Many doubt the US Department of Commerce's ruling on Chinese dumping will have a significant impact on American solar manufacturing. But it does look likely to boost some unlikely players.
Taiwan -- Whether the U.S. DOCs ruling recommending 31% tariffs on Chinese solar cells will have a positive impact on Taiwan's solar cell industry, Maxim Group's Aaron Chew responds confidently, "Without a shadow of a doubt." Faced with 31% import tariffs on Chinese made solar cells, analysts say Chinese solar manufacturers are already turning to their neighbors across the Taiwan Straits to source solar cells.
Daniel Tzeng of Fubon Securities notes that all of the Taiwanese solar makers he’s spoken with say they have already seen an uptick in orders from Chinese makers seeking hedges against future action by the U.S., and forecast these gains continuing through the summer.
Taiwan, officially known as the Republic of China, shares more than just a name with the People’s Republic of China across the Taiwan Strait. The two sides were divided politically in 1949, with the retreat of the Chinese Nationalists (KMT) to Taiwan at the end of the Chinese Civil War. But after decades of hostilities, the two nations are now deep collaborators in global high tech supply chains, including solar PV. With Chinese makers suddenly facing 31% tariffs on exports to the U.S., it’s natural they would readily turn to Taiwan.
“I would expect this to be a widespread strategy used by Chinese solar makers this year and maybe into next,” forecasts Chew. “I expect a boost in revenues and possibly even pricing for Taiwanese solar makers in 2012.”
The markets agree; share prices for most of Taiwan’s solar makers have risen over the past few days on optimism that Taiwan’s solar makers might be finally seeing a boost to an industry buffeted by plummeting prices even as raw materials remained comparatively high. Gintech’s share price hit its maximum allowed 7% rise Monday as all of the other big solar makers saw gains of around 3%.
But increased revenues don’t necessarily add up to increased profits for Taiwan’s solar makers. Fubons’s Tzeng notes that prices for solar cells have dropped so significantly that Taiwanese solar makers continue to operate on razor thin margins and that all the big players reported losses in Q1 and are likely to report further losses in Q2 2012. An increase in orders related to tariffs on Chinese solar cells will likely lead to even greater losses, he says.
The reason is that import tariffs on Chinese solar cells into the US market will do little to address the fundamental issue facing the solar industry--the chronic oversupply that has caused solar cell prices to fall 50% in 2011 and another 20% so far in 2012.
In fact, many feel that the ruling may actually exacerbate the situation by prompting Taiwanese makers to restore the 30% or so of capacity they have mothballed over the past year. Fubon Securities analyst Daniel Tzeng says that many Taiwanese players reduced their production capacity recently because of losses. A surge in orders from China might cause them to bring this capacity back online, and as Taiwan is the second largest solar cell maker, an increase in its capacity impacts the entire global industry. Taiwan had 12% of the global market share for 2011, with three players, Motech, Gintech and Neo Solar in the top ten global cell makers, ranking 6, 7 and 8 respectively. Along with SolarTech and DelSolar, these five companies produced 3.5 gigawatts in 2011, according to SolarBuzz.
But even as Taiwanese makers ramp up production to meet a potential gap in the market, analysts feel that Chinese makers will not reduce capacity accordingly. Aaron Chew predicts that with tariffs removing the U.S. market from their price range, “[Chinese solar producers] are going to start dumping in Europe, dumping in China.”
“In the grand scheme of things, this does nothing to improve the economics of solar,” Chew says.
Gintech’s spokesperson Becky Yu notes that while Taiwanese cells might not be subject to high antidumping tariffs, “we really don’t know the benefit that might be gained.” She cautions that the ruling could trigger a trade war between the U.S. and China, which might ripple out to U.S. equipment makers and installers, impacting demand. “We can only say wait and see. We don’t think the PRC will take this happily.”
According to Aaron Chew, pricing in solar is driven by two overarching factors — the push of overcapacity on the supply side, and the pull of demand. For solar pricing to reach levels that are sustainable for manufacturers, overcapacity must be reduced and/or demand must reach levels where it doesn’t rely on subsidies. With prices coming down so far in the past year, grid parity seems not too far off. But for capacity, “there’s no rationalization in sight.”
In such market conditions, a wave of bankruptcies might be expected as solar makers drop out, unable to sustain years of little profitability, and indeed 2011 saw a number of prominent failures. QCells went bankrupt, as did Solon, while First Solar cut capacity.
But Aaron Chew notes that Solon hasn’t stopped operations and QCells continues making panels under bankruptcy protection, while First Solar’s capacity reductions were negligible.
Furthermore, new cell makers are entering the fray. GE, Samsung and even Taiwan’s own TSMC have announced plans to enter the solar market, while upstarts such as Alex Solar, Nimbo Solar and Talesun were “all names no ones heard of a year ago, now they are all close to a gig in capacity.”
