The amount of excess solar inventory has fallen in the past quarter, but there’s still two quarters worth of excess supply sitting around, according a new report from FBR Capital.
The lack of funding for large solar projects, as well as a harsh winter in Germany, created a build in solar inventories across the board. As is evidenced in the above chart, poly/wafer, cell/module and those downstream (integrators/distributors/installers) all have inventories to last the next two quarters or so.
FBR warns this build up in inventories will hurt Q2 earnings for solar companies, and it advises investors to sell stock and profit from the rally in the past few months, as we enter earning season.
More inventory write-offs/write-downs can be expected as module companies are trying to better adapt to lower-than-expected demand while reducing expensive inventories. We expect new and increased levels of inventory write-downs throughout the supply chain as prices come down even more in 2Q09. Most of the module companies candidly admitted that they are open to a larger provision of inventory write-downs, given that the market sentiment remains relatively cautious.
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