As global energy sources decrease in supply and increase in cost, renewable energy sources have taken on a much larger role in the global economy. The photovoltaic manufacturing industry represents a renewable energy source and viable alternative to the traditional fossil fuel driven energy industry. Despite this increase in demand, most companies have not realized a profit until recently. The majority of the companies are highly leveraged with debt to equity ratios above 100 and asset to equity ratios ranging from 1 to 7.
This indicates the high amount of working capital needed to perform in the industry. The industry follows a focused differentiation generic strategy, focusing sales to those who buy environmentally friendly energy. Companies within the industry agree that the long-term goal of lowering costs to compete on an unsubsidized basis with other energy sources is critical. Strategies to reduce costs include: 1. Research and development in efficient materials usage, 2. Improved manufacturing techniques, 3. Alternative materials usage, 4.
Vertical integration and partnering for materials, and 5. Achieving economies of scale. Photovoltaics compete with all other sources of energy. Long-term growth looks promising for the industry as other energy sources decrease in supply and increase in cost. This is augmented with the increased momentum of “green” policies domestically and internationally. Buyers and suppliers have considerable power, due to substitute energy sources and a worldwide shortage of silicon-the main input to the photovoltaic industry.
Government subsidies and incentives are currently driving demand in the industry. Although high levels of capital investment create high barriers for entry into the industry, many energy suppliers have sufficient resources to enter. The North American Industry Classification System (NAICS) number for the photovoltaic industry is 334413. The scope of this industry analysis focuses on specific portions of the industrial supply chain related to the photovoltaic manufacturing industry.
The general industry supply chain is depicted below in Figure 1, and can be separated into four main segments beginning with silicon crystal production, progressing to photovoltaic cell production and photovoltaic module assembly, and finally, systems assembly and installation. We required sample companies studied within the industry to have m ajor operations within the second and third phases of the supply chain. The second and third phases were required due to the fact that the largest technological variation occurs within these areas, and are more likely to affect the direction of the microenvironment of the industry.
It is important to note however, that large companies within the industry often integrate vertically upstream and downstream within the supply chain. Private and public companies based within the U. S. and other countries were used in the industry sample. A sampling of industry players was favored over a complete listing of all companies within the photovoltaic manufacturing industry (hereafter referred to as the photovoltaic industry) due to the substantial number of competitors worldwide and the significant fragmentation of the industry.