2012: solar industry in intensive care

If 2011 has been the year where solar industry was severely injured, due to drop of prices in solar panels, then  2012 is the year of the hospitalization of the industry!

2011: The bang!
In 2011 the oversupply of the solar panels industry along with the intense price competition of the Chinese companies (30-40%)  drove the
first companies to declare bankruptcy. Since the fall of Solyndra last year many other companies have followed and many more are going to follow!

What to expect in 2012

EU and US solar industry in trouble!
The problem lies mainly in European and US based companies.  They have invested millions of dollars in infrastructure and R&D in order to be competitive, especially in thin film industry.
But technology's pace is lower than the market demands!
Solar panels are more treated as a commodity  since the differences in technology aren't much and cant guarantee much higher performance VS panels cost. And as Chinese dominance is becoming more and more powerful in terms of sales volume , the EU and US manufacturers are driven to insolvency! Their stock value is low and

Survival kit for solar companies
First solar, the biggest US producer of Thin film solar panels announced recently that:  they are cutting 1/3 of their workforce, shutting down Germany factory and keeping idle the one in Philippines! Within a period of almost a year, there have been at least 6 US companies to declare bankruptcy and at least 13 European companies (the majority of which is German). The list is growing and growing.

Rule 1: cash, cash, cash
The problem with this hospital is that you have to pay daily the service provided in cash! Otherwise you are thrown out!
Qcells - once the leader in solar modules- collapsed within 3-4 months  without any help from the German Banks or the German government. In times of economic crisis each company is on its own! and of course cash is proved once again to be the king

Rule 2: Cut, cut, cut
As profit margins reach bottom, and since prices are dropping, marginally but dropping actions are taken by the companies to reduce expenses, such as employee lay off, shutting down lines or  factories.


Rule 3: Technology 
The patented technology at low cost is the key to long term profitability. But how can you invest in future when you are in intensive care and which technology path is the one to be proven profitable? I would be rich by now if I knew the answer!

Who will survive?
For sure , if you buy US or EU solar panels you have higher possibilities to buy from a company that may not exist tomorrow! Chinese solar companies are in less trouble. But all of them are suffering of low profit margins! LDK's (china based company) operating profit margin was -125%!

Mergers and Acquisitions may be a solution for some! Companies going bankrupt will continue to be added on my list. I am afraid that if incentive strategy and legal framework remains the same in the short term there will be few non Chinese countries to survive.

Those that will survive in 2012 have increased chances to be the winners.