Wacker Chemie Exits Solar Industry, China Government to Curb Silicon Oversupply

wackerschott Wacker Chemie Exits Solar Industry, China Government to Curb Silicon Oversupply

Wacker Chemieis getting out of the business of making silicon wafers for the solarmarket to focus on producing silicon instead, the company saidWednesday.

The German company announced the move four months after it opened a new wafer factorywith its joint-venture partner Schott Solar. At the time, Wacker saidit intended to expand the wafer manufacturing capacity to reach 1gigawatt by 2012.

Wacker, which claims to be the world’s second largest siliconsupplier for the solar and chip markets, said it would ratherconcentrate on its core business of producing silicon. Schott Solarwould rather concentrate on making solar cells and assembling them intopanels.

Schott Solar would take over the wafer business from Wacker sincemost of the wafers already go to Schott Solar. The two companies formedthe joint venture, Wacker Schott Solar, in 2007.

Focusing on its core business makes sense at a time when demand forsilicon should remain strong over long term thanks governmentincentives in Europe, the United States and Asia are boosting solarenergy demand.

"I think it’s just a realization that the polysilicon business stillretains the potential for higher returns than wafers, and Wacker istherefore choosing to focus its energy and capital on its corebusiness," said Shyam Mehta, a senior analyst at GTM Research. "SinceWacker has no cell/module participation in the market, integration isof limited value to them anyways, compared to a cell/modulemanufacturer, for whom it provides lower inputs costs and improvedlogistics."

On the other hand, Wacker also needs to marshal its resources to navigate a downturn in the solar industry.

Some of its fellow silicon makers already have stumbled quite a bit (see Silicon Producer SilPro Teers on Bankruptcy and Hoku’s Dilemma: What Happens When Your Customers Can’t Pay?). Others are planning to expand their capacities (see Despite Solar Slump, Tokuyama Plans New Factory).

The prices of silicon have fallen quickly over the past year,prompted partly by the soft demand from project developers who couldn’tline up financing (see Contract Silicon Price Falls 50%, Close to Spot Price). Solar panel prices also have fallen by 30 percent to 40 percent over the past year, if not more.

Solar panel makers also boosted their production in 2008 to takeadvantage of a booming market in Spain, only to see the countryslashing its incentive program and the global financial market crumbleat around the same time in late 2008 (see Solar Panel Glut Could Last Until 2012, Says Report).

Since then, many manufacturers have sought to renegotiate their silicon contracts.

Wacker’s silicon division saw its sales increase to €269.1 millionin the second quarter of this year, from €194.2 million in the sameperiod in 2008.

But the second quarter figure fell short of the €315 million fromthe first quarter of 2009. Falling spot market pricing for the solarmarket was partly to blame, the company said.

Meanwhile, the Chinese government is taking steps to curb the expansion of the country’s silicon production to stem oversupply. The government recently issued a statementthat pointed to "redundant projects" in the silicon manufacturingsector and promised to fix that problem with measures such asrestricting companies’ access to capital and toughening environmentalrules. 

The country’s silicon production apparently has boomed despite a big fall in solar energy equipment prices, reported the Wall Street Journal

Image via Schott Solar.

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