China: The new silicon valley
Investing in renewable energy: The solar power industry (Part 8 of 24)
Polysilicon
Polysilicon is the first link in the value chain of photovoltaic cell, or PV, (TAN) manufacturing. At the end of 2013, polysilicon manufacturing capacity stood at about 300,000 tons globally, out of which ~90% was made by the top ten producers. In terms of output, here’s how the top five ranked:
GCL Poly Energy, China – 65,000 tons
Wacker Chemie, Germany – 52,000 tons
OCI, South Korea – 42,000 tons
Hemlock Semiconductor Corporation, US – 36,000 tons (GLW) (DOW)
REC, Norway – 21,500 tons
Major American producers of polysilicon also include SunEdison (SUNE) and ReneSola (SOL).
About 5 tons of polysilicon is required to manufacture one 1 MW (megawatt) crystalline solar module. Current polysilicon capacity supports 60 GW (gigawatts) of PV module capacity. Of course, about 25,000 tons of polysilicon is used by the microelectronics industry.
Market development
Prior to 2007, the PV industry practically lived on polysilicon waste produced by the microelectronics industry. The picture started changing in the mid-2000s when governments across the world, especially in Europe, introduced major incentives for cleaner energy.
In 2005, only 13,000 of a total capacity of 30,000 tons of polysilicon was available for solar PVs. The imbalance between demand for polysilicon from the solar PV industry and its supply led spot prices to rise from $70 per kg in 2004 to $450 per kg in early 2008.
Massive amounts of new capacity came online beginning in 2008, especially in China. Prices started to come down. Then, Spanish government incentives for solar energy ended abruptly in September 2008, hurting demand and pushing prices down farther. Polysilicon prices now hover at around $20 per kg.
Production by country
Historically, the US dominated the polysilicon industry. Even in 2008, when new Chinese and South Korean capacity came online, the US had a market share of 43% in polysilicon production. In contrast, China had just 6%. Germany and Japan are two other major producers of polysilicon.
Five years later, the picture looked completely different. China’s market share had rocketed to 36% by 2013, while the US share dropped to 26%. In some respects, China has become the new silicon valley.
Part of the reason for this shift is the duty levied by China on polysilicon imports from the US.
In the next part of this series, we’ll try to understand the market structure of the polysilicon industry.
Browse this series on Market Realist: