Is There A Global Solar Panel Oversupply?

Concerns related to solar panel oversupply have been looming on the US Solar segment. UBS’ Julien Dumoulin-Smith said in a report that industry participants and manufacturers had noted oversupply in the back half of 2016.

“Commentary on oversupply in 2016 is coming earlier than anticipated, with the potential to magnify the issue come 2017 when global demand is anticipated to dip slightly due to Japan, the US, and the UK rolling,” analyst Julien Dumoulin-Smith wrote. he emphasized that the 2017 outlook was “only modestly out of balance.”

Pressure On Pricing

During its 4Q15 earnings call, Trina Solar Limited (ADR) TSL had highlighted an expected global module oversupply in the second half of 2016, resulting from capacity expansion on behalf of Tier-1 manufacturers.

Assuming the oversupply in 2016, management had indicated that it would be outsourcing capacity through OEMs in order to add flexibility, while also expanding overseas versus China.

Management had added that there could be global downward pricing pressure of 5-10 percent, given the expected surplus. This is fairly significant given that many participants are not projected oversupply till 2017, Dumoulin-Smith pointed out.

Impact On US Domestic Players

The impact on SunPower Corporation SPWR and First Solar, Inc. FSLR may be “fairly muted” in 2016, the analyst stated, since both companies had indicated that they were largely sold-out this year.

“The result of the oversupply will be more significant as it extends into 2017, with the companies likely to be forced to follow the pricing trends of the broader market participants despite their efficiency advantages,” the UBS report noted.

Since SunPower has a specialized product, First Solar may be impacted much more by the oversupply, although both companies appear to be poised to address the issue, Dumoulin-Smith commented.