“Every time capacity goes offline somewhere, it comes back somewhere else,” Chew observes.
Chew is bullish on demand, despite widespread pessimism that the U.S., Japan and emerging market demand will offset the decline in demand from Europe following subsidy reductions. But even with his rosier demand forecasts, “We have enough capacity to last for a long time.”
So what is the way forward for Taiwan’s export driven solar cell industry?
Despite widespread pessimism, McKinsey and Company’s report on the solar industry, “Solar Power: Darkest before dawn” (April, 2012) offers solace. In this light, the report recommends three strategies for solar industry — achieving manufacturing excellence, developing differentiated and scalable technologies and addressing the Balance of Systems costs — the costs of associated installation and equipment costs. The report further notes, “downstream segments of the value chain will become increasingly attractive.”
Gintech, for one, has already taken a 32% share in an installer, and the company has completed projects as far flung as NJ and Taiwan’s second largest city, Kaohsiung. AU Optronics is employing its BenQ brand in an effort to develop a turnkey solution to installation.
Meanwhile, Taiwan’s public/private research center, the Industrial Technology Research Institute in Hsinchu, Taiwan is hard at work innovating in the solar realm. The director of its Green Technology division, Dr. Alex Tong, suggests that “disruptive technologies” might completely change the global solar market, and that his researchers are hard at work on the next big thing.
McKinsey’s report acknowledges the problems facing the industry, but says these are “normal growing pains, not death throes” for the industry.
Maxim’s Aaron Chew feels that that pricing and demand will eventually come into balance. “At some point you have to settle on pricing in the marketplace that not only is good enough to attract or invite demand but has enough profitability for the rest of the value chain to survive.”
When this will happen, however remains a wide-open question. In the meantime, Fubon’s Tzeng is pessimistic over Taiwan’s solar makers’ chances of turning a profit. With overcapacity persisting for at least the foreseeable future, “the only thing they can do is court losses and wait for better opportunities.”
As for the Taiwanese major players’ ability to survive this challenging market, Aaron Chew isn’t worried.
With their deep pockets and large scale, he says, “I have every confidence the largest Taiwanese makers will pull through the downturn.”
“I just don’t know how much money they’re going to be making in the process.”
http://www.renewableenergyworld.com/rea/news/article/2012/05/could-taiwan-be-the-next-big-solar-manufacturing-hub
Taiwan -- Whether the U.S. DOCs ruling recommending 31% tariffs on Chinese solar cells will have a positive impact on Taiwan's solar cell industry, Maxim Group's Aaron Chew responds confidently, "Without a shadow of a doubt." Faced with 31% import tariffs on Chinese made solar cells, analysts say Chinese solar manufacturers are already turning to their neighbors across the Taiwan Straits to source solar cells.
Daniel Tzeng of Fubon Securities notes that all of the Taiwanese solar makers he’s spoken with say they have already seen an uptick in orders from Chinese makers seeking hedges against future action by the U.S., and forecast these gains continuing through the summer.
Taiwan, officially known as the Republic of China, shares more than just a name with the People’s Republic of China across the Taiwan Strait. The two sides were divided politically in 1949, with the retreat of the Chinese Nationalists (KMT) to Taiwan at the end of the Chinese Civil War. But after decades of hostilities, the two nations are now deep collaborators in global high tech supply chains, including solar PV. With Chinese makers suddenly facing 31% tariffs on exports to the U.S., it’s natural they would readily turn to Taiwan.
“I would expect this to be a widespread strategy used by Chinese solar makers this year and maybe into next,” forecasts Chew. “I expect a boost in revenues and possibly even pricing for Taiwanese solar makers in 2012.”
The markets agree; share prices for most of Taiwan’s solar makers have risen over the past few days on optimism that Taiwan’s solar makers might be finally seeing a boost to an industry buffeted by plummeting prices even as raw materials remained comparatively high. Gintech’s share price hit its maximum allowed 7% rise Monday as all of the other big solar makers saw gains of around 3%.
But increased revenues don’t necessarily add up to increased profits for Taiwan’s solar makers. Fubons’s Tzeng notes that prices for solar cells have dropped so significantly that Taiwanese solar makers continue to operate on razor thin margins and that all the big players reported losses in Q1 and are likely to report further losses in Q2 2012. An increase in orders related to tariffs on Chinese solar cells will likely lead to even greater losses, he says.
The reason is that import tariffs on Chinese solar cells into the US market will do little to address the fundamental issue facing the solar industry--the chronic oversupply that has caused solar cell prices to fall 50% in 2011 and another 20% so far in 2012.
