By Finlay Colville

As demand for solar energy has grown significantly in recent years, Photovoltaic (PV) manufacturers have embarked upon aggressive fab capacity expansions. Production lines have been added to keep up with growing demand and to increase economies of scale in manufacturing to lower production costs. Top tier PV manufacturers have also been actively positioning themselves as key module suppliers to the industry ahead of future growth phases, through aggressive vertical integration strategies.

Such capacity expansions have elevated the importance of the PV industry within leading capital equipment suppliers. Consequently, the PV industry now provides strong revenue upside potential as an emerging (adjacent) industry to complement established industries such as Flat Panel Display (FPD) and semiconductor.

In 2005, PV industry demand was just 1.5 GW and the accompanying equipment market was below US$1 billion. In 2011, the PV market demand is forecast to be in excess of 20 GW, and the equipment opportunity may grow to above US$15 billion. Therefore, the PV industry has, now, matured into a significant revenue opportunity for equipment suppliers, characterized by companies such as Applied Materials, GT Solar, centrotherm and Meyer Burger now reaching and exceeding the US$1 billion threshold for trailing-twelve-month (ttm) PV specific tool revenues.

Equipment Market Share Dominated by European & U.S.-Based Companies

During the early growth phases of the solar industry, regions where incentives were introduced to stimulate PV adoption also tended to be the locations where manufacturing expansions were most pronounced. This occurred in the late 1990’s/early 2000’s in Japan, and, then, again in Europe from 2004 to 2008. Stimulating local PV manufacturing to satisfy regional demand provided local equipment manufacturers with the ideal platform to enter the PV equipment supply chain.

Capacity expansions in Japan by Sharp, Kyocera, Sanyo and Mitsubishi Electric were─not surprisingly─heavily weighted towards the use of production equipment manufactured in Japan by established tool builders. European expansions by the likes of Q-Cells, SolarWorld, Schott Solar, Ersol Solar (now Bosch Solar) and REC Solar, then, provided a direct route to market for companies such as Baccini and HCT Shaping Systems (both now part of Applied Materials), Roth and Rau, centrotherm, Oerlikon, Meyer Burger, Rena and Schmid.

Finally, when PV manufacturing growth moved swiftly to China and Taiwan from 2007, many of these established European equipment suppliers actively targeted the new opportunities across the Asia Pacific region. In addition to the equipment suppliers mentioned above, several tool suppliers headquartered in North America succeeded in tapping the Asian PV equipment spending boom. Examples here include GT Solar, Despatch Industries, and Amtech Systems (through their European-based subsidiary Tempress).

Companies headquartered in Europe and North America accounted for the top 5 equipment suppliers by revenue to the PV industry during 2010.

Overseas Revenues Driven by Global Fab Investment Cycles

Equipment spending within the PV industry during 2010 grew 80% year-on-year to US$10.6 billion (covering equipment used for c-Si ingot-to-module and thin-film panel production). While production output meeting market demand was biased to c-Si production in China and Taiwan, the distribution of equipment spending was spread globally across many different countries and PV technology types.

Global diversification is most evident by the continued strong investment into thin-film PV technologies─still being aggressively funded as a means to potentially offer a step-wise reduction in panel pricing in the long term. While many of these fabs may not survive through their initial expansion phases, the collective revenue opportunity within the thin-film sector provides a significant Served Addressable Market (SAM) for equipment suppliers to tap into for incremental revenues. During 2011, equipment spending on thin-film fab expansions is forecast to exceed US$3.9 billion.

Figure 1 shows the global breakdown of equipment spending to the thin-film PV segment between 2007 and 2011. The most striking observation here (especially when performing a side-by-side comparison with the FPD industry) is the limited role Korean thin-film manufacturers have played in providing thin-film tool revenues for the equipment supply-chain.

