Taiwan's Solar Cell Concentration in the PV Supply Chain makes it Vulnerable to Oversupply

Taiwan’s Solar Energy Industry has shown the fastest growth after China in recent years.The country’s leadership in the Solar Industry was led by Motech which was once a top 10 Solar Cell Producer.However the recent financial crisis had hit the island nation’s solar industry very hard with Motech and E-Ton facing a massive erosion in profits and revenues.With the recovery in the solar industry in 2010,Taiwan’s Solar Cell Producers have come back with a vengeance.Gintech,NeoSolar,DelSolar are some of the newer entrants which have grown sharply in 2010.Taiwan’s Solar Industry have broadened significantly in the past few years with presence in all parts of the Solar Supply Chain.A Polysilicon Plant was also recently opened in Taiwan which  is totally dependent on raw material imports for solar crystalline cells.Note the Wafer and Poly Tightness has already started increasing putting pressure on the input cost of cell producers.However the country’s solar industry remains largely dependent on the manufacture and exports of Solar Cells.

Massive Demand lifts all Boats Including Taiwanese Cell Producers

Huge demand from Solar Module Producers in Europe and Japan has led to boom times for Taiwanese Cell Manufacturers.Motech has again reclaimed it leadership position with sales of more than 100 MW in a single month.Other companies too are showing record revenues and profits.Note this phenomenon has been seen across the world with even high cost European producers like Aleo and Solon making impressive revenues and profits.The Strong Solar Demand Tide has lifted all boats even the uncompetitive ones.The real test will come in 2011 when increased supply comes online particularly from ultra low cost producers from China.

Solar Capacity Expansion threatens Taiwanese pure play Cell Makers

However Solar Capacity in the Industry has increased rapidly particularly in Taiwan and China.Besides Semiconductor and LCD Heavyweights like AUO ,UMC and TSMC have made huge investments into Solar Production.Korean Companies are too making a strong entry into the already crowded segment.Despite some capacity build in the wafer and module parts of the supply chain,Taiwan remains largely a cell producer.Compared to the integrated Chinese producers like Trina,Yingli,LDK and others,Taiwanese Solar Makers are vulnerable to sharp price cuts.They depend on European customers who are largely uncompetitive and would face huge pressures with the decline in the German market.Chinese producers have much lower costs due to their vertical integration which currently most Taiwanese  lack except Motech.Taiwanese Cell Capacity is set to increase manifold next year from the current 5 GW.Most of the Tier 2 Cell Producers would be running empty while even Tier 1 players will see a sharp decrease from this year.

Inside Taiwan’s PV Manufacturing Push – REW

Of the five key components of the crystalline silicon (c-Si) photovoltaics supply chain — polysilicon, wafer, cell, module, and inverter — many PV companies in Taiwan have set their sights on the high-value-add cell manufacturing.

Taiwan presently has 5.3 GW of installed cell capacity at more than 15 companies, and 1.2 GW of installed module manufacturing capacity at another 15+ companies (see table, below).

Complete fabrication value chain. (Source: IEK)