Despite huge investments over the past several years in new solar technology, Applied Materials (NASDAQ:AMAT) lost its lead in the solar equipment market, dropping 78.6% year-on-year.
Applied moved into the top spot back in 2008 with the success of its ill-fated amorphous/microcrystalline silicon turnkey business called SunFab. Subsequently Applied announced in mid-2010 it would discontinue sales to new customers of its fully-integrated SunFab lines.
Applied's first customer, pulled plans to build a factory in New Mexico in April 2010, while another early customer, SunFilm, filed for bankruptcy protection, also in April 2010. Signet filed for insolvency in June 2010. Spanish solar panel maker T-Solar has filed for insolvency in March 2013.
Applied purchased HCT Shaping Systems SA of Switzerland in 2007 for $475 million and Baccini, manufacturer of screen printers for $330 million also in 2007. Applied purchased Varian Semiconductor for $4.7 billion in November 2011.
Applied created a market for amorphous solar cells at a time when there was a severe shortage of silicon causing prices to skyrocket. SunFab (or Applied's competitor Oerlikon) was the only way for a solar cell manufacturer to enter the market. Unfortunately, efficiencies obtained of less than 10% were not competitive compared to polycrystalline silicon or CdTe thin film competitor First Solar (NASDAQ:FSLR).
Meyer Burger moved up into the first position in rankings dropping 51% in dollar values. Meyer Burger offers a complete line of product equipment and services along the photovoltaic value chain that includes the manufacturing processes for wafers, solar cells, solar modules and solar systems.
In July 2012, Centrotherm Photovoltaics AG announced that it submitted an application to file for self-administrative insolvency. Revenues listed in the above table are for Q1 2012 only and any financial information for the whole of 2012 is not being released by the company.
According to a note to shareholders of Meyer Burger, "2012 was an extremely difficult year for the whole photovoltaic industry. The sharp consolidation process that had already started in the second half of 2011 continued unabated throughout 2012, mainly as a result of over capacity at solar cell and module manufacturers and steeply falling prices for cells and modules. Cell and module manufacturers were therefore very reluctant to invest in new production equipment."
In 2012, an estimated 30 GW of new photovoltaic (PV) capacity was installed at private and commercial end users, increasing the total globally to over 100 GW (source: EPIA Market Report 2012, February 2013)., as shown below:
Despite this solid demand for end installed capacity, enormous overcapacity produced by solar cell and solar module manufacturers in past years still remained. This overcapacity, although decreasing, combined with the significant decrease in the price of solar modules and the enormous pressure on margins at cell and module manufacturers has increased consolidation in the industry as a whole and even led to some manufacturers having to cease operations entirely.
Survival tactics of solar cell manufacturers will be a bright spot for equipment manufacturers. China Sunergy CEO, Stephen Cai presented four key strategic business developments, which need to occur, if companies are to weather the solar storm: (i) higher efficiencies; (ii) downstream investment; (iii) global operation; and (iv) diversified channels.
The first item, higher efficiencies, is critical for equipment manufacturers. As new solar cell designs are implemented or new processes designed to increase efficiency, new or additional equipment is needed. Applied's $4.7 billion purchase of VSEA was because of its Solion Blue technology, designed to produce high-efficiency P-type mono-crystalline solar cells utilizing the proprietary patterned implant technology of Varian's Solion ion implant platform. The technology is being used by Suniva in Norcross, GA. Suniva however, is a small company with a module capacity of only 170MW in the U.S.
Solion is a disruptive process, meaning that a solar manufacturer will need to change its production line from a diffusion process for doping to an implant process.
However, Applied Materials passed on an opportunity to invest in privately held SolarPA (New Tripoli, PA), which has developed a proprietary nanocrystal coating that increases the efficiency of solar cells by more than 1% at a cost of goods to $0.20 per panel, or less than 0.1 cent per watt. The coating is applied on a completed cell with no disruption to the cell manufacturing process and can be applied using a screen printer. In other words, Applied Materials could have sold more screen printers to customers who would use this technology. It could have even been used in conjunction with its Solion ion implant technology.