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Solar module manufacturers. A flash analysis.

Following the deep crisis in the previously booming solar module industry, more and more positive news is coming from this sector. Is the end of the price wars and the pressure to consolidate in sight?

Carried away by success – huge surplus capacity led to the crisis

Pushed by a wide range of subsidies for renewable energy, new photovoltaic installations worldwide grew by 85% - each year - between 2006 and 2010. At that time it was still possible for the module manufacturers to translate the dynamics into rising profits. German suppliers such as Q-Cells and Solarworld or the US supplier First Solar achieved margins of 20% and more in good years. Ceaseless investments were made in new production facilities, especially in China where the government identified the solar industry as a key industry and subsidised it. The consequence was huge surplus capacity and ruinous price wars. Less than half of the production capacity was being utilised globally at the peak of the crisis in 2012. Barely a German module manufacturer survived the resulting consolidation as an independent entity.

Recovery in the sector clearly visible

In the last few months more positive news has been coming from this sector. After painful restructuring measures, more and more manufacturers returning to the profit zone. The fall in module prices has slowed down. In addition, the solar module manufacturers have also become more cautious regarding their new investments, and at the same time the outlook is good: growth rates of a good 15% can be expected once again for new installations in 2015 and 2016.

Does this mean that the end of the price wars and the pressure to consolidate is in sight?

The current "Flash Analysis"  (PDF, 114 KB, non-accessible), a product of the Credit Analysis Department of KfW IPEX-Bank, examines our answer to this question and other aspects relating to the topic.

Published: May 2015