Polysilicon oversupply coming up?
MEMC Electronics (NYSE: WFR) and Sunpower Corp. (Nasdaq: SPWR) reported earnings last week and we got some more insight into the Polysilicon supply last week:
- Credit Suisse analyst Satya Kumar, “We see so much new poly coming online that it is now becoming a question of when, not if poly will go into oversupply; and our analysis suggests that first quarter 2008 could be when supply growth inflects high enough to overcome demand,”
- MEMC Electronics: Demand from the solar market, however, continues to be healthy.
- Sunpower Corp., “our partners M.Setek and DC Chemical have made steady progress with their new polysilicon manufacturing facilities”.
- Sunpower Earnings call transcript via SeekingAlpha:
- Two new entrants in the Polysilicon arena: M. Setek is integrating upstream to begin polysilicon production and their polysilicon plant is on schedule to deliver silicon based on this new capacity in Q3 of 2007. The other new entrant is DCC, the leading Korean chemical company and they are on schedule, as well, to begin delivery of polysilicon to us in Q1 of 2008.
- We expect pricing to be up relative to 2006 approximately 10%.
- In 2008 we would expect silicon prices to go down.
Click here to see how polysilicon affects solar stocks and to learn about Polysilicon
April 30th, 2007 at 8:12 am
The new polysilicon capacity that is coming on line in the next few years may relieve the supply problem temporarily but demand is increasing quickly, not only in solar. Also I have read that some of this new capacity is already used up by long-term contracts.
As the Green/Anti Global Warming movement grows, there will be more PV solar financed with carbon credits and tax incentives. But don’t forget about other areas of technology that require polysilicon as well. Ever more sophisticated cars will requires more and more semiconductors for hybrid drive systems, traction controls, ABS, lighting, etc. Practically every electrical device no matter how simple includes a chip and more will be used as energy efficiency becomes the new cool feature. Look inside of a fluorescent light bulb - in this example I count 2 power semiconductors, at least 3 diodes and a small bridge rectifier - 6 chips in one bulb.
http://upload.wikimedia.org/wikipedia/commons/c/c4/Elektronstarterp.jpg
Soon it will be mandated that these are used everywhere, that means billions will be sold.
Heating and lighting controls increasingly use semiconductor power switching instead of relays. Transformers are being replaced by switching power controls. The list goes on and on.
If the new polysilicon capacity coming online creates an oversupply, chances are it will be very temporary. WFR’s drop in price may signal that the market believes the oversupply possibility, but then why is HOKU still at $5.65?
May 3rd, 2007 at 10:27 am
another data point…
ATS Automation was trying to IPO their solar division (Photowatt) but pulled it in part because they had failed to lock up polysilicon supply. They have since announced a multi-year agreement to purchase refined metallurgical-grade silicon from Dow Corning. The fact that they are willing to sign a long term agreement to buy Met silicon when they admit this will hurt efficiency and margins indicates they are unable to find polysilicon supply over the next few years.
May 4th, 2007 at 11:24 am
Richard, all that suggests is that Photowatt was not willing to postpone locking up supply. If what you say is all true, than it’s quite apparent what their motivations are (ATS wants to spin off Photowatt into the capital markets while the spinning is good). Thanks for sharing.
Himanshu, stick with that FSLR short. This company is headed for a fall, and appreciate your commentary. I’m going to try to put up analysis on my blog over the weekend.