Chinese Solar Companies: Who Will Go Bankrupt First? 0

China, which is the world’s largest provider of solar panels made from crystalline silicon, is seeing a large number of smaller polysilicon companies go bankrupt or stop production.

The reason is that for many of the smaller companies, the price of polysilicon is $25-30/kg, while costs are $40-50/kg.  This means that the smaller companies are making massive losses with the production of each kg of polysilicon. Note: Polysilicon is a commodity industry like the memory industry, and goes through periodic ups and downs when prices go below costs.

In recent years a large number of companies set up polysilicon plants to benefit from the massive growth in solar panel demand in Europe. However, a huge glut in 2011 led the prices to fall across the supply chain of silicon solar panels. Poly prices fell from a high of $100/kg to $25/kg – a drop of almost 75% in one year.

This has made many of the smaller poly plants in China stop production as the price is below variable costs. The bigger producers like GCL , Renesola and Daqo have lower costs at around $25-30/kg, which means they are breaking even.  However, for smaller companies the situation is dire as massive capacity expansion by the top polysilicon producers will continue in 2012 keeping prices at around the same level.

The Players. . .

1) Hemlock Semiconductor (HSG) – This a a privately held company which is a JV between Shin-Etsu Handotai, Dow Corning and Mitsubishi. Hemlock has the largest poly production capacity in the world and has been trying to rapidly raise capacity to meet growing solar demands. However it has not grown fast enough.

2)Wacker Chemie– This German chemicals conglomerate has increased plant capacities rapidly in Germany and is expanding in the US as well. Wacker has the majority of its profits coming from its nearly 25,000 ton polysilicon capacity. It is one of the world’s major producers of semiconductor wafers as well, so it uses some of the poly in-house while selling the rest to Asian customers mostly.

3) OCI Chemical – This Korean chemicals company has seen the most spectacular rise in the poly business and has ambitions of becoming the No.1 player in 2012, overtaking both Wacker and Hemlock. Primarily targeting the solar market, the Korean company has plans of reaching 62,000 tons of polysilicon capacity at its plant in South Korea. Formerly known as DC Chemicals it started production only 3-4 years ago in partnership with Sunpower.

4) Renewable Energy Corporation – This Norwegian Producer was the largest solar wafer producer till a few years ago when it lost its leadership to the Chinese. It is now expanding into Singapore to reduce its high cost and integrating vertically. REC is also one of the biggest producers of Silane Gas which is used in making polysilicon. Like MEMC,it uses both the FBR and Siemens process in producing polysilcon. It has plants in the U.S.

6) GCL Poly – This Chinese company became one the biggest producers of polysilicon and wafers in 2010, going from zero in 2008. The company is expanding rapidly but not getting into production of solar cells and panels. The company is also on its way to becoming a Top 3 producer of polysilicon and is expanding by co-locating wafer plants near its customer factories. GCL has signed massive long term deals with most of the bigger solar panel producers in the world.

7) LDK Solar -This is the biggest producer of solar wafers that are used by crystalline solar panels, but is losing its No.1 position to GCL Poly.  The company is expanding rapidly into other parts of the solar supply chain and could break into top 10 solar panel producers in the next couple of years. LDK did run into a lot of debt troubles in expanding its poly plant to 15,000 tons, but got back on track in late 2010.

What is Polysilicon or Polycrystalline Silicon

Polycrystalline silicon or  Polysilicon( poly-Si or “poly”) is a material consisting of multiple small silicon crystals.The difference between Silicon Metal and Polysilicon is that Poly is highly pure form of silicon and is much costlier.Polycrystalline silicon can be as much as 99.9999% pure (also known as 4N pure,the 4 denotes the number of 9s after the decimal point).Polysilicon was primarily used by the semi industry till 5-6 years ago and the electronic industry used 9N pure polysilicon.The Solar Industry which has become the main user of polysilicon nowadays can do with 6N pure poly.

Chinese Solar Companies Next To Go Belly Up originally appeared in Green Chip Stocks. Green Chip Review is a free 2x-per-week newsletter, is the first advisory to focus exclusively on investments in alternative and renewable energies.

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