Bad Times – Solar Equipment Industry
To say that Solar Equipment Suppliers to solar panel makers like Trina, Yingli are going through bad times is an understatement. Like the other players in the solar supply chain, major solar capital equipment companies like Applied Materials, GT Advanced Technoloiges, Meyer Burger have seen their revenues and stock prices plunge while Centrotherm is effectively bankrupt. Some others like Oerlikon have thrown in the towel and sold their solar thin film division to Tokyo Electron. During the boom period of 2010 and 2011, a huge amount of capital expenditure took place in the crystalline silicon supply chain with almost $20 billion of equipment being bought. There were hundreds of old as well as new buyers as many companies took the plunge into solar panel production. Now there is a huge glut and solar module prices have crashed. Even big companies like Suntech and LDK have no money to pay suppliers much less buy new equipment.
It is therefore no surprise that the biggest solar equipment makers have reported almost 80% decline in revenues and orders. With overcapacity in almost every part of the supply chain, there is little possibility of a new upturn as the industry has to absorb the capacity over the next few years. Major companies like Meyer Burger and GTAT have already announced sharp job cuts. Even the big daddy Applied Materials reported a horrendous loss in its EES division and will have to take up further restructuring. AMAT had bought numerous companies to expand its solar offerings. Now some of those like HCT Shaping systems don’t make much sense given the overcapacity and lack of new technological progress.
However the industry downturn has caught up with even the best now as GTAT the biggest US solar equipment maker and Meyer Burger the biggest European company look to drastically reduce. Solar revenues have been cut down by over 50% as the solar panel customers have no money to spend on equipment. Even solar paste makers like Ferro are cutting jobs as sales dwindle. They are being forced to downsize in order to shape themselves for the new industry reality. Meyer Burger is also looking to diversify away from solar energy into the rapidly growing sapphire market. Note GTAT already has a big presence in the sapphire ingot equipment market. Centrotherm which was one of the biggest equipment makers announced a surprise bankruptcy after its bankers removed their credit lines.
Solar Capital Equipment Consolidation starting with Applied Materials thin film closure has not finished
Centrotherm, which was the second largest seller of solar equipment with revenues of more than $800 million went bankrupt. The company’s bank is refusing to renew credit lines or give it shipment finance. Centrotherm which was the second largest seller of solar equipment with revenues of more than $800 million is under court protection. The whole solar industry is in turmoil with bankruptcies rampant, so it is logical for banks to stay away. Oerlikon which for the last few years was trying to make a success of selling amorphous silicon thin film equipment too sold its division. Note Applied Materials had long ago given up its thin film equipment manufacturing. Oerlikon was persisting despite losses but it too has raised its hand given the abysmal level of solar panel pricing.
Meyer Burger goes from Acquisition Mode to Survival Mode
Meyer Burger became the 2nd largest player in the solar equipment market after buying Roth & Rau for $500 million. Now with the current industry conditions, the market cap of Meyer Burger is in danger of going below $500 million. Meyer Burger is contemplating cutting more jobs in addition to the 15% it has already cut. The company is going into the survival mode as its CEO talks about how they have enough cash to get till 2014.
The significant collapse in sales within Applied Materials’ Energy and Environmental Solutions (EES) division – which houses its solar equipment product range – is being questioned by financial analysts as the company continues to absorb losses rather than exit the sector altogether. Applied Materials said in its FYQ4 2012 conference call that it took a goodwill impairment charge associated with the EES segment of US$421 million in the quarter. Management said that this was due to the solar equipment sectors deteriorating market conditions that included customers financial health and ‘reduced market valuations.’ ESS sales for the full-year were US$425 million, down 79% y-on-y.
The full-year order intake stood at US$195 million, down 88% when compared to the previous year. Applied said that it made a non-GAAP operating loss of US$184 million and a GAAP operating loss of US$668 million for the EES division in FY2012.