This dramatic price collapse, caused by a global oversupply, has significantly changed the cost structures and strategies of leading PV module suppliers and making many switch from in-house production to buying in their wafer supply. Throughout 2010 and 2011, many suppliers had quickly expanded their in-house wafer capacities. However, as wafer prices have fallen by over $0.70/W to record lows, suppliers are now reducing their in-house manufacturing and purchasing more wafers from third-party suppliers.
According to IMS Research's latest quarterly 'PV Modules, Cells, Wafers & Polysilicon - Supply & Demand' , average wafer prices fell to $0.30/W in the first quarter of 2012, having stood at just over $1/W one year ago. This rapid decline in prices was driven by severe oversupply and highly competitive market conditions caused by huge capacity expansions that far out-weighed demand growth in 2011. IMS Research’s report reveals that global PV wafer capacity grew by 50 percent to reach 50 GW by the end of 2011, whilst installation demand grew just 35 percent to 26.9 GW. The average price of polysilicon, cells and modules also dived throughout 2011, although less severely than wafers, with average prices in the first quarter declining by 48 percent, 57 percent and 44 percent year-on-year respectively.
This severe price erosion has put huge pressure on the margins of all PV component suppliers and IMS Research found that many PV module suppliers have changed their supply and manufacturing strategies to reflect the dramatically changed pricing landscape in the PV industry. “Intense price pressure and competition throughout the PV industry has forced suppliers to focus on reducing costs to achieve profits more than ever,” commented IMS Research’s Senior Market Analyst Sam Wilkinson. “Large Chinese PV module suppliers in particular had previously aimed to achieve 100 percent vertical integration in 2010 and 2011 and quickly expanded their in-house wafering capacity. As wafer spot prices have fallen significantly more than polysilicon prices over the