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Solar Industry Stabilization

On the heels of a record-setting 2011 for photovoltaic manufacturing and sales, the 2012 end-market doesn’t look like it will come close to matching those numbers.

NPD Solarbuzz, a research, analysis, and consulting firm for photovoltaic products, stated there will be just less than 30 GW of photovoltaic demand in 2012, citing global trade barriers and market consolidation as the main reasons of the decreasing marketplace demand.

As a result, the companies which manufacture photovoltaic products that survive the market could be set for big rewards in 2013. Solarbuzz went on to say it believes next year will experience a “stabilization” period, with the lower-tier photovoltaic producers consolidating or liquidating and allowing for the upper-tier producers to capitalize on the demand.

While it is natural for periods of stabilization in a free market system, and it doesn’t call for alarm, the reasons for the stabilization need to be identified to ensure “stabilization” doesn’t turn into “downward spiral” or “bankruptcy”, as many European and American photovoltaic companies have experienced; Solarbuzz predicts this upcoming phase will see the “underperforming” Chinese second- and third-tier manufacturers exit the industry. A period of stabilization would allow manufacturers to focus on cost reduction, gross margin recovery, and overall breathing space which will hopefully result in a more competitive, efficient, and better market and product.

This is a good example of how private industry can operate under the current domestic and foreign economic and political systems. The free market appears to be doing its job in a sort of “fiscal-Darwinism”, and despite less-than-expected demand for the upcoming year, production has still been escalated within the companies which aim to survive the purge and consolidation.

U.S. companies are predicted to dodge most of the blow, but the global market depends on a late surge in shipments to China and India, and a strong European recovery. Unfortunately, once a global market is entered, it is difficult to sustain, but it is possible, assuming a successful stabilization.

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