China's 2005 Renewable Energy Law called for the country to increase its renewable energy consumption to 10 percent of the total by 2020. Without sufficient supply of domestic polysilicon, this goal, as well as solar cell export goals, will be difficult to meet.

China's Solar Energy Industry: Polysilicon 2007-2011

Susan Myers and LY Yuan | THT Research

China
China's 2005 Renewable Energy Law called for the country to increase its renewable energy consumption to 10 percent of the total by 2020. Without sufficient supply of domestic polysilicon, this goal, as well as solar cell export goals, will be difficult to meet.
Chinas Solar Energy Industry: Polysilicon 2007-2011
By Susan Myers and LY Yuan, THT Research

Editors Note:
It has recently been brought to our attention that some of the companies mentioned in this article are accused of dumping toxic byproduct waste from their manufacturing facilities in China. While I cannot substantiate the claims I would like to bring this to the attention of readers here so that they can make their own judgements about this potential problem. Here is a link to a Washington Post Story on the subject.

Humble beginnings: semiconductor waste

China's solar energy industry began in the mid-1980s when Semiconductor companies in Wuhan, Ningbo, Kunming, Xining, Chengdu and other Chinese cities began manufacturing solar cells using a P-N knot diode process with waste raw material from wafer production.

Equipment acquisition: 1985-1990

During the early stages of industry development, China companies began to acquire solar cell manufacturing equipment.

  • Ningbo and Kaifeng were the first two professional solar cell manufacturers in China, introducing key equipment into their solar cell manufacturing with government support.
  • Next, Qinghuangdao Huamei purchased new solar cell manufacturing equipment and began production.
  • Yunnan Semiconductor bought second-hand solar cell manufacturing equipment for its site.
  • Last to enter the industry were Haerbin Keluona and Shenzhen Yukang, both of which set up non-silicon-crystal solar cell manufacturing production lines.

By 1990, Chinese companies had established a primary solar cell industry with a total of 4.5 MWp manufacturing capacity.

Technology advances: 1990-2000

Beginning in 1990, the industry entered a decade of development.

Following the period of equipment import and technology adoption, the industry leaders began to adapt and innovate solar technology. Production of solar cells increased as technology and manufacturing processes developed and improved.

By 2000, the industry could almost fulfill China's domestic market demand, although there was very little export.

2000: Rapid growth and development of solar energy supply chain

Beginning in 2000, China's solar energy industry entered a period of rapid growth:

  • Baoding Yingli Solar became the first company to manufacture using single crystal instead of crystal silicon solar cell manufacturing technology. It built a 3MWp polysilicon solar cell manufacturing production line in 2001.
  • Wuxi Sun Tech built a 10MWp solar cell manufacturing production line.

Between 2003 and 2006 market demand in Europe (especially Germany) began to grow rapidly. Wuxi Sun Tech and Tianwei Yingli Solar expanded their capacity to meet demand, and more companies began to build solar cell manufacturing production lines.

Solar cell

Crystal-silicon solar cell

Non crystal-silicon solar cell

1673 MWp

1629 MWp

44 MWp

Table 1: China solar cell capacity, year-end 2006
Source: THT Research

With solar cell manufacturing as its starting point, China began to develop a comprehensive solar industry supply chain, which includes polysilicon material, ingot or wafer manufacture, solar cell manufacture, cell module and cell system, etc. In addition, the solar cell industry supply chain brought with it the development of related industries such as materials, equipment, and components for solar cells.

The rest of this whitepaper will focus on China's efforts to advance its solar energy industry by developing and promoting an independent supply of polysilicon, the raw material for the industry.

Global polysilicon industry overview

In 2006, global polysilicon material production stood at about 36,000 tons, with the top seven manufacturers contributing over 90% of production. Of that, over 18,000 tons of polysilicon were supplied to the solar industry, with the rest supplying the semiconductor industry.

Because of rapid development of the world solar industry, the shortage of polysilicon material is becoming increasingly tight.

