Down 5 percent from 8.7 GW during the same period in 2012
London (Sept. 4, 2013)—Worldwide market shipments of solar photovoltaic (PV) inverters declined by 5 percent year-on-year in the second quarter—the first such decrease since the third quarter of 2011—as demand fell in key European countries.
PV inverter shipments in the second quarter of 2013 amounted to 8.3 gigawatts (GW), down 5 percent from 8.7 GW during the same period in 2012, according to a new report entitled "The World Market for PV Inverters - 2013 Edition" from IHS (NYSE: IHS), a leading global source of critical information and insight.
Inverters are devices that perform an essential function in PV installations, converting direct current (DC) electricity from multiple solar panels into alternating current (AC).
The main culprit for the decrease in PV inverter shipments worldwide was the sharp slowdown in the European market. Shipments in the Europe, Middle East and Africa (EMEA) region during the first half of 2013 fell more than 40 percent compared to the first half of 2012. The EMEA region accounted for only 6 GW worth of shipments in the first half of 2013, down from 10 GW during the same period in 2012, as illustrated in the attached figure.
"The pace of contraction for inverter shipments in critical European countries such as Germany and Italy has been faster than expected, with some of these markets seeing their demand decline by more than 70 percent this year," said Cormac Gilligan, senior PV market analyst at IHS. "Some inverter suppliers have been very reliant on these historically large markets. Because of this, inverter suppliers are seeking new markets and have expanded their presence internationally in high-growth countries, including the United States, China, Japan and India."
Golden Sun heats up China's inverter market
Despite the annual decrease, shipments grew on a sequential basis, rising by 24 percent in the second quarter compared to the first quarter. The large growth in quarter-to-quarter shipments was largely accounted for by China, where inverter shipments increased by 174 percent in the second quarter of 2013 to reach almost 2 GW. The surge was powered by a rush to complete projects aided by China's Golden Sun program.
"Although China's inverter shipments nearly tripled during the second quarter of 2013, the country's inverter market is still dominated by domestic suppliers," Gilligan added. "China remains a challenging market for Western suppliers to penetrate despite its size. Average inverter prices have decreased by 14 percent in the second quarter of 2013 to reach as low as $0.07 per watt, which means that inverter suppliers really need a local presence in order to have competitive pricing in this market."
Inverter revenues on the wane
Average global inverter prices continued to decline, dropping by 10 percent in the second quarter of 2013 compared to the first quarter. This decline was the result of inverter shipments shifting to lower-cost markets in Asia and continued price erosion in mature solar markets. Revenue decreased by 18 percent year-on-year in the second quarter of 2013 to $1.6 billion.
In Europe inverter revenue fell by more than 50 percent in the second quarter of 2013, with markets such as Germany and Italy suffering revenue declines of more than 60 percent.
European suppliers struggle to keep pace
Decreasing European revenues have severely impacted the market share of domestic inverter manufacturers on the continent, which traditionally have been dependent on a few European markets. As a result, in the second quarter of 2013, only three European inverter suppliers ranked among the Top 10 suppliers in terms of market share. This was half the number compared to one year ago.
"Delays in gaining inverter certification for individual PV markets, decreasing revenues and difficulty in establishing a presence in new markets have posed significant challenges for the entrenched inverter suppliers from Europe," Gilligan noted. "The problem of decreasing revenues is further exacerbated by new market entrants, such as Chinese suppliers in Europe, and by the very competitive inverter prices in an already very crowded domestic market."
Inverter shipments will increase in the second half of the 2013 to reach more than 34.5 GW for the full year, IHS predicts.
However, the majority of inverter demand is forecast to come from the Americas and Asia, which will continue to put further pressure on inverter suppliers that do not have a strong presence in these markets. Owing to this market shift, inverter suppliers—particularly Chinese and Japanese firms such as Sungrow, Omron, Tabuchi and TMEIC—are expected to increase their market share substantially in 2013 at the expense of some of the European suppliers.