Analysis of the Current Situation in the Polysilicon Industry

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　　I. Overview of the International Polysilicon Industry At present, crystalline silicon materials (including polysilicon and monocrystalline silicon) are the primary materials used in photovoltaic applications, accounting for over 90% of the market share; they will also remain the main materials for solar cells for a considerable period of time to come. For a long time, the production technology for polysilicon materials has been in the hands of 10 factories belonging to 7 companies in the United States, Japan, Germany, and other countries, resulting in a situation of technical blockade and market monopoly. 　　The demand for polysilicon mainly comes from semiconductors and solar cells. Depending on the purity requirements, they are divided into electronic grade and solar grade. Of this, about 55% is used for electronic-grade polysilicon, while 45% is used for solar-grade polysilicon. With the rapid development of the photovoltaic industry, the demand for polysilicon in solar cells is growing at a faster pace than that for semiconductor-grade polysilicon; it is expected that by 2008, the demand for solar-grade polysilicon will exceed that for electronic-grade polysilicon. 　　In 1994, the total global production of solar cells was only 69 MW, while by 2004 it had reached nearly 1200 MW, representing a 17-fold increase in just 10 years. Experts predict that the solar photovoltaic industry will surpass nuclear power to become one of the most important primary energy sources in the first half of the 21st century. 　　It is reported that the U.S. Department of Energy plans to achieve a total installed capacity of 4,600 MW by 2010, Japan aims to reach 5,000 MW by that date, and the EU intends to reach 6,900 MW. It is estimated that the world’s total installed capacity will be at least 18,000 MW by 2010. Based on the above speculative analysis, the amount of polysilicon used for solar cells will be at least 30,000 tons by 2010; Table 2 presents projections for the global polysilicon industry for solar energy. According to foreign analysis reports, the world’s polysilicon production in 2005 was 28,750 tons, of which 20,250 tons were of semiconductor grade and 8,500 tons were of solar-grade. The demand for semiconductor-grade polysilicon was around 19,000 tons, resulting in a slight surplus ； The demand for solar-grade polysilicon is 15,000 tons, and supply falls short of this demand; since 2006, there has been a shortage in the demand for both solar-grade and semiconductor-grade polysilicon, with the gap in supply for solar-grade polysilicon being even greater. 　　According to a report by Japan’s Rare Metals Impurities on November 24, 2005, there is a tight demand for polycrystalline silicon in the global semiconductor and solar industries, primarily due to the rapid expansion of the solar market, especially in Europe. It is expected that the imbalance in polycrystalline silicon supply will worsen in 2006 and 2007. The difference between semiconductor-grade and solar-grade polycrystalline silicon in terms of price will gradually diminish or even disappear. In 2005, the world’s production of solar cells was around 1 GW; assuming that 12 tons of polycrystalline silicon are required per 1 MW of solar cell capacity, the total amount of polycrystalline silicon needed was 12,000 tons. With an average annual growth rate of 25% for solar cells from 2005 to 2010, the world’s annual demand for polycrystalline silicon used in solar cells will exceed 63,000 tons by 2010. 　　The main producers of polysilicon in the world include Tokuyama, Mitsubishi, and Sumitomo in Japan, Hemlock, Asimi, SGS, and MEMC in the United States, and Wacker in Germany. The annual production capacity of most of these companies exceeds 1,000 tons; among them, Tokuyama, Hemlock, and Wacker have the largest production scales, with an annual capacity of 3,000–5,000 tons each. 　　The main technical characteristics of international polysilicon are as follows: (1) Multiple production processes coexist, and the situation of technological barriers and monopolies in industrialization will remain unchanged. Since the primary and auxiliary raw materials used in various polysilicon production plants vary, the production process technologies also differ ； Consequently, there are also differences in aspects such as the technical and economic indicators of polysilicon products, product quality standards, applications, product testing methods, and process safety; each method has its own technical characteristics and trade secrets. Generally speaking, the main traditional processes for polysilicon production internationally include the modified Siemens process, the silane process, and the fluidized bed process. The production capacity of polysilicon manufactured using the improved Siemens process accounts for about 80% of the world’s total capacity, and the situation of technological monopoly and blockade in this sector is not likely to change in the short term. 　　