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The Rippling Silicon Market

Photonics Spectra
Feb 2009
Anne L. Fischer, Senior Editor, anne.fischer@laurin.com

So much can change in such a short time. Back in July, we reported that photovoltaic (PV) grade silicon was in short supply and that cell and wafer manufacturers were signing long-term contracts or partnering with silicon makers to ensure that they’d have enough of the main ingredient for the long haul. The data from iSuppli of El Segundo, Calif., which analyzes the electronics industry’s supply chain, shows that from early 2010 on, the tables will turn, and there will be an abundance of PV silicon. This expected reversal is causing solar industry experts to take another look.

GRisuppli_1.jpg

The supply of polysilicon (shown here in rod form) will soon outweigh demand, according to a recent report by iSuppli. Photo by Damien Heinisch. Courtesy of REC Silicon.

According to a report recently released by iSuppli, the supply of polysilicon is expected to double in 2009, while demand will grow by only 34 percent. The growth in production of polysilicon is a direct result of the exorbitant margins for polysilicon producers between 2006 and 2008 and the long-term growth of the solar industry. Established producers will expand heavily, and more than 60 new manufacturers have announced plans to produce the raw material by 2010. The report “Immature Photovoltaic Supply Chain to Result in Major Polysilicon Price Volatility” states that the fixed supply agreements signed by the cell and wafer manufacturers are causing substantial swings in inventory and pricing, which will result in a redefinition of contracts and sales channels.

Downward spiral

Prices have peaked, and the spot market price could be cut in half over the course of 2009. The spot market represents the orders placed without a long-term contract. Two years ago, polysilicon was selling for $200 to $300 per kilogram on the spot market, driving wafer makers to sign contracts, which could be as low as $80/kg for a five- to 10-year commitment. Last March, Suntech Power Holdings of Wuxi, China, signed an eight-year contract with DC Chemical Co. of South Korea. According to Dr. Henning Wicht, principal analyst with iSuppli, manufacturers will likely be renegotiating the prices in their long-term contracts because spot market prices will be driven down as low as $30/kg by 2012. Beyond that time, however, it’s not clear whether prices will continue to drop. Depending upon three factors – systems costs, amount of sunlight and local electric rates – areas such as California, Italy and Spain will likely have achieved grid parity in 2012, and a second boom could take place, causing prices to spike once again.

The report states that the top four polysilicon producers (Hemlock Semiconductor of Hemlock, Mich.; REC Silicon of Sandvika, Norway; Wacker Chemie of Munich; and MEMC Electronic Materials of St. Peters, Mo.) will continue to grow with the market and will have a 40 percent share by the end of this year. Large chemical companies, such as DC Chemical, and solar wafer companies, such as LDK Solar of Xinyu City, China, M.Setek of Tokyo and Renesola of Jiashan, China, will step up to take about 30 percent of the market. The rest of the market will be made up of smaller suppliers, which will include some Chinese companies. The report contends that Chinese suppliers will not make significant inroads in the market until 2012, when their installations will have ramped up and they will have gained more experience.

Other factors affecting demand for polysilicon will be increased development of thinner wafers, which use less silicon, as well as improved sawing methods that will reduce or eliminate silicon waste (kerf). Kerf recycling is also under development and could significantly affect demand for new material and reduce its cost.

Ripples continue

Despite negative economic news, the solar industry is, in Wicht’s estimation, suffering only a temporary downturn. “The overall driver is to become independent of fossil fuels, and solar is becoming cheaper every day.” The financial crisis has affected the solar market, as it has everything else, but Wicht anticipates that the oversupply of silicon will ripple right through the supply chain. An oversupply in cells and modules, for example, would decrease the PV system price, which would stimulate the market and create new demand, again turning oversupply to undersupply. The cycle goes on.


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