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Half of the existing solar manufacturers may not survive through the end of next year, according to the market research firm The Information Network, as reported by DigiTimes.

The piece said Information Network chief Robert Castellano believes “massive inventory buildup and huge overcapacity” are having a serious impact on solar panel manufacturers. The industry is up to 122 days of inventory, from an average 71 days in 2008, he reports. Capacity utilization in the industry is down to 27.9%, from 48% last year.

A key issue, he contends, is increase supply from China.; as they have ramped up, ASPs have dropped to $1.80 per watt, from $4.05 in Q3 2008. And he expects the trend to continue, with more capacity coming on line as manufacturers seek economies of scale. The result, he thinks, will be worse conditions still: he expects inventory to stretch to 133 days next year, with utilization falling to 25.7%. ASPs, he predicts, could drop below $1 a watt next year, and to 50 cents a watt in 2011. If that happens, he says, up to half the more than 200 solar manufacturers won’t survive.

The piece notes that in just the last few weeks, solar companies that have reported losses included Energy Conversion Devices (NASDAQ:ENER), JA Solar (NASDAQ:JASO), LDK Solar (NYSE:LDK), Q-Cells (QCSLF.PK), ReneSola (NYSE:SOL), Solar Power (OTC:SOPW) and Yingli Green Energy (NYSE:YGE).

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Source: One in Two Solar Firms Will Fail, Say Analysts