(2) Research on next-generation low-cost polysilicon process technologies is more active than ever. In addition to traditional processes (compatible with electronic-grade and solar-grade materials) and technological upgrades, several new process technologies have emerged for the production of solar-grade polysilicon, the main one being the cost-effective modified Siemens process ； The metallurgical method is used to extract high-purity silicon from metallic silicon ； Direct production of high-purity SiO2 ； Vaporization-liquid deposition method (VLD: Vaper to liquid deposition) ； Reduction or thermal decomposition process ； Chlorine-free process technology, low-temperature preparation of solar-grade silicon from Al-Si alloys ； molten salt electrolysis, etc. 　　II. Overview of the domestic polysilicon industry Jiangxi Sunwoda LDK Solar High-Tech Co., Ltd. is currently the largest producer of solar polysilicon wafers in Asia. The factory is located in the Economic Development Zone of Xinyu City, Jiangxi Province. It is a high-tech photovoltaic enterprise that focuses on the research, development, production, and sales of solar polysilicon ingots and polysilicon wafers, and it boasts some of the most advanced production technologies and equipment in the world. The company’s registered capital is 110.95 million US dollars, with a total investment of nearly 300 million US dollars. It came online in April 2006; its production capacity reached 100 megawatts in July. In August, it was included in the “RED HERRING Top 100 Asian Companies” list, and its production capacity reached 200 megawatts in October, earning it the title of “LDK Speed Miracle” from international experts. Awarded the title of “Most Promising Enterprise in China’s New Materials Industry in 2006”. Currently, the company is striving to become a “world-class photovoltaic enterprise”. 　　On June 1, 2007, Suntech LDK was successfully listed on the New York Stock Exchange in the United States, marking the largest IPO by a Chinese company in terms of funds raised through a single offering in U.S. history ； Saiwei LDK is the first company from Jiangxi Province to go public in the United States, and it represents the largest IPO in China’s new energy sector to date. 　　The company’s 15,000-ton silicon material production project was recently launched in Xinyu City, Jiangxi Province. With total fixed asset investment of over 12 billion yuan, it is expected to become one of the projects with the highest investment amount and the largest designed production capacity in the global solar industry to date. 　　It is reported that the first phase of this project is scheduled to be completed and put into operation by the end of 2008, achieving an annual production capacity of 6,000 tons of solar-grade silicon material ； Once all the projects are completed and put into operation by 2009, they will generate a production capacity of 15,000 tons, thereby making the company one of the world’s major producers of solar polysilicon raw materials. Forecast for the Development of the Polysilicon Industry High-purity polysilicon is a fundamental raw material for the electronics industry and the solar photovoltaic industry. Over the next 50 years, no other material is likely to be able to replace silicon as the main raw material in these industries. 　　With the rapid development of information technology and the solar industry, global demand for polysilicon is growing sharply, leading to a supply shortage in the market. The global production of polysilicon in 2005 was 28,750 tons, of which 20,250 tons were of semiconductor grade and 8,500 tons were of solar grade. The demand at the semiconductor level is around 19,000 tons, indicating a slight surplus ； The demand for solar-grade material is 15,600 tons, leading to a supply shortage. In recent years, global solar cell production has increased rapidly, directly driving a sharp rise in the demand for polysilicon. Global polysilicon has shifted from an oversupply to a shortage. As a result, the price of polysilicon, a key raw material for solar cells, rose rapidly. 　　