for this segment jumped to more than 161 days in Q1, up from 86 days during the first three months of 2008, iSuppli reported.