Although slowdown, growth of global PV market in 2011 stillrespectable. After a stunning growth of >100% of global PV market in2010, Solarbuzz forecasts the growth of global PV market will slow to<30% yoy with annual market size of 20.4 GW in 2011, as solar energypolicy changes in several European countries such as Germany and CzechRepublic would trim global PV demand.

Polysilicon and wafer price would decline on capacity growth. Withthe slower PV market growth and significant increase in poly-si capacity of42% yoy in 2011, poly-si price may soften and slide to below US$50/kg in2011. Since many major wafer manufacturers announced their capacityexpansion plans for 2011, wafer supply growth would also outstrip demandgrowth in 2011 and thus we forecast wafer price to continue to decline to~US$0.7/Wp in 2011 from the average of ~US$0.8/Wp in 2010.

Grid parity to spur volume growth in the long-term. The cost of PVmodule will continue to decrease in the coming decade. In contrast,conventional fossil fuel costs will surge in the long-term. As such, the gridparity will be achieved soon. Currently, some of the EU countries havealready been close to grid parity and will achieve grid parity in 2012.

c-Si technology continuing to be the mainstream while traditionala-Si losing steam. Crystalline silicon (c-Si) continued to be the mainstreamtechnology of the PV market with market share of 80% in 2010. Althoughit will lose market share to thin-film technology in the coming decade, it isstill the mainstream technology with a market share of 61% in 2020. Weexpect the market growth of a-Si to be lower than those of other thin-filmtechnologies.

Prefer c-Si plays. Stay away from a-Si plays. In light of the sustainablevolume growth of the PV market in the long-term and the dominant marketshare of c-Si technology, we prefer c-Si plays with huge capacity growthpotential and low cost advantage, such as GCL-Poly and Comtec Solar(712 HK). We suggest investors to stay away from a-Si plays such asApollo Solar (566 HK) as a-Si technology would continue to lose marketshare to other thin-film technologies and the company may not be able tocompete with the existing top-tier PV equipment and turnkeysolution providers.