Investments within Korea for PV fab expansions have been heavily weighted towards the c-Si value-chain─driven by OCI’s strong investments into polysilicon production (targeted to reach an annual capacity of 62,000 MT by the end of 2012) and c-Si cell expansions by companies such as Hyundai Heavy Industries, LG Electronics, Samsung, STX Solar, and Millinet Solar. However, the equipment suppliers chosen to satisfy nearly all capacity expansion phases by these PV manufacturers have been established PV tool suppliers with headquarters based in North America or Europe─further reducing the tool revenues on offer to local Korean equipment manufacturers.

Technology & Cost Roadmaps Demand New Process Tools

Equipment utilized for manufacturing PV panels has evolved considerably in the past 20 years, often driven by extensive in-house manufacturer development for highly specialized cell and panel production lines. Historically─with limited PV revenues on offer for established tool suppliers active within the semiconductor and FPD industries─the PV equipment supply-chain was often pulled by PV manufacturers to meet their in-house process requirements and capital equipment targets.

Today, capital equipment spending for a 50 MW PV integrated fab (c-Si ingot-to-module or thin-film panel) can range anywhere from US$30 million to US$200 million, depending on the PV technology type and level of automation installed. At the lower end, setting up a 50 MW c-Si module line can involve an investment of below US$5 million if using equipment from low-cost vendors located in China.

Regardless of the technology being pursued by PV manufacturers (whether c-Si or any of the thin-film variants), there are common targets which must be met as part of the overall cost reduction requirements from the PV industry. As a first requirement, raw material costs (e.g., polysilicon) are being reduced as additional capacity is brought online; polysilicon spot prices may drop to as low as US$50/kg by end of 2011. From a cell/module manufacturing standpoint, roadmaps are dominated by capital equipment and operating cost reduction measures. Equipment suppliers have a key role to play here today.

Leading PV manufacturers are now prioritizing new production methods and alternative process flows to provide market competitiveness as the industry moves into its next strong growth phase. While approaches here may vary between PV manufacturers, they all seek to reduce equipment costs, reduce the requirement on material costs used within manufacturing, increase overall cell efficiency, improve yield levels, and provide lower cost of ownership.

Tool suppliers who can offer breakthrough advances in cell/panel throughput, efficiency and cost of ownership will see strong revenue opportunities within the PV industry in the next 5-10 years.

Generic Process Steps Used within PV Manufacturing

As discussed earlier, there are several different approaches to manufacturing PV panels. The top-level split is always by c-Si and thin-film production methods. Within c-Si panel production, there is strong commonality in production tools and process flows used by all c-Si wafer/cell/module manufacturers. For thin-film PV panels, the range of options increases. Here, PV modules can be formed on glass panels or flexible (web-based) substrates made from metal foils or plastics. Thin-film panels come in various different dimensions/sizes today, with little standardization when compared to the FPD industry.

However, regardless of the PV technology type and panel substrate size/type employed, all PV panels are manufactured with similar functionality. In this respect, certain common process steps apply to all PV production methods. For example, all PV panels require highly efficient thin absorber layers, p-n junction formation, surface passivation, thin-films deposited with front and rear contacting, metallization for current collection, and interconnection for large area panel forming. And add to this list, other common requirements within both c-Si and thin-film manufacturing: etching, substrate cleaning, inspection, and testing.

Figure 2 illustrates the revenues by key process tool ‘category’ across the PV industry in 2010. For prospective equipment suppliers to the PV industry, this graphic captures the underlying opportunity to target, regardless of the specific technology pursued by any group of customers or manufacturing region.

Strategies Require Detailed Customer & Competitive Intelligence

With multiple cell/panel architectures and different substrates/materials used in manufacture─and a pool of potential PV customers in excess of 500 today located globally─the need for strong in-house market knowledge by equipment manufacturers is critical for success in the PV industry. To fully understand the PV equipment landscape, the following questions need to be addressed:

Which technologies are worth pursuing with existing or next generation tooling? Where are the regions globally which are favoring one PV manufacturing technology versus another? Which PV customers are strong candidates for fab expansion over the next 5-10 years? Which tool builders currently dominate the different tool segments? What are the requirements for tools in terms of cost, uptime, yield and throughput? Are there any critical inflection points in technology on the horizon which would make certain tool types obsolete in the near term?

