The fact that these facilities continue to receive government support would suggest that many policymakers remain fixated on domestic solar manufacturing, despite the chronic oversupply that currently exists within the upstream segment of the PV value-chain. Moreover, many of these projects are funded as a means of local ‘job creation’, despite the fact that modern module fabs are not particularly labor intensive compared to downstream PV system requirements.

Such manufacturing ‘support’ policies are being implemented globally. For example, within South America, there are manufacturing facilities with capacities of 5-20 MW being developed in Brazil. In Argentina, national and state funds are being made available in an attempt to create a domestic PV value-chain to satisfy up to 0.5 GW of installations over the next decade. In the Caribbean region, several islands have proposed tax policies to stimulate domestic PV manufacturing. For example, project developers in Jamaica are required to invest in manufacturing facilities as a prerequisite to securing PV project activities.

Across Africa, countries such as Algeria, Nigeria, and Tunisia are utilizing state-owned energy firms to develop manufacturing facilities to serve domestic electrification projects and regional off-grid system demand. Ethiopia and Kenya also have domestic module manufacturing facilities that are owned by partnership ventures between foreign and domestic companies. While some of these facilities are currently operating at low capacity utilization levels, they are producing PV modules, albeit courtesy of state support. Some recently-installed manufacturing lines are being configured to serve the growing demand for off-grid systems, from small to large-scale.

However, each of these domestic firms must still compete with large-scale international manufacturers. Therefore, it remains somewhat unclear if they can survive in the absence of state funding or when multinational firms start to expand into what were previously regarded as niche PV markets.

Domestic module manufacturing is also prevalent in more developed countries, in particular Canada. In Ontario, the Green Energy Act has enabled the creation of a robust domestic PV supply chain in just three years. In fact, the initiative has proved so popular that some Ontario-based PV manufacturers now find themselves at a competitive disadvantage, even within their own local market. By the middle of 2012, there will be over five times the amount of module capacity required to meet projected demand.

Another knock-on effect of the recent surge in small-scale domestic PV module manufacturing has been the creation of a new addressable market for PV equipment suppliers. Indeed, at a time when PV equipment spending is going through a prolonged downturn, any new market opportunity can be viewed as a positive development. Today, most PV module equipment suppliers are actively pursuing small-scale module fab builds to compensate for the absence of turn-key module line orders from countries such as Spain and Italy.

It remains likely that some form of local module manufacturing will be installed within all regions exhibiting PV market growth. However, with vertically-integrated multinational firms now aggressively targeting emerging PV regions, there is a distinct possibility that small-scale module manufacturing will only survive within niche markets that offer the security of local subsidies or domestic incentives.

Ultimately, all manufacturing must follow the global industry’s declining module ASP trajectory, with production costs at any stage of the value-chain being low enough to provide positive operating margins. With small-scale manufacturers dependent on upstream supply of c-Si cells, their ability to control costs will be challenged by the GW-scale vertically-integrated fabs of tier 1 industry-leaders. Thus, domestic incentives will provide a limited window of opportunity for small-scale manufacturers to gain a foothold in their local markets, potentially by partnering with downstream project developers to offer a value-added proposition.

As PV systems increase in size, it directly impacts the scale of individual projects and also results in new categories and definitions being applied in the market. As a result, some key changes have recently been occurring in downstream PV channel structures within the U.S., reflecting the different types of services and products on offer.

Traditional installers are referred to as “system integrators” or “turnkey solution providers.” Large system integrators that build utility-scale projects are categorized as engineering, procurement and construction (EPC) providers, and work closely with project developers. Furthermore, industry-leading PV module manufacturers with strong downstream focus – such as First Solar and SunPower – have been increasing their in-house EPC resources to help drive demand for their internal module supply.

Some services that were previously confined to utility-scale and large non-residential systems are now being offered to residential systems, by companies such as SolarCity and SunRun. Options here include financing (PPA or leasing) and/or operation and maintenance (O&M). Reduction or elimination of the high upfront cost and “hassle-free” maintenance and repair offered by the third-party ownership models are infiltrating the residential market.

The expired federal Cash Grant significantly increased the uptake in residential “leasing.” In fact, the third-party ownership model now accounts for approximately half of the residential market in some key states such as California, Arizona and Colorado. Originally established in 2009, the Cash Grant was configured to be applicable only to tax-paying business entities. Therefore, residential PV owners were effectively ineligible for the Cash Grant.

