On August 18th, Suntech Power Holdings confirmed that they “have ceased trial production of thin film products”. As a result, they took a $54.6 million impairment charge in their latest financial report that outlined otherwise impressive financial results for the second quarter of 2010. Further investigation points out that these “thin film products” are amorphous silicon (a-Si) modules manufactured on a Sunfab line purchased from Applied Materials (AMAT) and that the impairment charge is simply a write down of the value of the a-Si manufacturing equipment.

Citing “rapid cost reduction and improving competitiveness of crystalline silicon panels” as the driver for this decision, Suntech has, in our opinion, acknowledged that single-junction a-Si modules are no longer competitive with c-Si modules. This is not surprising since 1-J a-Si modules provide only about 6.8% module efficiency which is simply not competitive with the 14.4%-19.5% efficiency of mono-crystalline modules nor with the 13-15.2% efficiency of multi-crystalline modules. This performance deficiency of 1-J a-Si modules becomes apparent when typical module efficiencies by technology are compared side-by-side as depicted below.

True, module competitiveness is also a function of its cost per watt ($/W) and relative cost for Balance of System (BOS) elements, installation costs, and other costs that, when summed, result in total installed cost.

When total installed costs of 1-J a-Si modules are compared to those of CdTe modules from First Solar and c-Si modules from a variety of low-cost Chinese manufacturers, we estimate that 1-J a-Si modules would need to be sold at ASPs so low that they would offer NEGATIVE margins to their module makers. First Solar’s 11.2% efficient modules cost $0.76/W to make according to company reports, and total manufacturing cost of c-Si modules produced by the most competitive companies has plunged to about $1.20. To compensate for their efficiency disadvantage and resulting higher BOS costs, 1-J a-Si modules would need to be given away at no cost, and, in some cases, installers would need to be paid to take 1-J a-Si modules!

Obviously, then, we fully agree with Suntech’s basis for closing its a-Si venture because a-Si truly is no longer competitive with c-Si. In fact, we projected over six months ago that AMAT’s Sunfab line of equipment produced modules that could not be competitive unless they achieved north of 10% module efficiency. Consequently, Suntech’s decision may be a little late.

With Suntech ceasing a-Si production on top of AMAT’s decision to terminate their Sunfab business segment, the future of a-Si production looks shaky at best!