High demand driving trade

Current high demand means that major manufacturers of crystalline silicon are experiencing a strong upturn. According to Stefan de Haan, principal analyst in the field of solar research at market research firm IHS, the average utilization of the top ten producers has significantly improved: production utilization rose from 59% in the first quarter of 2013 to 70% currently (in February 2014).
“The leading manufacturers are almost at full capacity at up to 90%,” says de Haan. According to IHS, the global production utilization for crystalline silicon currently stands at 371,000 metric tons (mt). That is even taking into account the needs of the semiconductor industry, enough to equip around 60 GW of crystalline solar modules with wafers and cells. The production utilization of tier-1 manufacturers, producers of high quality solar silicon, however, currently lies at only about 45 GW worldwide. “If the markets in China and Japan continue to grow so strongly, top class goods could soon be in short supply,” adds de Haan.
The spot market prices for polysilicon are beginning to rise again after a long downward slide, he continues, adding that in recent months they have risen from around $17/kg to about $20/kg. Shyam Mehta, senior analyst for solar markets at GTM Research, expects that average silicon prices will rise to around $24/kg by the end of this year. Accordingly, the financial situation of the large silicon manufacturers will improve further this year, says Mehta. “The current situation for manufacturers is the best since 2010,” emphasizes the GTM Research analyst. He also expects further capacity expansion, but this wouldhardly be able to keep up with the rapid market growth, at least this year.

GCL – ahead in silicon

Newly placed at number one in the 2013 IHS ranking for crystalline silicon producers is the Chinese GCL-Poly Energy. “GCL has expanded strongly and made up ground on both quality and cost structure,” says de Haan. In terms of quality, he continues, GCL is now lying almost on par with its two main competitors, Wacker and Hemlock. The company has greatly benefited both from the strong growth of the Chinese domestic market as well as trade sanctions against Beijing’s U.S. polysilicon imports. Production utilization is currently at over 90%, so that the company is virtually at full throttle. “We assume that GCL is currently making profits with silicon production,” says de Haan. Mehta points out that the company began some time ago to sell polysilicon on the spot market, which is currently attractive due to high demand, in addition to supplying its own wafer manufacturing. “They will expand production this year,” says de Haan, probably from the current 50,000 mt up to 58,000 – 60,000 mt.

Wacker – slightly behind

Number two in the ranking of silicon manufacturers is the German Wacker Chemie AG. With an IHS estimated production of 47,800 mt, they were just behind GCL in 2013. “Wacker has fallen slightly behind, but their utilization is excellent and the profitability of their crystalline silicon business is high,” says de Haan. He believes that they could charge prices of more than $20/kg while at the same time reducing their costs. The prospects for 2014 are good; as a German manufacturer they have not been affected by Chinese sanctions against U.S. polysilicon imports. GTM analyst Mehta views the company’s situation rather more skeptically: Last year Wacker’s profitability deteriorated and their production costs are higher compared to a number of competitors, currently around $20/kg as they manufacture mainly with the Siemens process which, although of good quality, is more expensive than the new fluidized bed reactor (FBR) process. In addition, their machines at the Burghausen plant are relatively old. Also, Wacker sells most silicon on longer-term contracts and not the currently attractive spot market. “The challenge for Wacker this year is how they can keep to the necessary margins of 25%,” stresses Mehta. It is important as to whether they can diversify from the dominant Siemens process and make themselves more independent of the contract market.

Hemlock – also well utilized

“Hemlock had a pretty good year in 2013 and that will continue in 2014,” says de Haan of the number three company in the silicon manufacturer rankings. Although the U.S. manufacturer’s production capacity was lower than that of Wacker, they were working at about 80 to 90%. Also in terms of quality, the company was “well placed.” It will be interesting to see whether Hemlock expands this year – particularly at its Tennessee production centre. Whether the Chinese trade sanctions against polysilicon imports continue is also important for the performance of the U.S. company, emphasize both de Haan and Mehta, as Hemlock is strongly affected by Chinese import tariffs of up to 57% because the company manufactures polysilicon exclusively in the U.S.