However, solar leasing companies or investors – as business taxpayers – could legitimately apply for a Cash Grant for residential systems by assuming direct ownership of the PV system. By accessing the benefits of the Cash Grant (and state incentives), solar leasing companies have been able to attract homeowners by indirectly passing on these benefits in the form of reduced monthly PV leasing payments.

In addition to the Cash Grant, the increased availability of Asian-manufactured PV modules is viewed by some observers as having a positive effect on the third-party ownership business model. By emphasizing services specific to “electricity delivery,” solar service providers often take a technology- and/or brand-agnostic approach and subsequently identify the lowest module ASPs to sell through.

However, regardless of the PV project size (500-MW ground-mount power plant or 5-kW residential roof-mount), the key issue is that the type of services being offered within the U.S. PV market is growing in importance, not simply the type of module or system installed. Therefore, companies that prioritize ease-of-solution in delivering kWh/MWh of solar PV electricity to end-customers will have an increased value-added proposition within the U.S. downstream PV market.

The amendments have led to a wave of insolvencies in the German PV industry. Among the segments that were hit the hardest are developers of very large ground-mounted systems on reclaimed land, in particular as the transition phases set by the law turned out to be too short for many projects. Since these solar parks tend to exceed the 10 MW level, and in most cases are located on former military airports in eastern Germany, the Federal States in the eastern part of the country were among the strongest critics of the amended law.

The Federal Council’s committee for the environment is now demanding a fundamental revision of the law with the aim of avoiding further job losses in the PV industry and rebuilding investment security. The market integration model is among the most disputed points. The committee for economics of the Federal Council has proposed postponing the date which the amended law comes into effect to June 1. The Green Party wants to withdraw the exclusion of new PV plants of above 10 MW from EEG funding.

The arbitration panel consisting of members of the German Federal parliament and the Federal Council will have to work out a compromise, which will then need to go through both chambers again. The rejection of the new law by the Federal Council is seen by many as setback for the minister for the environment, Norbert Röttgen (CDU), who along with the minister for economics, Philipp Rösler (FDP), was main driver behind the amendment.

On May 13, Röttgen lost the election for minister presidency in Germany’s most populated state, North Rhine-Westphalia, leading him to resign as party leader of the state; political observers have now labeled him a “lame duck.” Along with the sweeping election victory of the Green Party in Baden-Württemberg just after the Fukushima events a year ago, Röttgen’s defeat shows that energy issues have established themselves as crucial in major elections in Germany. It also proves that the PV industry campaign for an improvement of the law paid off.

The next sitting of the Federal Council is scheduled for June 15, 2012, which should allow enough time to develop an amended EEG that will limit the damage to the PV industry caused by the hastily done law from April 1.

This year, with OLED TV showcased at CES, Samsung faced a similar battle with LGE about OLED techonology; Samsung has been developing RGB patterning (in which red, green, and blue organic emitters are deposited into each sub-pixel), while LG has been pursuing white with color filter. Like 3D,  OLED is an immature technology for TV so that there is plenty of room for Samsung and LGE to attack the weak points of each others’ technologies and to use them as a marketing tool for their TVs.

There are still several rumors that Samsung may adopt FPR 3D and white OLED like LGE, but Samsung presented a different focus at the “2012 Samsung Premium TV Showcase” last Thursday in Korea, intended to reinforce the message that Samsung is the leader in OLED TV. Perhaps the most interesting potential impact to emerge from this event was the “smart dual view” OLED TV, which uses the fast switching speed to show two channels simultaneously.

“Smart dual view” is not a particularly new idea. This technology originally come from shutter glass 3D, and was often used as a gaming feature allowing two-player game views. However, it could also enable consumers to watch two different programs simultaneously. For example, one member of the family can watch a drama while another enjoys a baseball game, on one TV at the same time. In the past, the “picture in picture” function enabled viewing two channels, but the secondary channel was in a greatly reduced format and without sound.

While plasma and LCD can also enable “smart dual view,” it is not likely that Samsung would feature it on these technologies. Many in the industry see OLED TV as a chance to save a saturated TV market but also worry at OLED TV is not differentiated enough from LCD TV. If Samsung succeeds in driving OLED TV with “smart dual view”, shutter glass 3D may attach itself to OLED TV, while making FPR 3D an old feature associated with LCD TV. Samsung’s new OLED TV even comes with two pairs of shutter glasses to reinforce the message that shutter glass 3D will prevail over FPR.

