The Poly Silicon Glut
Silicon prices are crashing. After five years of accelerating investment, spot prices as much as 20x leading edge costs, the rough estimate is that there is 2x as much ‘PV silicon’ as needed for the 2011 end market demand. Since most steps downstream of silicon have very low capital intensity, most of the leverage in the manufacturing model is at the SI phase of the process, and it’s not good. Even the biggest, lowest cost, producers are shutting in capacity and deferring investment. With about a third of the market at the extreme high end of the cost curve (mostly new capacity in China w/o latest regeneration technology or access to key chemical inputs), and over half of global downstream capability in that market, it will be very interesting to see who shakes out. Will Chinese silicon manufacturers upgrade (at great cost?) or consolidate and source from Korean/Japanese silicon producers? If the former, it’s going to be a long trough.