Silicon and Solar Cells

The Silicon Crunch and the Solar Market

Written by Brian Hicks
Posted October 11, 2007

Once again, the mainstream media has finally caught up to a story Green Chip got to first.

And I'd just to take a moment to thank you for reading our publication. Readers like you are contrarians, whether you believe it or not. Because rather than being force-fed the monotonous daily headlines of mainstream media like millions of others, you go a little further.

You've sought out news and information that's important to you. News and information that's truly important, not only for you, but for the whole world. I wish more people would get it like you do.

Feel free to recommend our newsletter to anyone you think would appreciate it.

Now, with that out of the way, let's discuss the most recent story the big boys just caught up with.

Silicon Supply for Solar Cells

In one of my latest articles, "News and Notes from Solar Power 2007," I devoted an entire section to silicon and its tight supply.

I discussed the ongoing silicon crunch of the past few years, and how that might not be an entirely bad thing for solar investors . I also hinted at the silicon mini-crisis coming to an end as new suppliers and refiners came online and capacity expanded.

And what happened this morning, a Reuters' story broke that discussed these very issues, stating that some makers of solar energy cells (what those in the know would call photovoltaics) would "boost production by more than half next year, as a material shortage dogging the alternative energy sector starts to ease."

At times I feel as though these guys scour the Green Chip archives for their news stories.

Granted, the silicon issue is an important one, and one that should be covered. But it just seems a little odd that the big news players are always the latest to the game.

And of course, I'm not going to be outdone by Reuters. So I've dug up the dirty details on the current state of silicon and where it's headed in the short-term.

So without further ado I give you. . .

Silicon's Short-Term Outlook

Silicon supply has been tight since 2005, mainly due to policy-driven demand growth. This was only exacerbated by the lack of companies that possessed the necessary chemical expertise for necessary for purifying and refining silicon.

Essentially, that led to a monopolization of the silicon market by only a few players, whose gross profit margins have expanded to 60% and beyond. We're talking about companies like Hemlock, Wacker (DE: WCH888), Tokuyama (JP: 4043), MEMC (NYSE: WFR), and REC (NO: REC).

This is what those companies produced in 2006, in metric tons:

  • Hemlock 8,350
  • Wacker 5,775
  • Tokuyama 5,300
  • MEMC 4,100
  • REC 5,250

But if you take a look at the 2008 production predictions by these industry stalwarts, you can already see how the problem is starting to abate.

  • Hemlock 13,000
  • Wacker 9,013
  • Tokuyama 5,500
  • MEMC 6,675
  • REC 6,667

But beyond just these silicon giants, there are also some new players coming online that will help to increase supply while driving down cost.

Here in the U.S., Hoku Scientific (NASDAQ: HOKU) is making good strides to break into the market. Their Idaho plant is currently under construction and they should be producing at least 1,000 metric tons by 2009.

And SolarWorld (Xetra: SWV.DE), which didn't produce any silicon at all in 2006, is anticipated to be producing 4,000 metric tons per year by 2009. Also keep an eye out for Japan's M. Setek, China's Total, Canada's Silicium Becancour, Slovenia's SolarValue, and Norway's Elkem.

Silicon's Bottom Line

Contact prices have been rising since 2003, but they have begun to level out. Spot prices are also starting to come down, having reached the ridiculous levels of $300 per kilogram in late 2006.

So, according to the latest estimates, substantial new supplies will flood the market by the second half of 2008.

Right now, every new capacity that comes online--no matter how small--is beneficial. And the companies that do this could see a significant rise in their stock price.

After the crunch is over, and silicon prices continue to fall, traditional manufacturers will see increased profits as well.

Green Chip Stocks readers will be benefiting from all angles.

You see, any media outlet can comment on an event as it unfolds. But we get you the information you need to profit--like some of the info I've provided here--before anyone else even knows what's going on. I guarantee Reuters has no idea about some of the up and coming silicon producers I've just discussed.

So to take the leap from free info to massive profits, click here .

Until next time,

nick hodge