Solar energy companies which operate further away from end-customers -- such as wafer and silicon producers -- are likely to fare better during a looming shakeout in the sector than their cell and module-making peers.
In recent years, solar companies have enjoyed significant growth rates and a keen appetite from investors. But the crisis in financial markets has taken its toll on the industry and a falling oil price has curbed demand for renewables, prompting analysts and industry experts to predict a wide-ranging consolidation is around the corner.
This is less likely to hit high-quality producers of wafer and silicon -- both needed to make solar cells -- than cell and module makers suffering from low prices and oversupply, analysts say.
"Producers of wafer and silicon will come out as the likely winners from the shakeout as they are under less pricing pressure than the cell and module producers," said Bjoern Glueck, portfolio manager at Lupus alpha which has 1.3 billion euros ($1.69 billion) under management in European micro-, small- and mid-cap stocks.
Analysts at HSBC forecast average selling prices for solar systems will drop by about a fifth in 2009 given oversupply and a tighter credit environment, but prices for cells and modules have so far fallen much faster than those for silicon and wafer. Several industry bellwethers, such as cell producers Q-Cells and Sharp as well as module maker Solon have had to revise outlooks.
"While we forecast margin erosion through the whole solar value chain, we believe investors should focus on the beginning of the value chain given longer-term contracts, more stable cash flows and the tighter supply/demand balance," HSBC analysts wrote....MORE