Figure 1: Comparison of 2012 Polysilicon to Solar Wafer Production

Source: NPD Solarbuzz Polysilicon and Wafer Supply Chain Quarterly

These differences between regional polysilicon production and demand mean that China is the most important market for top-tier poly manufacturers such as Wacker, Hemlock, REC, MEMC, OCI and Tokuyama.

Foreign imports of polysilicon into China vary substantially month-to-month, but as shown below are substantial and continue to trend upward.

Figure 2: Polysilicon Imports to China

Source: Chinese Customs Data

Imports of polysilicon from the U.S. to China are substantial, given that the U.S. is second only to China in polysilicon production and have been increasing this year. Chinese customs data also suggests that U.S.-sourced polysilicon prices have fallen rapidly since the end of last year, making it the cheapest available feedstock. In March, polysilicon shipped from the U.S. to China was $4.4/Kg less than the average import price.

Chinese manufacturers are exasperated by the U.S. Department of Commerce’s preliminary determination of cell and module dumping against them. And with all but the lowest cost Chinese polysilicon manufacturers stopping production due to continuously falling prices, Chinese makers have been filing petitions asking their government to impose anti-dumping tariffs against U.S. and other foreign polysilicon producers. The final verdict is still out on all allegations of solar industry dumping, but the China PV Industry Alliance will likely utilize recent polysilicon import and pricing data to try to bolster its case. If China does impose punitive tariffs on imports, it could make U.S. producers less competitive in the largest market for polysilicon.

 In China, seasonality in the TV market is strong, and TV brands tended to build inventories before the Western New Year, Chinese New Year (late January or early February), Labor Day (May 1^st), and National Day (October 1^st) Golden Week holidays to fulfill demand, especially for a massive geographic market with varied transportation quality. These inventory builds have as strong influence on LCD TV panel makers’ shipment performance. While the inventory builds are good for panel makers, there is always concern over whether the sell-through results justified the inventory. Chinese set makers bought a high volume of panels for the 2012 Labor Day Holiday, but according to some observers in China the sell-through results were not good. The worries of over-stocking in China rise.

 In our MarketWise – LCD Industry Dynamics report we developed a special index to track the state of panel inventories in China, by comparing monthly panel shipments to Chinese TV brands to monthly LCD TV shipments by those brands into the Chinese market.

Source: MarketWise – LCD Industry Dynamics

Our analysis shows the inventory level is still healthy even though the Labor Day sell-through was not as good as expected, due to the following points:

• In April, as global TV brands were preparing new product launches in regional markets for the upcoming London Olympics, LCD TV panel shipments to China were constrained and less than previously forecast. Panel shipments to China are likely to stay flat.
• Our research indicates that panel shipments to China will be flat or slightly decline in May, then build gradually in preparation for the October 1^st holiday promotion. 
• Due to pre-promotional efforts and stronger demand from rural cities, the LCD TV sales result is likely to come in at low single digit growth for the May Day Holiday.
• Sunning and some other Chinese retailers have extended the promotion period after the May Day holiday, so we expect that the inventory will fall from the current level.

If Chinese TV makers control panel purchasing in the coming months, panel inventories may not reach a risky level, and the supply/demand result will be much different from the pattern in 2H of 2011. Unlike last year, the gap between panel and set seems to indicate that Chinese TV companies are maintaining reasonable levels of inventory.

Unfortunately for the Australian market, these types of installations are projected to decline in 2012 as a result of policy cutbacks at both the federal (solar credit multiplier declining 1 July 2012) and state level (only one state, QLD, has maintained its FIT program). Current projections show that the Australian PV market could contract by almost 20% in 2012 as a result of these policy changes.

However, a new business model has recently emerged that could revitalize the flagging residential market segment and also provide a jumpstart to the commercial customer market segment. The model in question is third-party system ownership via leasing programs. Under these programs – already hugely successful in the USA – solar PV leasing companies install, maintain, and own PV systems that are sited on residential or commercial rooftops while the site owners is able to sign a long-term (20 year or greater) power purchase agreement at rates often lower than retail electricity. This provides a ‘win-win’ scenario as the system ‘host’ can secure cheaper long-term energy pricing and the system ‘owner’ (the leasing company) has a steady long-term revenue stream that makes it easier to finance systems and provide acceptable ROIs.

