Worldwide revenue from shipments of panels will decline to $12.9 billion in 2009, down from $15.9 billion in 2008, iSuppli said. A drop of this magnitude has not occurred in the last 10 years and likely has not happened in the entire history of the solar industry, according to the firm.

The plunge in revenue will come despite an 9.6 percent rise in gigawatt (GW) installations of solar panels in 2009, growing to 4.2GW for the year, up from 3.8GW in 2008, iSuppli said. However, 11.1GW worth of panels will be produced in 2009, up 62 percent from 7.7GW in 2008, the firm said, meaning that supply will exceed demand by 168 percent.

With the gap between supply and demand rising to such a level, pricing and market revenue will drop in 2009, iSuppli said.

"Supply and demand were already unbalanced in 2008 with 100 percent more modules produced than installed," said Henning Wicht, senior director and principal analyst for photovoltaics at iSuppli (El Segundo, Calif.).

Wicht said short-term boost in demand from Spain and Germany kept installation companies busy and solar orders and module prices high. "But this boom is over," he said, adding that by the end of 2009 average prices for panels for new installation contracts will collapse to the $2.50 to $2.75 per watt range, down from the current level of $4.20 per watt. The overall aveare price for the year will be $3.10 per watt, Wicht predicted.

Virtually all crystalline silicon solar cell and panel suppliers are expected to feel the impact of the revenue plunge, iSuppli said. These companies will suffer revenue declines and most will see their inventories balloon, the firm said.

"Newer Chinese and Taiwanese suppliers will be hit particularly hard because they have invested heavily in both PV panel, cell and wafer production, areas where massive oversupply is expected," Wicht said.

Solar panel suppliers that are fully integrated, producing their own raw materials and components, are expected to suffer less severe losses than their non-integrated competitors because they can reduce margins over the entire supply chain and remain competitive, iSuppli said.

Companies like First Solar, REC Solar Inc. and SunPower Corp. should weather the storm better than competitors, iSuppli said.

In the second half of 2010, iSuppli projects that PV panel revenue will return to strong growth as the demand picture improves, some weak players are eliminated and price declines slow. The firm projects panel revenue will rise in 2010 to $17.8 billion, up 38.2 percent from 2009. Revenue will rise by another 11.1 percent in 2011 and by 29.1 percent in 2012, according to iSuppli's forecast.