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Overview of the domestic polysilicon industry: The growth of integrated circuits in China, as well as the development of silicon wafer production and solar cell industries, have **driven the growth of polysilicon materials. Based on the fact that 11–12 tons of polysilicon are required to produce 1 MW of polysilicon solar cells, in 2004 China’s production of polysilicon and monocrystalline solar cells was 48.45 MW, which meant a demand for around 678 tons of polysilicon. However, the actual production capacity was around 70 MW, resulting in a shortage of more than 250 tons of polysilicon. By the end of 2005, China’s solar cell production capacity had reached 300 MW, with an actual output of around 110 MW; approximately 1,400 tons of polysilicon were required for this. It is predicted that by 2010, solar cell production will reach 300 MW, demanding roughly 4,200 tons of polysilicon as a conservative estimate. Thus, the production of solar cells will **drive an increase in the demand for polysilicon, as shown in Table 3. In 2005, the operating rate of enterprises producing monocrystalline silicon for solar cells in China was between 20% and 30%, while that of enterprises producing monocrystalline silicon for semiconductors was between 80% and 90%; none of these enterprises were able to operate at full capacity, mainly due to an insufficient supply of polycrystalline silicon. It is expected that even after expansion, the production capacity of polysilicon manufacturers will still not be sufficient to meet the rapid growth demand. In 2005, the global supply of polycrystalline silicon for solar cells was approximately 10,448 tons, while the demand for silicon materials used in solar applications was around 22,881 tons. If the demand for polycrystalline silicon used in solar cells is considered to account for 65% of the total demand, then the demand for such polycrystalline silicon would be about 14,873 tons. This results in a global market gap of 4,424 tons for polycrystalline silicon used in solar cells. In 2005, there was a shortage of 6,000 tons of polysilicon for semiconductor use, and an additional 4,424 tons was missing for solar energy applications; in total, this amounted to 10,424 tons. The severe shortage led to an increase in the prices of polysilicon worldwide. The ongoing growth in the polysilicon market has prompted various manufacturers to announce plans for capacity expansion. According to statistics from the International Photovoltaic Organization, global polysilicon production capacity will reach 49,550 tons by 2008, and 58,800 tons by 2010. It is estimated that by 2010, global demand for polysilicon will reach 85,000 tons, resulting in a shortage of 26,200 tons. In the long term, given the future shortage of petrochemical energy and the strong support provided by various countries for the solar energy industry, demand will continue to grow. According to the 2010 development plans for the photovoltaic industry in various countries prepared by the European Photovoltaic Industry Association, global photovoltaic production is expected to reach 15 GW by that time (1 GW = 1000 MW). It is assumed that 60% of this production will use polysilicon as a raw material; if technological progress reduces the amount of polysilicon required per MW to 10 tons, it can be conservatively estimated that the world will need at least 50,000 tons of solar polysilicon. China’s polysilicon industry began to develop in the mid-1950s and 1960s, with over 20 production facilities at that time. Due to the difficulties associated with production technology, small scale of operations, outdated process techniques, severe environmental pollution, high energy consumption, and high costs, the vast majority of these enterprises suffered losses and thus stopped operating or shifted to other types of production. By 1996, only four companies remained: Emei Semiconductor Materials Factory, Luoyang Monocrystalline Silicon Factory, Tianyuan Chemical Factory, and Lingguang Industrial Company. The total output of these companies that year was 102.2 tons, and their production capacity as well as their technology were significantly inferior to those of foreign companies. After 1995, Lingguang Industrial Company and Chongqing Tianyuan Chemical Plant ceased production one after another. Currently, the main domestic polysilicon producers include Luoyang Zhongsi High-Tech Company, Sichuan Emei Semiconductor Factory, and Sichuan Xinguang Silicon Industry Company. By the end of 2005, Luoyang Zhongsi High-Tech Company’s 300-ton production line was in operation, while the construction of a second phase involving an expansion to a 1,000-ton polysilicon production line also began at that time. Henan Province plans to expand this facility to a capacity of 3,000 tons, thereby creating the largest silicon industry base in the country. Sichuan Emei Semiconductor Materials Factory is one of the earliest enterprises in China to possess polycrystalline silicon production technology. The 220-ton polycrystalline silicon production line, expanded with investment from solar cell manufacturers in 2005, is set to go into operation in the first half of 2006. The 1000-ton polycrystalline silicon production line planned by Sichuan Xinguang Silicon Industry Company is under accelerated construction and is expected to be operational by the end of 2006. In addition, there are plans to build production lines in Yunnan, Yangzhou, Shanghai, Heihe, Jinzhou, Qinghai, Inner Mongolia, Yichang, Guangxi, Chongqing, Liaoning, Handan, Baoding, Zhejiang, and other regions as well. III. Main issues in the industry’s development Compared with international advanced levels, the gaps in industrialization among domestic polysilicon producers are mainly evident in the following aspects: 1. Low production capacity, with a prominent supply-demand imbalance. In 2005, the operating rate of single-crystalline silicon manufacturers in China for solar energy applications was between 20% and 30%, while that of manufacturers using it for semiconductor applications was between 80% and 90%; full-capacity production was not possible. Polycrystalline silicon technology and the related market remained in the hands of a few manufacturers in the United States, Japan, and Germany, which severely hindered the development of China’s industry. 2. The production scale is small; the currently recognized minimum economic scale is 1,000 tons per year, with the optimal economic scale being 2,500 tons per year. However, China’s polysilicon manufacturers are still far from reaching these scales at present. 3. The processing equipment is outdated, resulting in high consumption of materials and electricity for similar products, as well as numerous issues related to waste generation. Compared to international standards, domestic polysilicon production involves more than double the energy and material consumption, making the product costs uncompetitive. 4. The reliability, advancement, maturity of the thousand-ton-class process and equipment technologies, as well as the compatibility among various subsystems, all require verification through actual production operations, and further improvement is needed. 5. Domestic polysilicon manufacturers lack strong technological innovation capabilities, with insufficient investment in basic research; in particular, their ability to develop and manufacture custom equipment is poor. 6. Local governments and enterprises investing in polysilicon projects pose the risk of low-level redundant construction. IV. Strategies and Recommendations for the Industry’s Development 1. The market conditions necessary for the development and expansion of China’s polysilicon industry are now basically in place, and the time is ripe. **Relevant departments should increase their support for research and development in polysilicon technology, as well as for technological innovation, process improvement, and project development, so as to take advantage of this favorable opportunity to foster the growth of China’s polysilicon industry. 2. Support the implementation of improved common technologies based on the Siemens process, accelerate the development of key technologies for the industrial production of polysilicon in quantities of a thousand tons or more, and establish an industrial production line for polysilicon that encompasses material production processes, equipment, automatic control systems, as well as recycling mechanisms; the performance of these materials shall be close to that of similar international products ； Establish a polycrystalline silicon production system that is energy-efficient, low-consumption, environmentally friendly, circular, and economical, in order to enhance the competitiveness of our polycrystalline silicon on the international stage. 3. Relying on universities and research institutes, strengthen fundamental and forward-looking research on next-generation low-cost process technologies, establish a knowledge and technological innovation system for the research and development of low-cost solar energy and polysilicon, and acquire production processes and technologies with independent intellectual property rights. 4. **The competent authorities should strengthen macro-control and industry regulation to prevent repeated investment in low-quality projects, ensuring the orderly and sustainable development of the industry.