For some time, the downstream Australian PV industry has been preoccupied with providing solar systems as ‘hardware’ rather than as a ‘service’. However, recent announcements from several companies indicate this situation is about to change. Established PV systems providers, both domestically and internationally, have recently announced they will start offering this type of service, including Australia-based Energy Matters and California-based Sungevity. In the US, this type of business model has become the de-facto method of installation for residential systems in several states because it requires less upfront investment from the customer and provides similar benefits. According to our North America research, in Q1’12, leased systems accounted for 64% and 75% of new residential PV installations in California and Colorado, respectively; up from 37% and 47% in Q1’11. If Australian integrators can offer a reliable long-term service-based PV power solution, then the prospects for growth in the overall market could significantly improve; in particular, in states where retail grid-parity is expected to be reached within one to two years.

The companies have disclosed limited details of the partnership but did announce that a Nook application will be available for Windows 8, making Barnes & Noble’s library of books, magazines, and newspapers available to Windows customers worldwide. The impact of this partnership on both companies depends on a number of key details that have yet to be disclosed, among them the extent of the roles of each company and the goal of the partnership.

Thus far the companies have said that they are aiming to accelerate innovation in e-reading across a range of devices, which is vague but the partnership does put an end to the patent litigation between the two companies. Barnes & Noble and Newco have a royalty bearing license to Microsoft’s patents. Representatives have said that the partnership isn’t exclusive, so each company can work with other partners or on their own in the e-reading market.

The sense is that this partnership is more about a digital media strategy which recognizes that accessing digital content and having a common experience across devices will become a significant trend going forward. While tablets are and will continue to be an integral part of the device universe, they do not appear to be central to this partnership. The partnership does provide both companies with significant assets to enable a better experience for both their respective efforts: Microsoft in terms of investing in content that when accessed could potentially have a common feel across a growing array of device types, and Barnes & Noble in terms of proliferating its service across a wider reach of devices. The app essentially becomes a sales channel for Barnes & Noble to sell content to all Windows 8 devices that have the app downloaded.

Given that Windows 8 won’t be available until the end of the year, the impact of this partnership at this point is likely to remain fodder for speculation but is an encouraging sign for the e-reader market nonetheless.

The two companies showed strong performance, with LGE reporting 4.1% operating profit margin in its HE (Home Entertainment, which is mostly TV) business and Samsung reporting 5.0% from CE (Consumer Electronics, also mostly TV). What has enabled the Korean brands to improve their profitability?

1. With Japanese brands such as Sony, Sharp, Toshiba, and Panasonic suffering profit losses, Samsung and LGE were not compelled to reduce their prices to be competitive. As a result, both have been able to avoid selling money-losing products.
2. Tight inventory management from the end of last year helped save huge marketing expenses when liquidating old models to make room for new models.
3. Samsung and LGE immediately responded to market changes with low-cost models.
4. Premium models, with 3D capability, LED backlights and Smart functionality are driving profits with strong unit market shares.

With the Korean brands improved profits, they can be expected to become more aggressive in capturing share from other brands and increase pressure on Japanese TV brands, especially if the global TV market does not grow, as expected. This is one of the reasons Japanese brands are exploring closer collaboration with Taiwanese panel makers.

Over the past few years, it was seen as an impossible mission to make more than 3% margin in the TV set business, as Japanese set makers experienced increasingly worsening losses. In such an atmosphere, few expected Apple to enter this low margin category with a branded TV product. However, the opinion is starting to change and some in the TV industry, now believe that if Apple enters the TV category it may improve the margin structure as a game-changer, driving innovation and higher margins.

 The TV will be available in a variety of screen sizes, with a base unit incorporating a receiver module and disk player. As several screen sizes are available, it is likely that the screen part is a dumb HDMI monitor. Reportedly, TCL will be manufacturing the electronics.

 That highlights what is wrong with the industry. While some consumers are likely to think twice before buying an Ikea TV, concerned about the quality of the image or other performance attributes, Ikea is offering a five year guarantee, which at least addresses reliability concerns. But any consumer encountering a Japanese name on the set would have felt instantly reassured and bought in even more confidence. So why was this opportunity missed by the Japanese? Without doubt, Ikea drives a hard bargain, but the inability to compete on cost (even with brand equity adding value) is surely important. So either Japanese setmakers couldn’t compete, or ignored the built-in furniture opportunity even though some of the Ikea TV furniture costs as much as a 32” TV!