OCI – benefiting from Chinese import tariffs

The South Korean manufacturer OCI stayed in fourth place in the ranking of silicon producers. However, last year the utilization of its production capacity (43,000 mt), at approximately 63% (33,228 mt according to IHS estimates), was significantly lower than that of its direct competitors. IHS Analyst de Haan also finds fault with the cost structure of the company: There is a lot of catching up to do on its tier-1 competitors. GTM Research analyst Mehta sees things more positively. With production costs of $14/kg to $15/kg with the Siemens process, the company is firmly in the running. Among other things, OCI benefited from the fact that it produces on rather new machines and enjoys favorable conditions at its site in Korea (e.g. low energy prices.) Another plus point for OCI, as Mehta sees it, is the “balanced relationship” of polysilicon sales on the spot market and long-term contracts. The company also “benefitted strongly” from the Chinese import tariffs against U.S. manufacturers, according to Mehta. He also draws attention to the fact that OCI has announced an increase in its production capacity of 10,000 mt for the third quarter of next year.
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REC – strong with FBR

Ranking fifth, REC Silicon has defended its mid-table position. “REC was able to reduce costs significantly,” says de Haan. The company currently has its nose in front with production costs of only $12.50/kg, adds Mehta. REC currently produces silicon almost exclusively with the FBR process. But the company is now working on developing the quality of the FBR method and combining it with the Siemens process. This is probably sufficient for polycrystalline p-type technology but probably not for monocrystalline n-type technology (high efficiency cells), says Mehta. Last year the company, which produces silicon exclusively in the U.S., was able to combat the tough headwind created by the Chinese import tariffs through its strong business in Japan (25% of sales revenue). In addition, REC continues to export solar silicon to China.

SunEdison – Samsung as partner

SunEdison was able to hold on to sixth place. However, the utilization of their polysilicon production in the past year was, according to IHS, only 60%. According to de Haan, the company manufactures almost exclusively for its own projects. GTM analyst Mehta, however, expects that SunEdison will in future also offer production licenses. As part of a new joint venture with Samsung Fine Chemicals, the company is in the process of establishing production in South Korea with the latest FBR technology with an improved purity. The cost of production should be around $15/kg, according to Mehta, and the production capacity will be designed for 10,000 mt. In addition, the company recently announced, as part of a joint venture with local partners in Saudi Arabia, that they plan to establish a vertically integrated crystalline module production with a production capacity of 3 GW by 2017.

ReneSola – out of the rankings

As in the previous year the Japanese manufacturer Tokuyama Corporation occupies seventh place in the ranking. However, its utilization was low in 2013. With a production capacity of 17,200 mt, Tokuyama manufactured, ??according to IHS, just 5,900 mt. Substantially higher was the utilization of AU Optronics, which was taken over last year by M. Setek. The Taiwanese manufacturer with an annual capacity of 7,200 mt produced, according to preliminary estimates from IHS, 4,800 mt of polysilicon. New in at ninth place is the Chinese manufacturer TBEA Xinijiang Silicon. However, the company’s production utilization in crystalline silicon in the past year was, according to IHS estimates, only about 40%. The Chinese company Daqo New Energy follows in tenth place. ReneSola, however, no longer appears in the ranking. The company currently has no plans to expand but wants to reduce its costs during the year to up to $15/kg, according to de Haan.

Wafers are also running low

There has also been a strong upward trend for large wafer manufacturers. Their average production utilization has improved, according to IHS, within the last year from 57% (first quarter 2013) to its current 77% – even higher than the utilization of polysilicon manufacturers. According to de Haan, the global production capacity for wafers is currently at 52 GW, which is only slightly above the projected market growth for this year. Despite the anticipated increase in capacity by manufacturers, wafers could become scarce in 2014, he says. For several months the price graph has curved upwards. Shyam Mehta predicts that the spot market prices will increase from the current $0.23/W up to $0.27/W by year’s end. “I also see few opportunities to significantly reduce production costs in 2014,” says Mehta. On the other hand, the manufacturers are dependent upon market demand and would, for this reason, only raise prices according to “sound judgment.” But it is to be expected that the price increase in wafers will have a negative effect on the return of those cell and module manufacturers that need to purchase more wafers. Taiwanese manufacturers are expected to be particularly affected. It is also to be expected that module prices will rise. “It is likely that module prices this year will rise from $0.70/W to $0.73/W worldwide, and in some regions, such as the U.S., even up to $0.76/W,” says Mehta. IHS analyst de Haan, however, does not expect wafer and silicon price increases to affect module prices, adding that “there will be no significant module price increases in 2014.”

