Solar companies start to expand conservatively as demand increases in the high double digits

Solar companies are slowly starting to expand capacity as global demand is expected to hit as high as 50 GW in 2014. Note global solar capacity has been reducing in the last couple of years as a massive supply glut led to a crash in solar panel prices. Most of the Tier 2 and Tier 3 companies have shut down, while Europeans have become non-existent in solar manufacturing due to the cheap costs of Asian made solar products. Most of the western companies which are currently surviving have their factories in Asia (REC, Sunpower, First Solar). Companies had stopped expanding capacity in the last 2 years, as no one was profitable and the supply demand equation was heavily skewed towards supply. But with demand growing at an incredible pace in Japan and China, most Tier 1 companies have been seeing greater than 100% utilization in the last few months. These companies have been outsourcing production to OEMs and some like Jinko Solar (JKS) and Trina Solar (TSL) are expanding capacity cheaply, by either buying or partnering with Tier 2 solar companies. This means that the overall supply has not expanded much. Solar equipment suppliers such as GT Advanced Technologies (GTAT), Applied Materials (AMAT), Meyer Burger etc. have seen a 70-80% fall in orders.

However things are changing, with companies slowly expanding their cell and module capacities. Sunpower has already announced a big expansion while Taiwanese are also announcing capacity expansion. These are measured expansions as companies still remember the carnage due to overcapacity. Solar panel metallization paste maker Giga Solar is also expanding capacity as solar panel demand will increase by 20-50% in 2014. It’s a good time to buy solar stocks taking advantage of the “risk off” trade in the markets. Solar stocks are high beta, which means that you could buy stocks at much lower prices if the stock market goes down by 10%. Renesola (SOL), Jinko Solar (JKS), Sunpower (SPWR), Trina Solar (TSL) remain some of our favorite stocks to pick up on a decline.

DigiTimes

Taiwan-based PV conductive paste maker Giga Solar Materials will expand its silver paste production capacity in the second quarter of 2014 after seeing orders exceed capacity by 50%, according to company chairman Chen Chi-jen.