China’s polysilicon industry began in the 1950s, achieved industrialization in the mid-1960s, and by the 1970s, there were more than 20 manufacturers in the sector. However, due to backward production technologies, severe environmental pollution, high consumption, and high costs, the vast majority of these enterprises suffered losses and subsequently stopped operating or shifted to other types of production. To date, in China, the enterprises with polysilicon production capabilities include Luoyang Zhongsi High-Tech Co., Ltd., Emei Semiconductor Materials Factory (Institute), and Sichuan Xinguang Silicon Industry Technology Co., Ltd. 　　China’s demand for polysilicon in the fields of integrated circuits and solar cells is growing rapidly. In 2005, the integrated circuit industry required approximately 1,000 tons of electronic-grade polysilicon, while solar cells needed around 1,400 tons of polysilicon ； By 2010, China’s annual demand for electronic-grade polysilicon is expected to reach around 2,000 tons, while the annual demand for photovoltaic-grade polysilicon is expected to reach around 4,200 tons. China faces a severe shortage in its domestic supply of polysilicon; over 95% of the polysilicon needed is imported, meaning that supply is dependent on others for a long time. Coupled with soaring prices, this situation has threatened the development of many enterprises in the polysilicon industry downstream, becoming a bottleneck that hinders the growth of China’s information technology and photovoltaic industries. 　　As the demand for polysilicon continues to rise, driven by an increasing market gap and rising prices, a surge in interest in polysilicon projects has emerged in China. The investment boom in polysilicon projects can be seen as an inevitable consequence of the rapid growth of the solar cell market. However, China’s silicon materials industry must proceed with caution and avoid a rush into this field ； The key is to master the core technologies; otherwise, it will be difficult to escape being controlled by others. 　　As a high-tech industry that uses silicon ore to produce polysilicon, it consumes a large amount of energy and has high electricity demands. At present, electricity costs have become one of the bottlenecks that most silicon mining companies in China urgently need to overcome. Therefore, as China vigorously develops its polysilicon industry, it is urgent to introduce favorable electricity price policies in areas where the conditions are suitable in order to reduce costs. 　　Due to the rapid increase in demand and limited growth in supply, 2007 is expected to be the year with the most severe shortage of polysilicon supplies. It is projected that by 2009, the global annual demand for polysilicon will reach 65,000 tons. Over the next 3 to 5 years, that is, during China’s 11th Five-Year Plan period, it will be a golden age for the rapid development of China’s polysilicon industry. Polysilicon production capacity is expanding at an unprecedented rate across the country. The total planned production capacity for polysilicon projects in China is currently 177,000 tons, which is three times the global production capacity in 2007 ； Meanwhile, the global photovoltaic industry is also expected to face a situation of supply exceeding demand in 2009. In 2008, there were 34 polysilicon production projects under construction in 16 provinces and municipalities across the country, with an annual production capacity of 33,000 tons. The total planned production capacity for these projects was around 177,000 tons per year, which is more than three times the global production capacity in 2007, as well as over 100 times China’s total polysilicon production capacity from that same year. By 2010, China’s demand for polysilicon was expected to be only a little over 30,000 tons. 　　““This foreseeable capacity for polysilicon production already exceeds China’s actual development needs,” said Chen Yanhai, Director of the Raw Materials Industry Department of the Ministry of Industry and Information Technology, at the Promotion Meeting for the Development of Sichuan’s Silicon Industry held on September 26 as part of the 9th China Western International Expo in Chengdu. He noted that the international \"financial tsunami\" has led to a decline in global demand for polysilicon, reduced willingness to invest, and obstacles to exports – all of which are negative factors; therefore, all parties need to be fully aware of this situation. 　　As reported by reporters from Caijing, polysilicon, as a key raw material for the rapidly growing photovoltaic industry (primarily solar cells), has been in short supply in recent years. In 2007, global polysilicon production was 45,000 tons, while demand during the same period reached 52,000 tons, resulting in a shortfall of 7,000 tons. 　　