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EMS Firms Challenge PV Solar Module Manufacturing Value Chain
February 11, 2010 |Estimated reading time: 2 minutes
-- Alfonso Velosa, Gartner analyst, considers the major advantages EMS providers bring to solar module manufacturers, such as multi-faceted scalability and familiarity with low-margin operation.
In January 2010, BP Solar announced an agreement with Jabil Circuit to assemble BP Solar modules for the North American market in Jabil's plant in Chihuahua, Mexico. The agreement calls for an initial capacity of 45 megawatts (MW), with the opportunity for expansion as demand increases. Production will begin in the second quarter of 2010. This agreement builds on a relationship that began with the October 2009 announcement of a 45 MW deal for Jabil to manufacture BP Solar modules in Poland for the European market. Since that time, BP Solar has ordered a second 45 MW module assembly line at the Poland facility to feed continued strong European market growth.
Gartner considers this to be a major development in the ongoing evolution of the photovoltaic (PV) solar value chain. In particular, this announcement highlights the successful inroads that the electronics manufacturing service (EMS) firms have had in the PV solar market — and it's not just Jabil that is working in this market. Flextronics, Celestica, and the other EMS firms have been making steady inroads. This represents a serious challenge to existing solar module firms that have not rethought their cost structure.
The EMS firms bring five critical pressure points to the module assembly part of the PV solar value chain:Relationship. The announcement highlights the in-depth relationships that the EMS firms have been able to establish with leading PV solar brands, such as BP Solar. Furthermore, many midtier and startup firms, both in the PV market and the concentrated PV market, have ongoing manufacturing contracts with EMS firms.Global. The leading EMS firms have facility spreads of a global nature, ranging from California to Spain to China. This particular announcement related to facilities in Mexico and Poland. Wherever a PV solar brand wants to address a local market, there is a high probability that an EMS firm will have a convenient facility.Flexibility. The large size and breadth of capabilities of the EMS firms enable PV solar brands to ramp manufacturing up or down in an easier fashion than either owned facilities or traditional solar partners.Expansion. This is an attractive growth market for EMS firms, so we expect them to continue to invest sales, technology and manufacturing resources to win this business.Margins. EMS firms are masters of low-margin businesses, such as module assembly. Their technical capabilities, superb management of inventory and lean manufacturing approaches will increase pressure on the smaller and less-efficient module assemblers in the market.
Thus, while EMS firms have played a role in the PV solar market for years, this announcement emphasizes the expected increasing penetration of the EMS firms into the PV module assembly submarket and eventually the rest of the PV value chain.
Also Read:Is Solar Cell Production A Viable Business Venture for PCB Fabs? Electronics trade group IPC expands to solar
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