Q-Cells not immune to economic climate

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Yesterday Q-Cells reduced their revenue guidance for Q4 by 25%, effectively implying there would be no revenues in December. This is just three weeks after being particularly upbeat during their investor conference call. Certainly the signs were there three weeks ago as well, but according to management, shipments of product (solar cells) were strong through November but in the last couple of weeks business slowed down dramatically.

The fourth quarter of 2009 has already proven to be a difficult quarter for the Asian companies due to falling average selling prices and a frozen credit system, but this signals that despite a “flight to quality” in a buyers market that the European players aren’t immune to the financial crises. In the long term, the current price correction is a positive for the industry as it will create more demand. Pricing has been flat to up for the last 18 months and that’s not the path to grid parity!

Here is my take

– Q-cells also has to address the issue of the industry becoming increasingly vertically integrated. In order to take the costs out of the process, companies will need to be more vertically integrated. Solar is much more a business of low cost manufacturing than it is about technology.

– In 2009 the European Solar Manufacturers will not have the same advantage of low cost silicon that they had in the past cycle. Silicon prices probably go higher from current levels, but its unlikely they will reach the levels of Q1 2008. Some of the large Chinese solar players are well positioned for the next recovery. The implied cell price for 2009 in Q-Cells guidance is 2.20 Euros which seems optimistic considering it costs another 50 cents for a company to make the module and take a small profit … the final price wont be competitive with mainstream pricing in 2009.

Brad is the Managing Director for Renewable Analytics – a San Francisco and Frankfurt based solar photovoltaic supply chain research firm.

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