Why Asian silicon suppliers are swimming downstream

A pair of recent deals among Taiwanese and Chinese mc-Si silicon suppliers illustrate the growing importance of streamlining the value chain from ingots to cells, explains Lux Research’s Ted Sullivan.

January 27, 2011 – Chinese monocrystalline silicon (c-Si) ingot/wafer manufacturer Solargiga Energy has received shareholder approval for its proposed HK$835M (US$107M) acquisition of Sino Light Investments [PDF link], which wholly owns Chinese solar cell maker Jinzhou Huachang Photovoltaic Technology (HPT) and its just-tripled-to-300MW production capacity, about 20%-25% of Solargiga’s output capabilities. (Among details in that PDF, Solargiga flat-out states that it will “further accelerate its development of downstream business” to better understand downstream customers’ demand, and to develop synergies in its c-Si and mc-Si ingot/wafer businesses.)

Meanwhile, Taiwanese mc-Si ingot/wafer manufacturer Sino-American Silicon (SAS) has indicated it’s in a equal-owned JV with domestic cell maker Solartech (HTC chairman Cher Wang also holds a 10% stake), which will build and ramp a 1GW facility this year.

There’s an important theme in both these deals: the growing importance of streamlining the value chain from ingots to cells. “Vertically integrated players are aggressively driving down costs to enforce their already dominant position,” writes Ted Sullivan, senior analyst from Lux Research, in a recent report. In mc-Si, cost-of-goods-sold (COGS) will be slashed from $1.45/W in 2009 to a projected $0.93/W by 2015, so players that specialize in one or two steps of the value chain need to broaden their reach via M&A or JVs such as the ones mentioned above. The COGS downward march (largely driven by poly-Si costs) is also behind project developers’ preference for c-Si modules over thin-film technologies.

“Dominance in scale and continued manufacturing innovation will allow vertically integrated players to continue fending off newer technologies,” Sullivan writes. “We see x-Si remaining the dominant technology, at least until efficiency improvements begin to plateau in 2015.”

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