The air of confusion permeating across the current round of earnings calls in the PV industry is not particularly surprising, given the turbulence and negative operating performance by almost all PV manufacturers in recent quarters. Several questions remain somewhat off-bounds however when it comes to committing to any firm guidance. This includes timelines on margin-recovery, future capex plans, year-end demand (Q4’12 APAC-demand both encouraging and risky) and the one that trumps them all – future ASP trends.
When overcapacity (and then oversupply) infiltrated both upstream and downstream channels through 2011, the initial speculation was based upon what the industry would look like in order to sustain a rebound in ASPs. This optimism quickly turned to forecasting when (not necessarily how) ASP declines would halt and then stabilize – allowing PV manufacturers sufficient breathing space to work on cost-reduction.
The timing of ASP stabilization has been somewhat of a moving target now for 12 months, with the current ‘hope’ that this may occur at the start of 2013. But it is not clear what is driving this new form of optimism, other than the uncertainties related to anti-dumping investigations worldwide.
Supply-and-demand still remains precariously positioned, with offline capacity and underutilization of existing capacity being used as the control element here to limit upstream oversupply and further ASP erosion (based on competition to retain supply market-share). ASPs can only be stabilized at the manufacturing cost level before balance between supply and demand can be restored.
Rather, there are more alarm bells for Q1’13 in the works than reasons for optimism that ASPs will stabilize then. The historic industry trends highlight a track-record of year-end surges – previously from Europe, and now from APAC and especially the domestic Chinese market. And plans from Chinese manufacturers to adjust utilization rates in the second half of 2012 to meet a large spike in Q4’12 shipments can only come with a high degree of risk.
The threat of upstream inventory build in Q1’13 is therefore a strong possibility, and the chances of ASP stabilization if this occurs may be remote. Especially if there is a surplus of low-efficiency multi-based c-Si modules produced specifically for the Chinese end-market that subsequently need to be rerouted to any overseas market.
Of course, the silver lining once again is end-market elasticity with emerging markets being stimulated faster than expected on the back of low module ASPs. This will certainly help drive overall demand levels during 2013, but will represent new demand based purely on a low-ASP offering. And as such, it will be cost-reduction therefore that will almost certainly remain the dominant buzzword through 2013.