Huge Expansion Of Solar Production Capacity Continues

August 18, 2010

The manufacturing capacity of crystalline silicon solar panels is set to grow by about 80 percent this year as producers, especially in China, hastily build out factories.

The added capacity should amount to between 11 gigawatts and 13 gigawatts – or roughly the equivalent of this year’s entire market demand, equipment supplier Applied Materials said Wednesday. The company expects sales this year to be above 12 gigawatts.

Crystalline silicon solar cell manufacturing equipment

It’s “a heck of a lot of capacity,” CEO Michael Splinter said on a conference call. “There is a huge expansion in China.”

The onrush of new capacity is likely to lead to further price declines in coming quarters. It also could pressure profit margins at producers.

Applied offered its observation on a third-quarter conference call, where it said it saw solar demand increasing next year in addition to supply. Growth in Germany, the world’s largest market, could moderate from this year. But sales elsewhere in Europe, in China and in parts of the United States should increase.

The company has a particular good vantage point from which to observe production increases since it sells manufacturing equipment to the industry. On the conference call, it said:

*Spending on equipment to make crystalline silicon panels should double in 2010 to $8 billion.

*The utilization of fabs, or factories, has improved.

*The factories of the 10 to 15 largest producers are “fully loaded” and can’t keep up with demand.

*Producers have not yet begun to slow capacity growth. “We haven’t seen signs of a pull back at this point,” says Splinter. “We just see very strong orders.”

Applied said third-quarter sales in its energy and environmental solutions business more than doubled from the second quarter to $387 million, led by its crystalline silicon business. Orders, however, fell to $353 million. In late July, the company killed its SunFab product line for thin-film solar cells manufacturing.

As a result of the SunFab decision, Applied took a quarterly charge of $405 million, which forced the business unit to post an operating loss of $371 million.

Applied said that despite its SunFab decision a Chinese customer is considering a factory and could make a decision whether to go ahead in the fourth quarter.

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Posted by Mark Boslet

Applied Kills SunFab But Vows To Stay In Thin Film

July 21, 2010

Applied Materials said Wednesday it stopped selling its troubled SunFab line of manufacturing equipment for thin-film solar cells.

The company said tumbling sales for the product line were the result of falling crystalline silicon panel prices and a weak market for utility-scale solar plants due to the recent recession.

Applied Materials said it expects customers eventually will show renewed interest in thin film manufacturing equipment, like SunFab.

However the Silicon Valley semiconductor equipment maker vowed to stay in the thin-film business, not only selling individual tools to customers but continuing research and development on advanced chemical vapor deposition machinery targeting tandem and triple junction cells.

“We still believe in the technology,” said Mark Pinto, an executive vice president in the company’s energy division. “We are still going to invest in the technology.

As recently as two months ago, Applied Materials held out hope of attracting new SunFab business from large utilities in India and China. At the time, sales in its energy and environmental division were down 54 percent and SunFab orders were about two-thirds of what they were several quarters earlier.

Chief Executive Mike Splinter said Wednesday he could no longer continue down the path of poor performance. “This decision is about the market” and the shortfall in demand for SunFab, he said.

And yet, Applied Materials claimed solar manufacturers were likely to show renewed interest in thin-film cells in the future – amorphous silicon, like SunFab’s, and others.

The decision to exit the SunFab business creates uncertainty for Applied Materials’ more than a dozen customers. The company said it would support its users, but many are early in the technology and producing single junction cells.

Applied’s decision to pull the plug on SunFab will put as many as 500 employees out of work and result in a charge of as much as $425 million.

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Posted by Mark Boslet

More Trouble For Applied Materials’ SunFab

May 20, 2010

The slump in Applied Materials’ SunFab solar line continued Wednesday with sales and orders tumbling in the second quarter and the red ink increasing.

With the business now at perilous levels, Applied Chief Mike Splinter said sharp cuts were on the way, even after an $83 million second-quarter write down of SunFab equipment the company doesn’t think it can sell.

“We are taking decisive steps to redesign the business with a lower outlook,” Splinter told analysts on a conference call.

Applied to scale back operations at SunFab as sales and orders slump.

The move will push Applied’s entire solar energy business into the red for the year and delay its first profitable quarter until 2011. Applied had hoped for profits by late 2010.

The move is a blow for the beleaguered operations. Applied has maintained that SunFab has a lucrative future making large solar panels for utility-scale solar farms. (Costs make it less competitive in the residential and commercial rooftop markets.)

It claims panels can reach 10 percent efficiency this year – an important step in competing with crystalline cells.

However, the challenges continue to mount. In April, key SunFab customer SunFilm filed for bankruptcy in Germany. Meanwhile, the fabs continue to be expensive to build and need to operate at full capacity with high yields to justify the spending.

Splinter tried to put a brave face on the set back. He said the company is in business discussions with large utilities in India and China, where large-scale facilities might make sense.

Applied has accumulated a significant amount of data about production yields and plant efficiencies and knows the formula for success, he said. The key is gigantic fabs, where upfront costs can be spread over a large output.

But success seems more distant. The company admitted the backlog of orders for SunFab equipment fell to $400 – roughly two thirds of what it was a couple quarters ago. On top of that, sales for the entire energy and environmental business fell 54 percent in the recent quarter to $166 million, primarily because of a thin-film shortfall. The operating loss for the division was $145 million, including the inventory write down.

“Applied sounded more like it is going to wind down or reduce this business,” said Neeham & Co. senior analyst Edwin Mok, who listened to the conference call. “They are scaling back.”

In contrast, sales of equipment used to make crystalline silicon solar cells boomed in the quarter. Orders reached record heights with manufacturers racing to add capacity, says Chief Financial Officer George Davis. “We’re seeing very strong demand, mostly from China,”

Unfortunately it is not for thin film.

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Posted by Mark Boslet

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