Solar inverter makers’ profits will remain relatively stable while most other solar component makers are facing lower margins because of an industry decline.
Companies that make solar inverters have a more complex process to follow than companies that produce panels and cells, making solar inverter prices able to stay more stable.
Inverter profit margins are set to shrink $6 billion, but this is not as much as other solar power parts makers, according to Reuters.
Prices of solar cells and modules have been decreasing because of overcapacity, competition and cuts in government subsidies.
“There is more internal design for an inverter company, so while it’s easy to make an inverter, it is relatively hard to make a good inverter,” said Jon Sigurdsen, renewable fund manager at DnB Nor Group unit Carlson. “This means higher entry barriers and somewhat better margin protection.”
The inverter market has a relatively low amount of competition. There are over 150 inverter suppliers, but the top ten companies control 75 percent of the market, according to Ash Sharma, a senior research director at IMS Research.
Reuters reports, “While prices for panels have fallen about 40 percent so far this year, retail prices for inverters are down about 10 percent to 15 percent. Panels make up 40 percent of the cost of a solar system and inverters contribute up to 15 percent.”
Analysts are saying that inverters could be a safe investment for those looking for cheap, valuable solar stocks.
“We continue to believe that the supply/demand and pricing dynamics in the inverter market are very different from the solar panel market,” Cantor Fitzgerald analyst Dale Pfau wrote in a research note dated Wednesday.
Second-quarter gross margins at SMA Solar and Power-One, two leading providers of solar inverters, were above 34 percent, making the outlook promising for inverter makers and investors.
That’s all for now,