Solar glass industry analysis
A competitive analysis of the solar glass industry. Solar industry developments and outlook. Is the solar glass industry profitable?
Disclaimer: Please do not consider this post as an investment advice. I am not a registered financial advisor. Please consult a registered financial advisor before making any investments.
This week I was reading about the solar energy and the various industries present in the entire value chain of generating solar energy. In this article I will do competitive analysis of solar glass industry.
Solar and other renewable sources of energy such as wind are here whether you believe it or not. Moreover these sources are now cheaper than conventional sources of energy such as coal and gas.
To help India reduce its reliance on conventional sources of energy, reduce the massive annual oil import bill and become self-sufficient, the government came up with an initiative in 2010 - National Solar Mission. The mission had a target of generating 20 GW of electricity via Solar energy by 2022. The target of 20 GW was later expanded to 100 GW.
India currently produces ~40 GW of electricity through solar energy (as of Feb 2021).
Before we dive into the solar glass industry analysis lets take a look at the overall solar industry developments in the last decade, opportunities, threats and future outlook as per the first and only solar glass manufacturer in India - Borosil Renewables.
Solar industry developments
Opportunities
Threats
Outlook
With the basics out of our way, let us do a Porter’s 5 forces analysis on the solar glass industry. We will analyze the following points:
Threat of new entrants
Power of suppliers
Power of customers
Threat of substitution
Threat of competition
Threat of new entrants (Medium - High)
Solar glass is an extremely fast growing industry in India with a lot of focus and support coming in from the government. This has influenced other companies in the glass industry to enter the market. Atleast two more glass manufacturers have already disclosed their plan to enter this industry.
So we can clearly see that there is definitely a threat of new companies entering the industry which will have an impact of the overall competition.
Power of suppliers (High)
The major raw materials used in the manufacturing of solar glass are - soda ash, silicon and natural gas. All these are commodities whose prices fluctuate as per the global demand and supply.
The suppliers of these raw materials tend to quote the prices prevalent in the international market and easily pass on the change in prices to their customers (in this case - Glass manufacturers).
So it is evident that the suppliers have a lot of pricing power.
Power of customers (Low - Medium)
The customers of solar glass manufacturers are companies that manufacture solar photovoltaic (PV) modules.
Since there is an abundance of solar glass manufacturers (~90% from China) which drive the overall price of solar glass in the international market, the solar PV module makers always try and deal with the lowest cost supplier to keep their own costs down.
The previous only applies to international PV module makers. The Indian PV module makers are currently complaining about the anti-dumping and countervailing duties imposed on imported solar glass as these measures give more power to the only Indian solar glass maker (Borosil).
So we can deduce that the international customers have a good degree of power to choose the lowest cost supplier of solar glass. But the domestic customers have their hands tied until more domestic capacties come online.
Threat of substitution (Very Low)
As of now solar glass can’t be replaced / substituted with another material that can be used in a solar PV module to generate solar energy more efficiently.
On the contrary, solar PV module manufacturers have started producing glass-glass modules instead of single glass modules. This is because glass-glass modules are found to be more efficient.
The only real threat is if a manufacturer starts producing niche variety of solar glass that is suitable for some specific applications. E.g. anti-reflective or matt-finish glass.
So currently there is no major threat of substitution.
Threat of competition (Very Low - Low)
The government of India is putting in a lot of focus on the solar industry as a whole. It has announced PLI (production linked incentive) scheme to make the industry attractive.
The government aims at achieving 10 GW capacity of integrated solar PV manufacturing plants in India within two years through the scheme.
The government has also levied ADD (anti-dumping duty) and CVD (countervailing duty) to discourage imports of solar glass from China and Malaysia.
Such measures are making the domestic solar glass industry and more companies are entering the market which will eventually lead to healthy competition.
Having mentioned the above point, we should also take into consideration the massive demand for solar glass over the next decade which will far outpace the supply.
Therefore threat of competition seems to be limited. Atleast till the time government duties are in place to discourage solar glass imports.
So there you go. We just did a competitive analysis of the solar glass industry in India using the Porter’s 5 forces. Based on the analysis the solar glass industry in India will have following features:
Solar glass has commodity like characteristics as prices are not in control of manufacturers.
Margins would stay in a range. They will go up when there is more demand and raw material prices are subdued and would go down when there is less demand and raw material prices are up.
Margins could further shrink as more competitors enter the market over the years.
Solar glass is enjoying massive demand all over the world, especially in India with a lot of focus from the government.
Could be a good bet atleast for the next 5-10 years, unless the government decides to remove all duties on solar glass imports which would make the industry extremely competitive.
I hope this article helped you in understanding the solar glass industry.
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I would be publishing more such articles where we would analyze/dissect/rip apart an industry or a particular Indian “dhandho” (business) so that we all become better informed investors. So, please consider sharing this space.
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Until next time. Take care.
Best regards,
Sahil