  • Of a total global solar cell production of 1,818 megawatts in 2005, including about 1,700 megawatts of crystal-silicon cell.
  • 1 megawatt of solar cell production requires 11 tons of polysilicon.
  • Therefore, global solar cell polysilicon demand is about 18,700 tons. Global supply of solar grade polysilicon stands at around 11,000 tons and silicon waste from the semiconductor industry is around 4,000 tons, resulting in a shortage of approximately 3,700 tons of polysilicon per year.

As a result of the tight global polysilicon supply, polysilicon prices are rapidly increasing. From 2001 to 2003, the semiconductor polysilicon purchase price was about US$40 per kilogram and the solar grade polysilicon price was about US$25 per kilogram in China.

In 2005, the average contract price of polysilicon was over US$50 per kilogram and the average retail price was over US$100 per kilogram. In 2006, the contract price was about US$100 per kilogram and the retail price was over US$300 per kilogram in China.

Currently, polysilicon manufacturing is dominated by seven global leaders. The output of these companies has long lagged behind solar cell demand for numerous reasons, including technology and market monopolization and time required for production expansion. The polysilicon shortage has become the bottle-neck of the solar industry development.

We do not expect the shortage of polysilicon to be resolved before 2011. The shortage not only limits the development of solar cell production, but increases solar cell manufacturing costs, thus having an overall seriously negative effect on the development of the global solar industry.

China polysilicon industry overview

At the end of 2006, China's polysilicon production capacity was about 500 tons.

Company

Capacity (tons)

Luoyang Zhonggui

300

Sichuan Emei Semiconductor

200

Table 2. China polysilicon capacity (2006)
Source: THT Research

However, production only reached around 230 tons, while demand reached 4,380 tons. As a result, over 95% of China's polysilicon demand was imported in 2006.

 

2004

2005

2006

Semiconductor demand

910

1060

1260

Solar industry demand

585

1596

4000

Total demand

1495

2656

5260

Polysilicon production

57.5

80

230

Polysilicon shortage

1437.5

2576

5030

Table 3. China polysilicon production and demand, 2004-2006 (tons)
Source: THT Research
Notes: Solar cell polysilicon demand is calculated as:
2004: 12tons/MW;  2005: 11tons/MW; 2006: 10tons/MW.
 2006 crystal-silicon solar cell productions is about 400MW

Development potential of China polysilicon industry

If China is to develop the capacity to fill its polysilicon demand, it will need to overcome several obstacles:

  • Poor manufacturing technology. The most efficient polysilicon manufacturing technology is based on Siemens' methods, but China vendors use inferior technology processes, leading to energy consumption of two to three times international standards.
  • Small scale manufacturing. The ideal economy of scale for polysilicon manufacturing is 2,500 tons per year and the minimimum economy of scale is 1,000 tons per year. The two China polysilicon production lines each produce less than 300 tons per year, which increases production costs and makes it difficult for the companies to develop any competitive advantage.

The major challenge of China's solar energy and information technology industries is developing polysilicon manufacturing technology. The major international polysilicon manufacturers who monopolize the advanced technology required for polysilicon production have to date not been willing to transfer production technology to China. As a result, China polysilicon manufacturers have been forced to invest in developing their own production technologies.

Nevertheless, several Chinese companies have begun investing in polysilicon production technology and capacity expansion.

As of 1Q07, Luoyang Zhonggui and Emei Semiconductor have begun their planned polysilicion manufacturing capacity expansions.

Sichuan Xinguang Silicon Industry began manufacturing solar and semiconductor polysilicon on February 26, 2007 and now has the largest polysilicon production line in China. As a result, China is on its way to becoming the fourth country to achieve polysilicon manufacturing capacity of over 1,000 tons per year, following Germany, Japan, and the United States.

Other polysilicon production projects are also currently under way in China, including construction projects at Yunnan Qujin, Hubei Yichang, and other companies.

If all of the currently planned projects come to fruition, China's polysilicon manufacturing capacity will reach 12,660 tons in 2011 and China's polysilicon shortage will be resolved.

