There is "massive oversupply" in the solar power supply chain, according to market watcher iSuppli.
In the current depressed market that means that average inventories throughout the solar supply chain have leapt by 64.3%, which means price erosion, says iSuppli.
Average days of inventory among solar module and cell makers, polysilicon and wafer suppliers and vertically integrated companies that provide all these items surged to more than 121 in the first quarter of 2009, up from 74.2 during the same period in 2008.
"The worldwide solar industry for the first quarter added the equivalent of one-and-a-half months of excess inventory in just one year," said Dr. Henning Wicht, principal analyst, Photovoltaics (PV) research, for iSuppli.
And with new polysilicon capacity due to come online this year, there is the likelihood of further price erosion.
iSuppli estimates the spot price per kilogram for polysilicon, the key raw material for making solar cells, will drop to $50 by the end of the year, down by 72 percent from $180 per kilogram at the beginning of 2009.
Hardest-hit, said iSuppli, are the fully integrated players, including REC, Yingli, and SolarWorld.
Cell and module manufacturers are currently experiencing significant increases in inventory, with levels rising to 105 days from the third-quarter level in 2008 of 47 days. This is due, in part, to pressure from wafer and polysilicon suppliers desiring that their customers adhere to shipment schedules negotiated in 2007 and 2008.
This comes from iSuppli's latest report entitled: The Next Bottleneck: How Far Will Solar Prices Fall in 2009?
Beside hits to silicon suppliers and solar cells and modules manufacturers, there is side-effect on other technologies, such as thin-films. Their competitive advantage against cristalline silicon is vanishing, thus inducing strong disturbance in their growth business model. It's time for them to go ahead at full speed to keep their cost/W advantage by leveraging volume effect, if they can.