Within the c-Si cell and thin-film segment of the value chain, there are over 1,100 discrete capacity expansion phases being tracked at Solarbuzz, covering over 350 midstream PV manufacturers. This list runs to several thousand expansion phases and well over 600 companies when factoring in c-Si polysilicon/wafering and c-Si module fabs.

The challenge for each equipment supplier is to filter this extensive set of opportunities down to a prospects list which matches the tooling offered by any equipment supplier; and to focus on the opportunities within this list which have the greatest potential revenue return for equipment offered.

The Opportunity for Korean Tool Builders

While equipment manufacturers within Korea have an excellent track record in supplying capital equipment to fabs within the semiconductor and FPD industries, few have managed to successfully transition across to the PV industry supply-chain. The one exception to this statement within Korea is Jusung Engineering.

Having focused mainly on tool opportunities within the semiconductor and FPD industries until 2007, Jusung Engineering targeted the PV industry initially within Korea during 2008 and 2009. Here, they applied their expertise in deposition technologies to the growing a-Si thin-film PV segment, quickly gaining orders for new turnkey a-Si fabs being built within Korea.

However, the big breakthrough for Jusung was when they expanded their market reach beyond Korea, and sought equipment opportunities with PV manufacturers headquartered across Asia, North America and Europe. With this change in market focus, Jusung was able to expand its product offering into the lucrative c-Si cell portion of the value chain. During 2009 and 2010, Jusung’s backlog grew considerably ─from approximately US$30 million at December 31, 2008 to greater than US$160 million by end of 2010.

Deposition equipment offered by Jusung for a-Si thin-film fabs is illustrated in Figure 3. In Figure 4, modelled analysis from the Solarbuzz PV Equipment Quarterly Report illustrates just how effective Jusung has been in gaining share within their served addressable markets (c-Si cell and a-Si thin-film panel), with strong growth during 2010 as the range of products increased and the customer base was widened overseas.

Window of Opportunity Ahead of 2012 Equipment Spending Cycle Upswing

Equipment spending for additional capacity within the PV industry tracks in cycles, depending on supply/demand dynamics at any given time through the value-chain. The phasing of these cycles does not generally overlap with downstream module demand or installed capacity worldwide.

Furthermore, equipment spending cycles for different technologies (or stages) in the c-Si value-chain may not be in phase either. For thin-film fab expansions, equipment spending cycles are often driven purely by periods of strong venture capital investment into new PV technology types. In the c-Si value chain, expansions are most pronounced when relative tightness in supply is perceived to be a factor limiting downstream PV supply at any given time.

Tool suppliers seeking to enter the PV industry will, therefore, have various windows of opportunity, depending on whether they are targeting thin-film manufacturers, polysilicon/wafer producers, or c-Si cell/module manufacturers. Based on expansion investments and market demand scenarios being forecast for 2011 and 2012, the next phase of strong capacity expansions (for both c-Si and thin-film fabs) may be pushed out to 2013. For these expansions, production lines with enhanced efficiency and cost metrics are likely to be rolled out─many of which will use new tool types in production.

Therefore, given the time period from new-tool-acceptance to pilot-line-implementation to mass-production-qualification, the next 12-18 months represents a critical period for tool suppliers looking to be part of fab expansions beyond 2012. Understanding customer and technology trends, and engaging at the most appropriate stage of the PV value chain, will be essential for new equipment suppliers looking to maximize future revenue opportunities within the PV industry.

As a senior analyst at Solarbuzz (www.solarbuzz.com), Finlay Colville is responsible for uncovering trends on solar manufacturing equipment. He is a leading expert in solar photovoltaic manufacturing research and provides comprehensive forecasts of the solar industry in the PV Equipment Quarterly Report. Dr. Colville has been active in the PV industry since 2005, bringing more than a decade of sales and global market experience to Solarbuzz. He previously served as Director of Marketing for Coherent, Inc.’s solar business unit where he managed market intelligence and product strategy for the solar sector. Dr. Colville holds a B.S. from the University of Glasgow and a Ph.D in Physics from the University of St. Andrews, Scotland, U.K.