Solar equipment makers have been lying comatose in the last couple of years, as massive industry oversupply led to solar panel makers completely stopping their capex spends. Note the solar supply had reached almost 60 GW in 2012, compared to demand of 30 GW. This had led to a crash in the price of solar products and most companies swimming in red ink. With hundreds of bankruptcies happening in the solar industry, spending on equipment was the last thing on the solar companies’ minds.

Reasons for Increase in Solar Equipment

However, 2013 has been a great recovery year for the solar industry. Many of the top Tier 1 solar companies have returned to the black, even as the smaller weaker companies have failed. These companies are again making profits and seeing 100% profit utilization. Though solar equipment spends have crashed to less than $2 billion, from the $11 billion generated during the 2011 boom, it is projected by Solarbuzz that solar spends will again jump up to $13 billion by 2017.

The main reasons for this optimism lies in the fact that:

a) Tier 1 companies have become stronger over the last one year due to consolidation and are profitable

b) Increased spending will have to be made on solar cell efficiencies

c) Demand catch-up to supply.

Yingli Green Energy (YGE), Renesola (SOL) and some other solar companies are already shipping far more than their stated capacities. These companies have not been expanding capacity as they source from Tier 2 players which are mostly lying in the moribound state. Companies such as Trina Solar (TSL) and Jinko Solar (JKS) are augmenting capacity by taking over bankrupt Tier 2 companies.

However the companies will have to focus more on the technology improvements to reduce costs, as most of the scale and process advantages have already been squeezed out. Thin film solar technology will also see some investments particularly in the CIGs space. Note CIGs technology has one of the best potential amongst PV technologies for improving efficiency and reducing costs. Large companies such as Solar Frontier and Hanergy have the scale and size to make substantial investments in this area.

Many of the solar equipment companies have gone bankrupt during this tough phase, while others have drastically reduced operations. Tokyo Electron recently wrote of the more than $200 million acquisition of Oerlikon’s solar thin film equipment division. Centrotherm, Applied Materials (AMAT) and GT Advanced Technologies (GTAT) are the best ways to play the recovery in the solar equipment industry.