Meanwhile, the price of polysilicon also saw an astonishingly sharp rise: in 2002, the price of polysilicon was around $10 per kilogram to $20 per kilogram ； It rose to 66 dollars per kilogram in 2005 ； Exceeded $300 per kilogram in the fourth quarter of 2006 ； In the first half of 2007, it remained roughly between $300 per kilogram and $330 per kilogram ； At the end of 2007, a price of $400 per kilogram was reached ； In 2008, the market spot price reached as high as $450 per kilogram, which is $450,000 per ton. 　　As a result, polysilicon has become one of the most popular areas for investment, and the A-share market has seen several stocks associated with polysilicon-related projects, such as Tianwei Baobian (Shanghai Stock Exchange code: 600550), ChuanTou Energy (Shanghai Stock Exchange code: 600674), Jiangsu Sunshine (Shanghai Stock Exchange code: 600220), Tongwei Co., Ltd. (Shanghai Stock Exchange code: 600438), TBEA (Shanghai Stock Exchange code: 600089), Aerospace Electromechanical (Shanghai Stock Exchange code: 600151), Leshan Power (Shanghai Stock Exchange code: 600644), Minjiang Hydropower (Shanghai Stock Exchange code: 600131), and Nanbo A (Shenzhen Stock Exchange code: 000012). 　　While various parties are investing heavily in polysilicon projects, there have also been continuous voices calling for caution in an effort to cool down the situation. Shi Zhengrong, a leading figure in China’s photovoltaic industry and chairman of Suntech Power Co., Ltd. – the world’s second-largest photovoltaic company (listed on the New York Stock Exchange under the code STP) – publicly stated in December 2007 that there was a trend of herd behavior in China’s photovoltaic industry, with particularly excessive investment in polysilicon. 　　At the same time as Shi Zhengrong made this statement, the \"2007 Annual Report on China’s New Energy Industry\" released in December 2007 showed that the planned production capacity of polysilicon in China, both already in operation and under construction, was only 63,500 tons in 2007; yet in less than a year, this capacity nearly doubled. On October 17, 2008, Shi Zhengrong stated at the \"2008 China (Wuxi) Photovoltaic Technology Innovation Forum\" that by 2009, the global photovoltaic market would experience a situation of supply exceeding demand. 　　With the arrival of a \"winter\" for the photovoltaic industry, which is the main application area for polysilicon, will the polysilicon industry face further difficulties? 　　**Chen Yanhai, Director of the Raw Materials Industry Department at the Ministry of Industry and Information Technology, while acknowledging that the polysilicon industry has developed too rapidly, offered another perspective: \"As a new type of industry, polysilicon can play a significant role in driving the future economic and social development of the country. It can be utilized as a basic raw material in various fields, and its rapid development can also be leveraged to gain a foothold in the international market.\" Sichuan Province will become the largest polysilicon production hub in the country. Recently, Tongwei Co., Ltd. announced that it would invest 191 million yuan to acquire 50% of the shares in Yongxiang Chemical, which is controlled by Tongwei Group, thereby bringing Yongxiang Chemical’s polysilicon production facility in Leshan, Sichuan, under the control of this listed company. This is the fourth Sichuan-based listed company to announce its entry into the polysilicon business. Currently, the international market has strong demand for polysilicon, with prices exceeding 2 million yuan per ton and supply falling short of demand. Tongwei Co., Ltd. disclosed that Yongxiang Company invested in establishing a wholly-owned subsidiary in 2007 – Sichuan Yongxiang Polysilicon Co., Ltd. – to build a polysilicon production facility with an annual capacity of 1,000 tons, with production scheduled to begin in June this year. In addition, Tongwei is also preparing for the second phase of a polysilicon project in Leshan, with an investment of nearly 6.5 billion yuan; production capacity is set to be established in the first half of 2009. If all of the aforementioned 10,000-ton project is put into operation, it will become the largest polysilicon project in the country. Since 2007, more than 10 companies in Sichuan have announced plans to establish polysilicon production facilities, with a total investment of over 10 billion yuan. Sichuan has become the largest polysilicon production hub in China, with production mainly concentrated in Leshan.