China
 Production

Sichuang
 Xinguang
 Silicon
 Indutsry

Emei
 Semiconductor
 plant

Luoyang
 Zhonggui

Total

2004

0

57.5

0

57.5

2005

0

77

3

80

2006

0

130

100

230

2007 (e)

600

200

200

1000

2008 (e)

1100

200

300

1600

2009 (e)

1260

300

300

1860

2010 (e)

1260

600

400

2260

2011 (e)

1260

700

900

2860

Table 4. China polysilicon vendors' production (tons): 2004-2011
Source: THT Research, March 2007

 

Ningxia
solar
(Ningxia
Shuizuishan)

Asia
Silicon
(Qinghai
Xining)

Shenzhen
NanBo
(Hubei
Yichang)

Jiangsu
Shunda
(Jiangsu
Yangzhou)

Jiangsu
Zhongneng
(Jiangsu
Xuzhou)

Chaolei
Industry
(Sichuang
Guangyuan)

Aixin
Silicon
Tech
(Yunnan
Qujin)

Tongwei
and
Juxing
(Sichuang
Leshan)

Total

2004

0

0

0

0

0

0

0

0

0

2005

0

0

0

0

0

0

0

0

0

2006

0

0

0

0

0

0

0

0

0

2007

0

0

0

0

0

0

0

0

0

2008

100

200

300

200

300

300

0

0

1400

2009

700

750

800

500

700

600

500

200

4750

2010

1000

1000

1300

1000

1000

1000

1000

500

7800

2011

1000

1000

1500

1500

1000

1500

1800

500

9800

Table 5. Polysilicon construction plans and planned capacity (2004-2011)
Source: THT Rresearch, March 2007

Conclusions

We expect China's government to continue to support the development and expansion of polysilicon local technology development and production. China's 2005 Renewable Energy Law called for the country to increase its renewable energy consumption to 10 percent of the total by 2020. Without sufficient supply of domestic polysilicon, this goal, as well as solar cell export goals, will be difficult to meet. Going forward it appears clear that polysilicon will remain a good investment in China in the near future.

About THT Research

THT Research is the world's leading authority on contract manufacturing (OEM/ODM) in the global information technology (IT) industry. Established in 2001, THT provides comprehensive research and analysis through its on-line subscription database and through custom research and consulting projects. THT is quoted regularly in the business and information technology press, including BusinessWeek Magazine, The Korean Times, CHIP, Network World and Electronic Business

THT's coverage offers data and expert insight on the global IT contract manufacturing phenomenon as no other source can. Our extensive contract manufacturing database covers over 16,000 companies, their customers, affiliates, subsidiaries and parent companies.

In addition, THT's research teams in Asia, North America, and Israel produce in-depth reports and conduct custom research projects for clients, with expertise in emerging markets, manufacturing, and IP issues. Our market analysis comes from inside the industry. Our analysts have direct and personal experience working in the IT sector. Our approach is no-nonsense; our material is practical and bottom line oriented. As a result, managers throughout the IT world find THT's database and reports to be essential tools for their marketing, manufacturing and purchasing decisions. Over fifty percent of THT's revenue is drawn from custom research and consulting projects.

A partial client list includes Dell, Intel, NTT DoCoMo, Agere, A.G. Edwards & Sons, Applied Technology, Conexant, Dolby, Cypress, Thomson, National Semiconductor, Xerox, Xilinx, Philips, Flextronics, Andigilog, NDS, Sky Works, Siemens, Prismark, Israel Export Institute, TAITRA, Jenner & Block, Celestica, Sanyo, Sony, Canon, Panasonic, and Samsung.
 

THTResearch.com Copyright 1995-2007 SNG Networks, Inc. All rights reserved. Reproduction of this publication in any form without prior written permission is forbidden. The information and statistical data contained herein have been obtained from various sources we believe to be reliable but in no way are warranted by us as to accuracy or completeness. All information and advice is given in good faith but without any warranty. SNG Networks, Inc., THT Business Research and/or any of its affiliates and/or any persons related thereto shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice. This report is subject to the terms and conditions of use set forth on the www.thtresearch.com website.


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