US Solar Industry Posts Trade Surplus (WFR, AMAT, GTAT, FSLR, SPWRA, LDK)

The US solar industry needs some good news. Rising capacity, falling margins, and weakening economic conditions in developed countries have taken a heavy toll on US makers’ share prices since the beginning of the year. A new study shines some light on how the industry is doing.

The Solar Energy Industries Association (SEIA) and GTM Research today released a study showing that the US solar industry posted a $1.88 billion trade surplus in 2010.  Exports totaled $5.63 billion while imports totaled $3.75 billion. Polysilicon wafers and capital equipment were the two largest exports, while the largest imports came from finished solar photovoltaic modules. In other words, the technology-intensive part of solar PV manufacturing was a positive for the US, while the labor-intensive module manufacturing was outsourced, mainly to China and Mexico.

Silicon makers like MEMC Electronic Materials Inc. (NYSE: WFR) and Applied Materials Inc. (NASDAQ: AMAT) have struggled this year, while equipment maker GT Advanced Technologies Inc. (NASDAQ: GTAT) has done quite well. Solar PV providers like First Solar Inc. (NASDAQ: FSLR) and SunPower Corp. (NASDAQ: SPWRA) have both posted share price gains since the beginning of the year, but both are weakening as the outlook for the rest of this year gets revised downward.

The SEIA/GTM study also estimates the value creation for modules installed in the US in both 2009 and 2010. Here’s where the news for the solar industry is not so good. The development of polysilicon manufacturing in Asia — particularly in China — resulted in a -15% drop in value creation over the two years. The year-over-year cost difference was -19%. The new manufacturing capacity coming online from Chinese suppliers like LDK Solar Inc. (NYSE: LDK) and other large polysilicon makers is expected to drive costs even lower over the next few years.

Chinese polysilicon production in 2010 was less than 50,000 tons; by 2015, output is expected to reach 168,000 tons. The demand for solar PV installations will need to expand rapidly to soak up all that new production or prices will simply collapse.

Even GT Advanced Technologies (formerly GT Solar) is also likely to face competition from a new Chinese push into making solar and silicon manufacturing equipment. This could take a bit longer to happen, but when it does US exports of solar manufacturing equipment is also likely to get hurt.

As an historical document, the SEIA/GTM study provides a valuable look at the state of US players in the solar industry. But the historical evidence also leads to the notion that the trade surplus in solar PV is not likely to last much longer.

Paul Ausick