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Only polysilicon equipment suppliers are sheltered from the PV expansion freeze
In Q3’11, 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. This effectively 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.
While strong tool shipments during 2H’11 have driven the Book-to-Bill ratio firmly below parity, it is the ongoing declines in new order intake that will create the prolonged spending downturn through 2012. 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 rather than goals driven by aspirations of market-share gain.
The PV Book-to-Bill ratio compares new-order-intake to revenues-recognized by the PV equipment supply-chain within a given period. It summarizes the overall balance of demand to supply for PV manufacturing equipment. A PV Book-to-Bill ratio of 0.44 for Q3’11 means that US$44 million of new order intake was booked by PV equipment suppliers for every US$100 million of recognized shipment revenues.
According to Finlay Colville, Senior Analyst at Solarbuzz, “PV equipment suppliers have benefited considerably from a myriad of PV manufacturers adding significant production capacity in 2010 and 2011. The main challenge this created was how to manage growth, with the priority on meeting increased shipment targets. While this offered impressive Y/Y revenue growth for shareholders during 1H’11, it was in stark contrast to the diminishing prospects lists being submitted by field sales teams.”
At the company specific level, the performance of equipment suppliers can be benchmarked against Book-to-Bill metrics applicable for the various stages of the PV value-chain served by their products.
With high barriers-to-entry, long plant build-outs, and finite periods between tool shipment and revenue recognition, polysilicon equipment spending cycles are fundamentally different to the ingot/wafer and cell/module stages. This is characterized by a polysilicon Book-to-Bill ratio projected to remain above parity during 2H’11 and 2012.
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.
“PV equipment suppliers have experienced cyclical downturns before, only to bounce back quickly with record bookings activity. 
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.
The technical and financial metrics that underpin the PV Book-to-Bill analysis are featured within Solarbuzz PV Equipment Quarterly reports. This includes quarterly revenues, bookings and backlogs for leading PV equipment suppliers forecasted four quarters out, complemented by process tool equipment spending for leading suppliers active within each tool sub-segment.
