Costs of solar cells and microchips are set to decrease as the key component that makes these items falls 93 percent in price.
Polysilicon, a brittle charcoal-colored semiconductor, is the material that goes into making solar cells and microchips. This commodity has decreased to $33 per kilogram from $475 per kilogram just three years ago, reports Bloomberg.
This is great news for the solar industry. Polysilicon makes up a quarter of the cost for a finished solar panel. Bloomberg says:
The photovoltaic industry consumes almost 90 percent of the supply, which is also is the foundation of most computer chips made by manufacturers such as Intel Corp. (INTC), the world’s largest.
Although microchip manufacturers will benefit from the lower polysilicon prices, the material only accounts for about five percent of production cost.
The industry is expected to produce a 28 percent surplus of this material next year, up from a 20 percent surplus this year, said Robert Schramm-Fuchs and Shai Hill, analysts at Macquarie Group Ltd., reports Bloomberg.
This price change is narrowing margins for manufacturers led by companies such as Hemlock Semiconductor Corp. and Wacker Chemie AG (WCH). Solar-cell producers, like Suntech Power Holdings Co. (STP), use this polysilicon material and have been able to reduce the cost of photovoltaic’s, which pushed three U.S. manufacturers into declaring bankruptcy this year, according to Bloomberg.
While this may sound like terrific news, some companies may be at risk. Bloomberg reports:
Price declines for products at every step in the solar supply chain triggered a 60 percent drop in the Bloomberg Global Leaders Solar Index since February tracking 37 shares. It’s led to speculation that more poly producers and panel makers may either combine or go bust in the coming months. Q-Cells SE, once the world’s biggest cell maker, has said it’s open to takeovers.
Bloomberg says the “shakeout has started.” An analyst from Macquarie wrote a note that said:
Two-thirds of the existing 66 polysilicon producers could fall victim to the shakeout that has just started. The total number of Chinese polysilicon producers could fall to as little as four over the next three years, down from 35 known to us today.
It is reported that about 90 percent of polysilicon plants in China may have to halt production because of the major price drop.
When the cost of a material falls so much, so quickly, there becomes little room for fluctuation.
OCI’s shares have lost about 40 percent this year in Korea and Wacker has declined 46 percent in German trading. GCL-Poly has the highest debt compared with its equity, or 113 percent, of the top five that are publicly traded, Bloomberg data shows.
Prices for polysilicon are predicted to fall into the $20 price range and then stabilize back around $30 after the surplus is reduced over the course of 2012.
The global supply of polysilicon is set to reach about 500,000 tons by 2014, Ewald Schindlbeck, head of Wacker’s polysilicon unit, said in an interview with Bloomberg. That compares with 266,000 tons this year, according to Macquarie.
That’s all for now,