According to a recent report from The Information Network, the Solar panel industry is due in for some challenging times next year as it faces possible extinction of over half its marketplace.

The market research firm noted a massive inventory buildup and huge overcapacity from suppliers in China, which will add an additional 1 gigawatt of panels to the supply chain by the end of 2009. In other words, inventory is averaging 122 days in 2009 versus 71 days in 2008, and capacity utilization has dropped to 27.9% in 2009 from 48.0% in 2008.

There are several implications to this market change. China’s solar panel manufacturers have dropped the price per watt to $1.80 USD which is even lower than the anticipated rate of $1.85 USD. By contrast, the average selling price in Q3 2008 was around $4.05 USD per watt. At this projected rate, prices could drop below $0.50 USD by 2011.

More than two hundred solar panel manufacturers are currently selling their panels at prices above $2.00 USD per watt, which spells nothing more than hard-hitting economic disaster. The Information Network projects that over 50 percent of current solar manufacturers may not survive from China’s competition in 2010 and may be forced to resign from the marketplace.

More here.