What is going on in the polysilicon industry? It is common knowledge that silicon is the second most abundant element in the Earth's crust (after oxygen) and the third in the planet's mantle (behind oxygen and magnesium), so any sort of silicon shortage may sound like nonsense. However, this is the situation.
Solar cell makers paid US$25 per kilogram for solar-grade polysilicon five years ago but the price recently reached US$500 in the spot market and then dropped 20%, according to sources such as the Prometheus Institute for Sustainable Development in the US. Production capacities have been growing, but in 2007 the shortage of polysilicon that has been observed during the past few years persisted.
US-based Hemlock Semiconductor Corporation (HSC), a joint venture of Dow Corning and Shin-Etsu Handotai and Mitsubishi Materials, is known as a global leader in polysilicon production since 1994. Moscow-based Computerworld Russia recently had a chance to talk with Hemlock Semiconductor vice president of marketing and sales Gary Homan about the polysilicon market. Topics discussed included the current state of the polysilicon market, the effect of newcomers in the industry and the effect of the shortage on the overall semiconductor industry. In cooperation with the Computerworld Russia, Digitimes presents the interview for an English audience.
Q: How does Hemlock see the current situation in the polysilicon market? Do you agree with a statement made by Frost & Sullivan in February that this year will see the end of the long-term polysilicon shortage?
A: There are many factors that could change the polysilicon supply-demand situation. Based on public announcements, it appears polysilicon supply will increase by 35% in 2008. This may provide adequate supply of silicon feedstock to allow an 80% growth in the solar industry as well as continued steady growth in silicon for electronics. We must also consider that many companies will utilize the additional supply to rebuild strategic inventories. Therefore, the real test in 2008 is to observe whether the solar demand continues to parallel the silicon supply situation.
Q: Looking back to the first time you found a significant polysilicon shortage caused by growing demand from the solar-energy industry, why do you think the shortage occurred? There is an opinion that major polysilicon suppliers did not expect growth in the solar industry to be that fast in the early to mid-2000s. Do you share this opinion?
A: First off, I do not agree with your premise that companies did not anticipate the boom. I cannot speak for other polycrystalline silicon producers, but we did anticipate it and have been adding capacity to meet that increasing demand at a very high rate. To the extent that demand significantly outweighed capacity for a period of time, you have to understand the production of polysilicon is a complex, time and capital intensive process. Adding capacity requires a significant investment, and therefore significant risk to the manufacturer.
Q: In 2005, Hemlock estimated the global polysilicon supply was about 10,000 tons short of demand, twice the figure that The Information Network attributed to the same period. How big was the shortage last year according to your estimates?
A: While it is clear there was still a shortage last year, it would be hard for us to quantify the exact gap between supply and demand.
Q: How did the shortage affect Hemlock's business? What were the advantages and disadvantages of this?
A: Hemlock Semiconductor wants to work with its customers to help the solar industry move towards being economically competitive with conventional energy sources and become a sustainable energy option globally. To the extent that polysilicon shortages were challenging that goal, we are working hard to add capacity to meet this need. Hemlock Semiconductor announced another expansion at its operations in Hemlock, Michigan in May 2007 with an investment of up to US$1 billion. The expansion project, along with earlier announced expansions, is expected to provide a nearly five-fold increase in Hemlock Semiconductor's output of polycrystalline silicon since 2005.
Q: Currently, how big is your polysilicon production? Can you give an update of your near-term capacity expansion plans?
A: In 2007, we manufactured nearly 11,000 metric tons and will be ramping up to nearly 36,000 metric tons by 2012. In addition, we continue to evaluate options for potential further expansion.
Q: In 2006, Hemlock predicted global polysilicon output will reach 54,000 tons in 2008. What is your forecast now?
A: Hemlock Semiconductor presented an update at the Photon International conference in Munich on April 1, 2008. Based on public announcements, HSC projects 2008 polysilicon output to be 56,000 metric tons.
Q: There are now many new polysilicon makers, especially in Asia. Do you think the available space in the polysilicon market is now big enough to accommodate all the newcomers?
A: The process of manufacturing polycrystalline silicon is an extremely complex and precise process that requires significant experience and expertise as well as a significant financial investment. Hemlock Semiconductor has been manufacturing polysilicon for nearly 50 years and is constantly upgrading its processes and technology to become more efficient in manufacturing this highly specialized material. While assuredly some of these new entrants to the industry will be successful, it will be interesting to see what success these companies have. For example, will they be able to compete in the long term when there is not such a significant gap in supply and demand? For those that are successful, in order for solar energy to truly compete with traditional energy sources, worldwide leaders, such as Hemlock Semiconductor, and newer entrants into the industry, will all play a significant role throughout the solar industry supply chain.
Q: How does Hemlock currently split its polysilicon supply between the solar-energy industry and the semiconductor industry? Do you expect the proportion may change in the next two to three years?
A: Both the solar and the semiconductor industries will continue to compete for silicon in the foreseeable future. While this competition for material may be causing short-term supply/demand issues, Hemlock Semiconductor has been able to expand capacity of its product in large part because it has a diverse market to serve with its products. Many companies, especially many of the newer entrants, are not capable of or interested in serving the semiconductor market. Hemlock Semiconductor is committed to serving customers in both industries and have built in flexibility at our manufacturing sites that allow us to manufacture both solar and semiconductor grade product.
