Here’s Why Solar Equipment Stocks Could Face More Trouble

Expansion has been halted and the consolidated PV Book-to-Bill fell to an all-time low of 0.44, according to analysis featured in the Solarbuzz PV Equipment Quarterly report. The severity of the current module downturn for solar manufacturing is so large, due to a massive oversupply, that “corporate failures will be necessary to take capacity out of the system,” claims a Solarbuzz analyst. Those affected include Applied Materials Inc. (NYSE:AMAT), Veeco Instrucments Inc. (NYSE:VECO), and Intevac Inc. (NYSE:IVAC).

The PV Book-to-Bill ratio compares new-order-intake to revenues-recognized by the PV equipment supply-chain within a given period. The module downturn for solar manufacturing signals an end point to the most recent PV equipment spending cycle: one that was characterized by aggressive investments across all manufacturing tier categories towards a common goal of reaching GW-capacity status. This is a direct consequence of deferred and cancelled expansion plans by leading PV cell manufacturers, as the industry adopts a more measured approach to capacity addition.

Polysilicon equipment spending cycles are fundamentally different to the ingot/wafer and cell/module stages with high barriers-to-entry, long plant build-outs, and finite periods between tool shipment and revenue recognition. Historically, the wafer/ingot spending cycles have lagged behind cell/module investment phases by one or two quarters. Now that upstream ingot/wafer vertical integration by leading c-Si tier 1 companies is largely complete, future capex across the entire ingot-to-module chain is projected to be in-phase and governed by traditional supply/demand dynamics.

“This industry downturn is so severe and the excess capacity so large that it will embrace not just a period of low capacity utilization, but also corporate failures that will be necessary to take capacity out of the system,” added Colville,” according to Solarbuzz.