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Steep production declines from China’s…
Taiwan, known as the republic of China, collaborates deeply with its larger neighbour in global high tech supply chains, and it is only natural that as China faces 31% tariffs on solar cells they export to the US, they will turn to Taiwan for help.
Daniel Tzeng from Fubon Securities said that he has already noticed the many Taiwanese solar manufacturers have already experienced an increase in orders from China, and share prices have also risen recently due to optimism that the nations solar industry will grow considerably.
Aaron Chew of Maxim Group expects “this to be a widespread strategy used by Chinese solar makers this year and maybe into next.” He predicts a “boost in revenues and possibly even pricing for Taiwanese solar makers in 2012.”
However Tzeng warns that this development may not be good for the Taiwanese, or indeed the global solar industry, because solar cell prices have fallen so much that many solar companies are operating on tiny margins, reporting losses in Q1 which are expected to grow in Q2; increasing the orders will just result in even greater losses.
Due to massive oversupply in the market solar cell prices fell 50% in 2011 and have so far fallen 20% this year. Many fear that the increase in orders from China will force Taiwanese manufacturers to increase production levels, restoring the 30% capacity reductions they made last year. An increase of this magnitude will affect the global solar market as Taiwan is the second largest producer of solar cells in the world.
Worse is the fact that as Taiwan increases its production levels, China will not be reducing their own, but instead are more likely to continue at their current rate and merely look for new markets for their cells, such as Europe or China itself.
A wave of bankruptcies can be expected as many solar panel makers will not be able to operate profitably with such high supply compared to demand driving down the prices even further, to unsustainable levels.
By. James Burgess of Oilprice.com
James Burgess studied Business Management at the University of Nottingham. He has worked in property development, chartered surveying, marketing, law, and accounts. He has also…