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The general tone of module makers is that demand has picked up nicely in 2Q09, maybe 50-100% sequentially for most module vendors. The improvement is off a very low base. It appears that May was noticeably better than April. Module makers indicate that they are no longer receiving as many calls from system integrators pushing orders out to later delivery dates, an indication that projects are going forward and inventory levels have improved. Orders from
distributors are also returning. STP noted that the order improvement was fairly broad-based, with markets like Spain and Italy improving from the low 1Q09 levels.
Limited Visibility Remains; Current Trends Positive:
Companies still say visibility is more limited than what was present in mid-2008, but that if recent trends continue June will be a solid quarter. Many of these companies have guided investors to expect this type of 2Q09 rebound in shipments, but appear to have a bit more confidence in it now than even a week ago.
Module Pricing:
Module prices have fallen about as expected, perhaps 12% from 1Q09 to about the $2.45 per watt (from low-cost China vendors). Some companies indicate a belief prices will level out in 3Q09 (notably YGE), while others believe further digression is likely in 2H09. We believe that prices will continue to decline in 3Q09, as there is still tremendous excess capacity and the cost of producing modules will decline as vendors burn through higher cost polysilicon and wafer inventory. At current spot market prices, many solar module vendors are able to produce modules for less than $1.60/watt, so we find it unlikely that module prices will
be sustained at current levels, since competition would erode that margin. Wafer prices are surprisingly low, at less than $1.00/watt on the spot market.
Channel Inventory at More Reasonable Levels:
We have several indications that suggest channel inventory has been reduced to more reasonable levels, which implies that sell-out has exceeded sales into the channel over the past month. System integrators indicate that they are no longer being bombarded with the unsolicited module offers from random distributors that had been filling their email boxes in February and March.
Financing Remains Difficult:
Indications are that financing remains difficult in most markets, which is limiting commercial installations in markets like Spain and Italy. While the near-term outlook has improved, we believe our 5,575MW worldwide module forecast for the year may prove to be aggressive. Our forecast assumes 2,400MW of that total will come from German demand.
Discussions with many market participants located in Germany suggest a level in the 2,000-2,200MW range is more likely. Participants in the Italian solar market indicate that our 450MW forecast for that country is a best case scenario. Our forecasts of 350MW for Spain may also be at risk, as 1Q09 was very low and 2Q09 appears to be below a pace needed to reach that level. If these markets do miss our forecast, a good portion of the shortfall for these markets
will have occurred during 1Q09, so not necessarily that painful for the outlook.
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