DC Chemical's polysilicon expansion plans

SEOUL, KOREA: DC Chemical has signed a poly crystalline silicon long-term supply agreement with Swiss Wafers AG. The contract amount is worth KRW 488,169,235,000, while the contract period is from 01/01/2010 ~ 12/31/2016.

Earlier, DC Chemical publicly announced on June 25, that its board of directors approved plans to expand the company's polysilicon manufacturing facilities.  Polysilicon is a key raw material that is used to manufacture solar cells and semiconductor wafers.

Specifically, the company plans to invest 880 billion won to build a No. 3 polysilicon plant with 10,000 metric tons of annual capacity at its Gunsan plant site.  Construction will commence in July of this year, and the project will be completed by December 2009.

In addition, DC Chemical has decided to expand the annual capacity of its No.1 polysilicon plant from 5,000 metric tons to 6,500 metric tons (the construction of the No.1 plant was previously publicly announced on June 28, 2006 and July 12, 2007).  Further, additional funds are needed for the construction of the No.2 polysilicon plant, with a capacity of 10,000 metric tons (this was previously announced on December 12, 2007), due to an increase in material costs and exchange rates.  For the aforementioned expansions, DC Chemical will invest a total of 260 billion won in its No.1 and No.2 polysilicon plants by June 2009.

With these additional investments, DC Chemical's aggregate investment in the polysilicon business will total 2.25 trillion won during the period of July 2006 through December 2009.  This is comprised of an initial investment of 1.11 trillion won and the newly announced investment of 1.14 trillion won.  Upon the completion of the aforementioned expansion projects, the annual polysilicon production capacity of the company will total 26,500 metric tons.

According to a company official: "DC Chemical is planning to focus on the polysilicon business, which is a key raw material segment in the solar photovoltaic (PV) industry, and the industry itself is expected to grow by more than 30 percent per year.  Moreover, through this capacity expansion, DC Chemical will become the world's second largest polysilicon manufacturer in 2010 with the nameplate capacity of 26,500 metric tons."

The completion of this large-scale expansion is expected to help solve the current shortage in the supply of polysilicon, and looking ahead, it will spark greater demand for solar products, which will also be aided by a drop in polysilicon prices.  Accordingly, all of these factors are expected to accelerate the achievement of grid parity (the point at which the cost of solar generated electricity reaches the same level as the cost of conventionally generated electricity), and ultimately, DC Chemical will significantly contribute to the overall growth of the solar PV industry.

This expansion will be fully financed by prepayments from long-term supply agreements and internal funds.  Most of the capacity of the No.1 and No.2 polysilicon plants has already been sold through long-term supply contracts, which total approximately US $3.9 billion thus far.  Moreover, additional long-term arrangements are under discussion for the capacity of the No.3 plant.  Considering the stability and profitability of the polysilicon business, DC Chemical expects to sell most of its polysilicon capacity through long-term supply contracts, with the remainder being sold in the spot market.

DC Chemical completed the No.1 polysilicon plant in Gunsan in December 2007 and commenced production through the successful commercialization of high-purity (9 nine) polysilicon in March of this year.  Additionally, the construction of the No.2 polysilicon plant with an annual capacity of 10,000 metric tons is scheduled to be completed on time by the first half of 2009.

Driving force for growth of Korea's solar PV industry

As the primary raw material used in the solar PV industry, polysilicon is at the top of the supply value chain, followed by ingots, wafers, cells, modules and solar power plants.  It also requires advanced technology and a purity level of 99.9999999 percent (referred to as "9 nines").  Moreover, the polysilicon industry is a capital intensive industry, requiring large investments in equipment and facilities, with high technological entry barriers.  Accordingly, only a few companies in the world such as Hemlock (US), Wacker (Germany), REC (Norway), MEMC (US) and Tokuyama (Japan), possess the necessary technology to produce polysilicon.

As a result of its successful commercialization of high purity polysilicon, DC Chemical has joined a group of select companies that possesses polysilicon manufacturing technology.  Further, through its rapid expansion efforts, DC Chemical is expected to become a market leader and an important catalyst in the development of both the domestic and global solar PV industry.

Solar PV industry: Growth engine for future

Due to the significant increase in oil prices and increasing depletion of fossil fuel reserves, solar energy is viewed to have the most potential as an alternative energy source.  In this regard, many countries, including Germany, are planning to achieve grid parity in the next 5 to 10 years through various public policy support mechanisms, the development of new technology and mass production.

Although Korea is a relative latecomer in the solar power industry compared to countries such as Japan and Germany, which entered the industry approximately 10 years ago, Korea is quickly catching up with the implementation of various policy mechanisms.  The current target is to supply 1.3GW of solar electricity by 2012.  In addition, due to its possession of a high quality solar PV related infrastructure, such as advanced semiconductor manufacturing technology, a skilled labor force and the localization of semiconductor equipment, the growth of Korea's solar PV industry is expected to accelerate even more in the future.

Besides the recent boost to the polysilicon sector, Korea's solar PV industry is rapidly expanding to other parts of the solar PV value chain.  Companies such as Neosemitech, Smart Applications, Woongjin Energy and Nexolon have entered the ingot/wafer markets, while Hyundai Heavy Industries, Shinsung ENG, STX Solar, KPE and Millinet Solar are aggressively gaining access to the solar cell and module markets.