Solar Crisis to Hit Equipment Companies

NEW YORK (TheStreet) -- I noted last week in my article, "Solar Panel-Price Eclipse Coming," that in 2010 the solar industry will exhibit capacity utilization of 25.7%; inventory will be stretched to 133 days; average selling prices could drop below $1 a watt in 2010 and 50 cents in 2011; and as many as 50% of the more than 200 solar manufacturers, mired in red ink with current selling prices above $2 a watt, may not survive.

In addition to the failure and consolidation of the solar panel manufacturers, companies supplying equipment to manufacture panels will be severely impacted. Two things will happen. The obvious impact will be the loss of customers of equipment suppliers.

Next, solar manufacturers, in their exuberance to increase capacity from 17.6 gigawatts in 2009 to 24.2 GW, will initially purchase equipment only to have it sit idle in factories as inventories stretch to 133 days. As these companies close or consolidate, this equipment will then be sold on the secondary market, further exasperating revenue growth for equipment vendors.

The equipment companies currently are experiencing a slowdown because even though solar customers want to make purchases, financing is still tight. Going forward, the largest solar manufacturers will survive as a customer base. Chinese solar manufacturers, who prefer to purchase low-cost equipment from Taiwan, also will survive, as the Chinese government will subsidize their survival through stimulus packages.

I also noted in my Sept. 1 article on TheStreet.com that solar panel manufacturers who have reported losses just in the past few weeks include Energy Conversion Devices(ENER Quote), JA Solar (JASO Quote), LDK Solar(LDK Quote), ReneSola(SOL Quote), Solar Power (SOPW.OB Quote) and Yingli Green Energy (YGE Quote).

Interestingly, five of the six companies are Chinese. They continue to increase inventory, lose money, and effect the entire solar panel industry. Perhaps it is an attempt to become the worldwide leader in the solar market by eliminating the competition.

In 2008, the top 10 equipment manufacturers of the $4 billion market were:

Ranking of Top 10 Equipment Manufacturers 2008 Rank 2007 Rank Applied Materials* 1 9 Oerlikon 2 2 GT Solar * 3 6 Schmid Gruppe 4 1 Centrotherm 5 3 Meyer Burger 6 5 Roth & Rau AG 7 4 Ulvac 8 8 Manz Automation 9 10 Von Ardeen 10 7 *Applied Materials (AMAT Quote) and GT Solar (SOLR Quote) are the only two U.S. manufacturers in the top 10. Source: The Information Network

-- Written by Robert Castellano in New Tripoli, Pa.