In fact, many feel that the ruling may actually exacerbate the situation by prompting Taiwanese makers to restore the 30% or so of capacity they have mothballed over the past year. Fubon Securities analyst Daniel Tzeng says that many Taiwanese players reduced their production capacity recently because of losses. A surge in orders from China might cause them to bring this capacity back online, and as Taiwan is the second largest solar cell maker, an increase in its capacity impacts the entire global industry. Taiwan had 12% of the global market share for 2011, with three players, Motech, Gintech and Neo Solar in the top ten global cell makers, ranking 6, 7 and 8 respectively. Along with SolarTech and DelSolar, these five companies produced 3.5 gigawatts in 2011, according to SolarBuzz.
But even as Taiwanese makers ramp up production to meet a potential gap in the market, analysts feel that Chinese makers will not reduce capacity accordingly. Aaron Chew predicts that with tariffs removing the U.S. market from their price range, “[Chinese solar producers] are going to start dumping in Europe, dumping in China.”
“In the grand scheme of things, this does nothing to improve the economics of solar,” Chew says.
Gintech’s spokesperson Becky Yu notes that while Taiwanese cells might not be subject to high antidumping tariffs, “we really don’t know the benefit that might be gained.” She cautions that the ruling could trigger a trade war between the U.S. and China, which might ripple out to U.S. equipment makers and installers, impacting demand. “We can only say wait and see. We don’t think the PRC will take this happily.”
According to Aaron Chew, pricing in solar is driven by two overarching factors — the push of overcapacity on the supply side, and the pull of demand. For solar pricing to reach levels that are sustainable for manufacturers, overcapacity must be reduced and/or demand must reach levels where it doesn’t rely on subsidies. With prices coming down so far in the past year, grid parity seems not too far off. But for capacity, “there’s no rationalization in sight.”
In such market conditions, a wave of bankruptcies might be expected as solar makers drop out, unable to sustain years of little profitability, and indeed 2011 saw a number of prominent failures. QCells went bankrupt, as did Solon, while First Solar cut capacity.
But Aaron Chew notes that Solon hasn’t stopped operations and QCells continues making panels under bankruptcy protection, while First Solar’s capacity reductions were negligible.
Furthermore, new cell makers are entering the fray. GE, Samsung and even Taiwan’s own TSMC have announced plans to enter the solar market, while upstarts such as Alex Solar, Nimbo Solar and Talesun were “all names no ones heard of a year ago, now they are all close to a gig in capacity.”
“Every time capacity goes offline somewhere, it comes back somewhere else,” Chew observes.
Chew is bullish on demand, despite widespread pessimism that the U.S., Japan and emerging market demand will offset the decline in demand from Europe following subsidy reductions. But even with his rosier demand forecasts, “We have enough capacity to last for a long time.”
So what is the way forward for Taiwan’s export driven solar cell industry?
Despite widespread pessimism, McKinsey and Company’s report on the solar industry, “Solar Power: Darkest before dawn” (April, 2012) offers solace. In this light, the report recommends three strategies for solar industry — achieving manufacturing excellence, developing differentiated and scalable technologies and addressing the Balance of Systems costs — the costs of associated installation and equipment costs. The report further notes, “downstream segments of the value chain will become increasingly attractive.”
Gintech, for one, has already taken a 32% share in an installer, and the company has completed projects as far flung as NJ and Taiwan’s second largest city, Kaohsiung. AU Optronics is employing its BenQ brand in an effort to develop a turnkey solution to installation.
Meanwhile, Taiwan’s public/private research center, the Industrial Technology Research Institute in Hsinchu, Taiwan is hard at work innovating in the solar realm. The director of its Green Technology division, Dr. Alex Tong, suggests that “disruptive technologies” might completely change the global solar market, and that his researchers are hard at work on the next big thing.
McKinsey’s report acknowledges the problems facing the industry, but says these are “normal growing pains, not death throes” for the industry.
Maxim’s Aaron Chew feels that that pricing and demand will eventually come into balance. “At some point you have to settle on pricing in the marketplace that not only is good enough to attract or invite demand but has enough profitability for the rest of the value chain to survive.”
When this will happen, however remains a wide-open question. In the meantime, Fubon’s Tzeng is pessimistic over Taiwan’s solar makers’ chances of turning a profit. With overcapacity persisting for at least the foreseeable future, “the only thing they can do is court losses and wait for better opportunities.”
As for the Taiwanese major players’ ability to survive this challenging market, Aaron Chew isn’t worried.
With their deep pockets and large scale, he says, “I have every confidence the largest Taiwanese makers will pull through the downturn.”
“I just don’t know how much money they’re going to be making in the process.”
http://www.renewableenergyworld.com/rea/news/article/2012/05/could-taiwan-be-the-next-big-solar-manufacturing-hub
No comments:
Post a Comment