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With large numbers of entrants having rendered the solar panel-frame market into a red sea, leading players are focusing on innovation and flexibility in their operation, in order to provide sophisticated service-oriented products and survive the acute competition.
A typical example is fixed tilted frames which have become a bulk product, with its price having plunged to the nadir of less than US$0.07/watt (after adjustment of module efficiency), as suppliers have discovered methods minimizing the use of materials without sacrificing strength, as well as optimal installation method, capable of boosting the power-generation efficiency of solar panels, thereby cutting frame cost per watt.
In addition, sharp price cut of solar energy has inflicted heavy pressure for solar-panel frame suppliers to slash their prices as well, as many customers demand suppliers to cut prices to minimal level, so long as quality can be kept at acceptable level. Consequently, margin for solar panel frames has dropped to razor-thin level, a far cry from 30% gross margin in the past.
In the past, thanks to high margin, fixed tilted frame suppliers focused on R&D, farming out manufacturing. At present, this field has become a mass market, with little differentiation among products, as numerous players have swarmed to the sector, thanks to low entry threshold.
Fierce shakeout
Suppliers of single-axis sun-tracking frames are faced with a similar plight. Although the sector is still staying in an innovation stage, featuring constant rollout of new products, cost reduction has become a major consideration in R&D. The acute competition has hampered the pace of innovation. Several years ago when NEXTracker managed to slash cost by 30% via a new design, numerous competitors caught up within a short time, with scores of companies now capable of offering products at similar prices with similar design, including NClave, Soltec, GameChang, PV Hardware, SFR, and Gestamp.
With entry threshold for single-axis sun-tracking frames becoming ever lower, product differentiation has been increasingly slurred, as virtually all key components and parts, such as controller, bearing, motor, worm-gear transmission assembly, and actuator, are now available on the market.
As a result, sun-tracking frames have also become a mass merchandise, with only thin margin, prompting many suppliers to shift focus to provision of services for higher margin. However, since services are tailor-made, business scale tends to be limited. Another approach is vertical integration to sustain margin.
In order to cope with their plight, suppliers, numbering several hundreds for fixed tilted frames and 30 for sun-tracking system, are seeking opportunities for merger. The effort is difficult, due to difficulty to find potential buyers, given bleak outlook for the industry. Consequently, fierce shakeout appears to be in the offing.
For the time being, suppliers can only resort to various means available, in order to enhance their chance of survival, including cost reduction, vertical integration, quality improvement, expansion of scale, and switch to services.
(Collaborative media: TechNews, first photo courtesy of U.S. Department of Agriculture via FlickrCC BY 2.0)