Opportunity amid overcapacity and hypercompetition: An interview with Lux Research Lead Analyst Fatima Toor on PV manufacturing equipment markets and technologies

Fatima Toor
Fatima Toor

Fatima Toor is an Analyst on the Lux Research Intelligence team leading the Solar Components Intelligence service. She and her team help clients - Innovation 1000 corporations, leading institutional investors, utilities, and public policy makers - make better strategic decisions and monitor the ever changing global solar market.

Prior to joining Lux Research, Fatima was a postdoctoral researcher in the Silicon Materials and Devices group at the National Renewable Energy Lab (NREL). While at NREL, Fatima improved on the previous best efficiency of nanoporous black x-Si solar cells, a technology that was patented and licensed by a solar industry manufacturer. Fatima has published in many peer-reviewed scientific journals, presented at various scientific conferences and received several awards for academic excellence.

 

Solar Server: Can you give us a quick overview of your latest research on PV equipment manufacturing?

Fatima Toor: We recently published a state of the market report on the PV equipment market, Turning Lemons into Lemonade: Opportunities in the Turbulent Photovoltaic Equipment Market, in which we report that Right now the global PV capacity utilization is relatively low; for crystalline silicon it is around 55% and for cadmium telluride and CIGS around 70-80%. And because of this overcapacity, capacity expansion plans have been frozen, and nobody is trying to expand.

However, because of this overcapacity there is hyper-competition in the industry; everyone is trying to differentiate. All the major players have some sort of differentiated product that they are developing, so that they can get to high efficiency modules that reduce production costs.

So we think that this desire for product differentiation from the module manufacturer side presents an opportunity for PV equipment manufacturers, and also as new material stacks, such as quasi-monocrystalline silicon, epitaxial silicon, CZTS and gallium arsenide technologies make their approach into the PV market, that is going to introduce equipment opportunities as well.

 

Solar Server: The PV equipment sector has been hit hard by flagging demand, with its fifth consecutive quarter of negative book-to-bill ratios in 2Q 2012. Will the smaller players be able to survive this extended, severe downturn? And what does this mean for the PV equipment industry overall?

Fatima Toor: As you know, most of the PV industry is going through a consolidation phase, be it cell or module manufacturers, be it non-active materials, such as encapsulants, and backsheet manufacturers. We expect to see similar trends in the equipment industry as well.

There is going to be consolidation, and the smaller players are either going to get acquired by the bigger players, for example Meyer Burger acquired several different small companies, including Roth & Rau, Somont and others. And the other equipment manufacturers that don't offerany value in their equipment offerings will go out of business.

 

Solar Server: What does this mean for the large companies, and the main players?

Fatima Toor: We spoke to a few large equipment manufacturers a for the report and theytold us that in the short them, the equipment companies would rely on  supplying equipment for upgrades, as cell and module manufacturers differentiate and demand for equipment that reduces manufacturing costs and improves cell and module efficiencies.

And in the long term, the equipment manufacturers will  certainly see that as the global demand catches up with global supply, there will be an opportunity. They do understand that equipment industry  for PV, is similar to that foracross the board, semiconductors and displays, where the equipments sales cyclical over the course of several years.

I also had some discussions with equipment manufacturers who said that certainly there is an overcapacity in China, but they are getting orders from the emerging markets, such as, Brazil, India, and some places in the Middle East.

So there is opportunity for PV equipment manufacturers in the emerging marketsas well.

 

Solar Server: What are the most significant technology trends that you see in new PV equipment?

Fatima Toor: So, as I have been stressing, product differentiation upstream is driving demand for PV equipment. Quasi-mono crystalline silicon ingot growth is very popular, companies, such as RenaSola, which is a large vertically integrated company with focus on wafer manufacturing in China, has converted all of its ingot capacity to quasi-monocrystalline silicon ingot growth. ReneSola its designed its own ingot growth furnaces and then outsourced the building of the furnaces within China.

However, there are companies, such as AMG, Idlecast and GT Advanced Technologies, that have products that the ingot manufacturers can use to pursue quasi-monocrystalline ingot growth.

So that is one of the opportunities, or trends that we see. Another imminent trendis, high-efficiency crystalline silicon cell designs. There are several options out there, HIT cells, PERC cells, selective emitter, IBC, and metal wrap-through.

And some of the large PV equipment manufacturers are developing equipment for these cell designs, Meyer Burger/Roth & Rau announced a partnership with Innolas to offer an integrated silicon nitride/aluminum oxide PECVD tool for the PERC cell design, and according to their press statement they have tested this tool in several different cell manufacturing facilities, and have made sales.

