Polysilicon and silicon wafer supply: Avoiding the sun burn

USA: Silicon wafer demand for semiconductor production is expected to grow at a CAGR of 13 percent over the next five years. For the past several years semiconductor silicon wafer manufacturers have been struggling due to the large investments that were required while installing new capacity for 300mm wafers and from the increased pressures of semiconductor manufacturers to decrease costs.

Today, the photovoltaic industry is competing for silicon wafers alongside the semiconductor industry. The increased demand for solar panels has introduced a whole new customer base for polysilicon and silicon wafer manufacturers.

“Most major silicon wafer suppliers were not focused on the photovoltaic market. Silicon wafers used for solar applications do not have the same stringent requirements for flatness and consistency that a semiconductor wafer requires. When the demand for solar wafers was small, wafer manufacturers were able to sell the lower quality pieces at essentially scrap wafer prices to the solar industry. However, as solar cell demand increased, the wafer manufacturers had to step up production that was actually targeted at solar panel manufacturers,” said Joanne Itow, Managing Director and Manufacturing Analyst for Semico Research.

Another market dynamic is the fact that although a semiconductor wafer sells for a much higher price than a solar wafer, the silicon wafer amounts to a very small percent of the total cost of a semiconductor chip. However, the silicon wafer is approaching one half of the total cost of a solar cell. Hence, a 5 percent increase in a semiconductor wafer has much less impact on the semiconductor manufacturer than a 5 percent increase in a solar grade wafer to a solar panel manufacturer.

In the past, the top five or six polysilicon suppliers have controlled over 80 percent of the polysiilicon supply. These suppliers have announced plans that would increase polysilicon supply by as much as 65 percent by the end of 2008. In addition, there are several new entrants into the market.