Prospects for a Thin-Film Manufacturing Equipment Industry

NanoMarkets recently published study, "The Future of Thin Film and Organic Photovoltaics Manufacturing," concludes that by 2015, this sector of the photovoltaics (PV) industry will have a capacity of around 29 GWp and will be spending $4.8 billion on equipment. This suggests important new markets could open up in the thin-film PV (TFPV) sector for equipment firms that currently offer printing machinery or manufacturing equipment sold into the semiconductor and display industry. In many cases, this kind of hardware can be easily adapted for use in the manufacture of TFPV cells and solar panels.
Unfortunately for equipment manufacturers targeting the TFPV space, NanoMarkets research suggests that there is a serious barrier to entry: the firms that make TFPV cells and solar panels seem to prefer to design and build their own fabrication equipment. The purpose of this article is to analyze why this barrier exists and how third-party equipment manufacturers might break through it.
If You Build It Will They Come?
Manufacturers of solar panels and cells often perceive their competitive advantage in the TFPV business as flowing directly from their fabrication processes. It is in those processes that an individual cell/panel firm can distinguish itself with higher efficiencies, longer lifetimes and lower costs. This is why TFPV firms are often so secretive about these processes and it is one reason they are so reluctant to buy off-the-shelf equipment.
Only by building their own TFPV manufacturing equipment, or so it is often claimed, can TFPV panel/cell makers incorporate the nuances of process and thermal control, materials handling and choice of deposition/patterning techniques, that they believe will lead to producing the best-of-the-best solar panels.
Until recently, the vital point about the economics of TFPV has been somewhat obscured by a second fact; many firms in the TFPV cell/panel business didn't buy the equipment they needed because they couldn't. The TFPV sector was just too small for manufacturing equipment firms to chase after, so the cell/panel makers had to roll their own hardware, as it were.
This situation has begun to change. At the beginning of 2008, there was well under 2 GWp of manufacturing capacity installed for making TFPV and OPV cells. By next year that will rise to 3.8 GWp. That extra capacity translates into demand for more manufacturing, and several equipment firms—most notably Applied Materials—have begun focusing on the opportunity. Applied is mainly interested in the amorphous silicon (a-Si) part of the TFPV market. But this is just for starters. In its market research, NanoMarkets found a number of firms that see considerable potential in selling CIGS manufacturing in particular.
But the big question for the equipment makers is this: If you build it will they come? In other words, given the strategic importance of manufacturing in TFPV, will TFPV panel makers still want to go their own way in manufacturing? No TFPV solar panel firm really wants to be in the capital equipment business, of course. But would a panel maker be conceding too much if the company bought off-the-shelf equipment, and thus gave up on the virtues of a proprietary approach to cell/panel manufacture?
This same, off-the-shelf equipment could after all be bought by any or all of the panel maker's main competitors.
Depending on the answer to this question is the future of an independent TFPV equipment industry. If the intrinsic economics of TFPV is such that the fabrication technology is too important to outsource, then the third-party TFPV equipment sector will remain small, confined to equipment that is of little strategic importance and likely of little aggregate value either.
It is far too early in the evolution of the sector to be sure whether or not this is the case, but NanoMarkets market research on the a-Si segment of the TFPV market suggests that TFPV panel makers will not give up on their "home- brewed" equipment easily. Amorphous silicon PV is the one segment of the TFPV market where third-party equipment has existed for some time and yet where solar panel/cell makers still seem quite keen on hanging on to proprietary fabrication approaches.
Four Entry Strategies for Equipment Makers
This is not the best of news for equipment makers. More optimistically, NanoMarkets' analysis suggests that there are two emerging segments of the TFPV solar panel market that may be more amendable to buying from third party equipment manufacturers than the market as whole, and a third segment where there would be strategic reasons for manufacturing equipment firms to make a market entry. For the purposes of this article we will refer to these segments as (1) "rapid entry," (2) "value-added," (3) "the flexible electronics beachhead."
The rapid entry segment: One group of potential customers that is likely to favor off-the-shelf equipment suppliers are firms hurrying into the PV market for the first time, with no time to develop their own equipment and processes. As a result of the "cleantech" boom, there is a growing number of firms that fall into this category. These firms simply want to capitalize on rapidly growing demand for solar panels and believe that a rising ride lifts all ships. They are a prime market for third-party equipment firms, especially those that have the ability build complete turnkey plants. Unfortunately, as "newbies," these TFPV cell/panel manufacturers are the most likely to fail; they might simply lack the skill sets required for success. From the perspective of the third-party equipment manufacturer, this is clearly not the sector to sell to on long-term credit.
The value-added segment: The participants in this segment are cell/panel manufacturers whose value proposition rests more on the features and performance of products higher up the value chain rather than performance at the solar cell level, which may only have to be adequate rather than industry leading. They may, for example, rest their business case on the size and growth of demand for (say) solar wall cladding and be relatively unconcerned whether their manufacturing equipment can squeeze the last fraction of a percent in energy conversion efficiency out of their solar material. Firms in this segment are much more marketing plays and less focused on manufacturing finesse.
The flexible electronics beachhead: In the third segment, we are back to a manufacturing orientation again. There is much talk these days about "flexible electronics," defined as creating large array electronic or photoelectronic devices on flexible substrates. The motivation for this strategy is that (a) it facilitates roll-to-roll (R2R) processing, and (2) it enables the creation of novel products, such as rollable displays. As this example suggests, this is a much bigger theme than just PV. But this is just the point. Because TFPV is arguably the most vibrant part of the thin-film electronics business right now, it enables equipment manufacturers to generate early revenues with machines that will have broader applicability for manufacturing the flexible displays, sensor arrays, smart packaging, smart textiles and flexible medical devices of tomorrow.
NanoMarkets believes that the most likely scenario for the future is a movement away from proprietariness in the TFPV manufacturing sector, but a slow one. Clearly, there are already some cell/solar panel firms that believe that their competitive advantage lies in areas other than manufacturing and therefore would be happy to buy off-the-shelf equipment now. But such firms are few and far between at the present time. However, the continued growth of TFPV will give equipment manufacturers more incentive to compete in this space, and to compete effectively these firms will improve the performance of their off-the-shelf manufacturing machinery. Better equipment will make it just a little less likely that cell/panel makers will want to hang on to their proprietary approaches.
As the use of third-party equipment becomes more strongly embedded in the business culture of the TFPV industry, it is likely to produce its own special economies of scale that some proprietary approaches will find hard to match. In particular, the availability of "standard" thin-film silicon processes will substantially reduce capital costs, while the customized approach inherent in proprietary processes/equipment will increasingly make the proprietary approach seem expensive. At the same time, competition among equipment suppliers is likely to drive rapid process improvement, narrowing the gap between the performance advantages achievable with proprietary approaches.

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