Also, Applied Materials acquired Varian, which has the technology for ion implantation baseddoping for selective emitter cell designs. We recently spoke to Varian and they told us  that they are partnering with Astro Energy in Taiwan to try out their tools.

Furthermore  new materials stacks provide opportunities for PV equipment manufacturers, especially epitaxial silicon, a technology that is being developed by companies such as Solexel and Crystal Solar, and copper zinc tin sulfide, that IBM andSolar Frontier are developing.

In addition, single junction gallium arsenide (GaAs) being developed by Alta Devices is also a next generation technology that will require equipment innovation for it to be scaled. Currently these three technologies are at relatively small scale and require equipment innovations. Solexel and Alta Devices are designing custom equipment as well as partnering with incumbent PV equipment manufacturers to enable scale up at reasonable manufacturing costs.

So these are some of the major technology trends that we have seen in new PV equipment.

 

Solar Server: With so many different technology approaches, if you had to pick a few as particularly promising, which would you choose?

Fatima Toor: I would pick quasi-mono crystalline silicon, and all the high-efficiency crystalline silicon cell designs, because we have already seen equipment companies that are cashing in on in the opportunities provided by these two technologies.

I quoted Roth & Rau and Innolas, that stated in their in the press statement that they have already sold equipment. I also spoke with GT Advanced Technologies and the company said that they have already seen an opportunity for the quasi-mono ingot growth furnace.

Those would be the two opportunities that I would highlight for the short term. And for the long term, I think equipment manufacturers should keep an eye on the upcoming technologies, such as epitaxial silicon, CZTS and GaAs, definitely needs process control improvements.

For the long term, you can pick epitaxial silicon, CZTS and gallium arsenide. For the short term, it will be anything that improves the current crystalline silicon technology.

 

Solar Server: Since manufacturing equipment is such a prime determinant of overall costs, how do the recent trends in PV equipment reflect on future cost profiles and market shares of thin-film versus crystalline silicon PV?

Fatima Toor: That's an excellent question. In the end, it all boils down to what is going to be successful and what is going to go bust.

In the report we have extensive cost models for incumbent technologies and some of the next generation designs for crystalline silicon, epitaxial silicon, CZTS and gallium arsenide. Certainly for many years to come, crystalline silicon technology will have the lion's share of the market. There is just no way around it because of its cost competitivenessand because of the scale that it has reached.

In thin films CIGS has a lot of potential. Solar Frontier recently announced a sub-module at 17.8% efficiency and the CIGS modules that they are selling in the market are around 12.4%, which is one percent absolute higher than cadmium telluride modules from First Solar. Given the higher module efficiency trends, we expect that CIGS will increase in its market share.

On the other hand, amorphous silicon, which just because of fundamental physics cannot go higher than 10% module efficiency is going to drop in its market share.

And cadmium telluride is going to increase, but at a slower rate. It might have opportunity in some of the emerging markets, in Asia and South America and that is where First Solar is targeting its product.

 

Solar Server: Is there anything that we didn't talk about that you think is important for our readers to know in terms of your report and your work?

Fatima Toor:
I would also like to point out the competition from China. Everybody knows that there is certainly a lot of cell and module manufacturing happening in Asia, specifically China and Taiwan. Across the board when we spoke with the Western equipment manufacturers, they all talked about the competition that they see from the equipment manufacturers in China.

The equipment manufacturers in the Western hemisphere are strategizing to deal with the competition from China through differentiation and innovation because they realize that they cannot compete on cost.

Certainly there is a fear, or kind of an anxiety in the western equipment manufacturers about up-and-coming competition from China. We surveyed around 493 global equipment manufacturers, and we found that 43% of the equipment manufacturing today is from Asia-Pacific, 40% is based in Europe, and 17% in the U.S.

 

Solar Server: Wow. That is quite a development. Who are the big players in Chinese equipment manufacturing?

Fatima Toor: In the report we noted top 10 companies, based on revenues and sales. Most of the top 10 companies are based in the Western Hemisphere with one company, CETC-48, from China, and NPC and ULVAC from Japan.

Other major equipment manufacturers from China include Shenzhen S.C New Energy Technology Corporation, Hans Photovoltaic, and JYT Corporation.

 

conducted on September 24th, 2012
by Solar Server International Correspondent Christian Roselund