Rapidly-declining PV module prices will lead to a contraction in industry revenues worldwide in 2011 and 2012, according to the latest quarterly report from IMS Research.

Fierce competition and module oversupply have led to module prices falling dramatically and despite shipments increasing, revenues are forecast to shrink by almost 10% in 2011, and further in 2012.

This year, module production capacity is forecasted to pass 50GW, a figure that is more than double that of demand. This huge oversupply has prompted many suppliers to wage price wars in order to capture market share and stay afloat; current prices are now 35% lower than they were at the end of 2010.

Understandably, these tumbling prices will have a negative impact on module revenues – which rose 74% to US$38 billion in 2010. IMS forecast that, despite shipments increasing, this figure will slump to US$30 billion in 2012. However, once the industry rides out this troublesome period, revenue growth is forecast to resume in 2013, although a return to 2010’s record levels are not expected to happen until after 2015. Gross profits are set to fall from US$10.3 billion in 2010 to just over US$5 billion in 2012.

“The PV industry has a tendency to focus on shipments and megawatts; however recent price collapses have caused huge financial damage to the industry, and suppliers are now increasingly looking at the real bottom line; revenues and profits – both of which will significantly decline in 2011,” said IMS senior research analyst Sam Wilkinson. “As global demand is forecast to grow at relatively unremarkable rates for the next few years, it is unlikely that revenues and profits will recover to the levels that we saw in 2010 within the next five years.

“Another significant consequence of declining revenues for the industry will be a sharp decrease in profits. As module prices have fallen much faster than suppliers have been able to reduce their costs, average gross margins are currently half what they were six months ago.”