GCL – nose in front on wafers

GCL is again number one in this year’s ranking of wafer manufacturers. The distance to the competition – in terms of production numbers – is considerable. Last year the Chinese company produced, according to preliminary projections from IHS, wafers with a nominal capacity of 8,238 GW, four times as much as Yingli. The production utilization was more than 90%. “I expect GCL to increase its market share this year,” says de Haan. In terms of profitability, however, GCL “still has difficulties” when it comes to wafer production. Market share expansion currently has precedence. GTM analyst Mehta assumes that GCL will continue to expand its current production capacity amounting to 9 GW of wafers due to high demand this year. Capacity expansions in wafer fabrication are “not so expensive.”

Yingli – well in the race

Yingli Green Energy has improved by one position in the 2013 ranking and is placed second. “They use their wafers exclusively for their own cell and module production, are very well utilized, but also buy in additional wafers,” says de Haan. Yingli is now back in the black and has once more achieved “double-digit margins,” says the IHS analyst. The integrated vertical production concept that the Chinese company has built up over the years is still functioning well. Shyam Mehta, however, expects that Yingli will buy in more wafers than before in order to satisfy the increased demand for modules. Some time ago, the company announced a collaboration with GCL to this end.

ReneSola – important wafer concern

In third place, and therefore slightly down on the previous year, is ReneSola. The Chinese company’s wafer production, however, was also almost at full capacity in 2013, reaching in excess of 85%, according to data from IHS. “After dropping plans to become a leading silicon manufacturer, I predict that ReneSola will continue to expand their wafer production in the future and increasingly sell wafers to others,” says Stefan de Haan. ReneSola is technologically well positioned and in a strong financial position, says Mehta. It is to be expected that the company will increase capacity this year to be able to better operate both its own cell and module production and sell more wafers. However, it is unclear how the company will deal with Chinese government restrictions for production expansion, says Mehta. The takeover of a Chinese competitor could also be problematic for ReneSola as many Chinese tier-2 manufacturers are currently highly over-indebted and the Beijing government is keen to avoid further bankruptcies.

LDK – low utilization

LDK Solar, the Chinese manufacturer, has moved up several places in the ranking and is now the wafer industry’s new number four most prominent producer. However, LDK’s production utilization was just under 40% in the past year. According to preliminary calculations by IHS, the company produced 1,595 GW of wafers, with a production capacity of 4 GW. The company’s situation is rated as difficult by IHS and GTM Research. After LDK sold its cell and module production it is again concentrating on wafer manufacturing, says de Haan. But the company is still in quite a turmoil, and in the middle of an ongoing restructuring process. LDK also did not make it on to the shortlist of companies that meet Beijing’s new industry standards for the Chinese PV industry. However, it is to be expected that LDK will receive further financial support from the provincial government in order to preserve local jobs. GTM analyst Mehta is rather skeptical about whether LDK can continue to compete against other large wafer manufacturers. He expects that in future they will fall further down the global ranking.

Hidden champions

The next positions in the ranking are filled by specialized Chinese wafer manufacturers who are rather unknown as they do not appear as module manufacturers on the global stage. In fifth place is Huantai Silicon Sci. & Tech. They produced multi-wafers at a very high utilization last year, according to IHS, and benefited greatly from Chinese market growth. In sixth place is the Jinglong Group, parent company of JA Solar. Jinglong specializes in mono wafers and last year also produced, according to IHS, at a high utilization above 80%. However, de Haan expects JA Solar to expand their own capacity for the production of multicrystalline wafers this year. In seventh place is Jiangxi Sornid Hi-Tech Co., according to IHS an independent wafer manufacturer, which is also greatly benefiting from the boom in the Chinese PV market. Xi’An Longi Silicon is a manufacturer specializing in mono wafers. The company came in eighth place in the ranking and likewise benefited in 2013 very much from Japanese market growth, according to IHS. Analyst de Haan expects the company to expand further this year and rise up the rankings.

Also featured – Trina and Jinko

New to the Top 10 ranking is Trina Solar. Last year the company produced, according to IHS, wafers with a nominal capacity of 1.09 GW for internal requirements, and thus had a production utilization of over 90%. Analyst de Haan, however, expects that in future Trina will concentrate more on expanding its module and cell production capabilities and thus will buy in more wafers than previously due to greater demand. In 2013 Jinko Solar produced 1,024 GW of wafers, according to IHS, which corresponds to a production utilization of nearly 70%. This put the vertically integrated module manufacturer in tenth place in the rankings. Jinko Solar also manufactures only to its own requirements. In future de Haan assumes that Jinko will increasingly buy in more wafers in order to operate their own expanding module production in emerging markets.