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Value Chain Activity: Manufacturing Wafers


Context

The process of melting polysilicon into ingots and subsequently cutting them into wafers is wedged between polysilicon production and cell manufacturing. Yet, it is a distinct process that does not require physical proximity to upstream or downstream processing. Consequently, some companies specialise in just doing that.

Industry Dynamics


Low barriers to entry


Standard production facilities can be bought off the shelf. Although a significant capital outlay is required, companies that are on either side of the value chain are well positioned to move into this segment.

 

Upstream: Big polysilicon producers may want to forward-integrate

As the process and output of ingot growing and wafer cutting are fairly standardised, it is realtively easy for polysilicon producers to forward-integrate into wafer cutting, thus becoming direct competitors to established wafer cutters. Of the big suppliers, MEMC and REC are already producing wafers as well, leaving pure-play wafer companies with less bargaining power.

 

Conclusion

following the crash in polysilicon prices on one side and decrease in demand for wafers on the other, this segment is under threat of being taken over by its suppliers and customers in search for capturing more stable value

Competition based on price

Competitors
The wafer industry is dominated by 5 companies sharing over 90% of the market with Shin-Etsu and Sumco alone having a third each. There are however, many more smaller companies fighting for share.

Product Differentiation
Wafer quality is a distinguishing feature, as it determines the efficiency of the module..

Cost Structure and Margins
Average non-silicon related costs are $/W0.4, hence this is much less of a fixed cost business than the polysilicon production. Average margins have come down from 20% in 2008 to just 6% in 2009. Hence, cost control is ever more important. Cutting wafers from silicon ribbons seems a very good cost alternative, while still maintaining good quality.

Wafers
 

No threat of substitution

There is virtually no threat of substitution for this process, as long as silicon wafers are needed for both chip makers and solar cell manufacturers.

 

Downstream: Threat of backwards integration

Although there is a large number of potential clients (i.e. cell manufacturers), our estimate is that 40% of cell manufacturers are already backwards integrated into wafer cutting.

More significantly, only 10 out of 39 companies are not vertically integrated into other activities in the solar value chain. They are highly vulnerable of being acquired by either polysilicon suppliers or cell manufacturers who want to capture more value.

 

Market Share in Wafer Production

Market Share

The Top-5 companies share 93% of the wafer market, and the top-3 companies demand 78%.

There are regional differences in the market share though. While Shin-Etsu, from Japan, is also the market leader in Asia-Pacific, Siltronic is the leader in Europe, whilst SUMCO leads the market in North America.

Well over 50% of the market is controlled by companies related to the polysilicon segment: Siltronic is 100% owned by Wacker while SUMCO is the merged wafer operation of Sumitomo and Mitsubishi. Only MEMC operates in the polysilicon market under the same name.

Wafer Cost Trends

Average Cost Trends

While non-input related production costs have remained constant, average margins for wafer production have dropped by 70% to just 6% in 2009.

This is an increasingly difficult place to be in if not vertically integrated.

Company Details


Name Vertically Integrated? Country Comments Revenues Revenue growth Gross profit margin
Top-5 Companies
Shin-Etsu Chemical Co Ltd Yes, into other materials Japan World's leading silicon wafer manufacturer. Also produces compounds such as GaAs     28.39%
Sumco No Japan Joint venture between Sumitomo and Mitsubishi. Has closed production facility in 2009 due to overcapacity. Produce highly efficient wafers. 2,952.30 -17.48% 21.91%
Siltronic No Germany Joint venture with Samsung on production of 300mm wafers      
MEMC Yes, into polysilicon USA Produce branded wafers "Perfect Silicon", based on a proprietary ingot growing process, resulting in the world's highest quality wafers. 1,448.34 4.30% 50.13%
LG Siltron No South Korea Dedicated wafer company      
Company using Ribbon Processing
Evergreen Solar Yes, into cells and modules USA Utilse the Ribbon technology for silicon wafers. 80.90 60.24% 16.87%
Sovello Yes, cells and modules Germany Produce wafers using Ribbon technologyinto. Capacity: 100MW (2008), 180MW (2009), filed for bankruptcy in 2012 219.00    
Other Companies
Beijing Hope Solar New Energy Co Yes, into cells and modules China      
Canadian Solar Inc Yes, into cells and modules China completed two solar demonstration projects with a combined system size of 29.5 kWp for China’s Suzhou Municipal City Hall 509.40 132.83% 10.07%
Chinaland Solar Energy Co Yes, into cells and modules China      
DCH Solar GmbH Yes, into cells and modules Germany      
GCL Solar Energy Yes, into polysilicon China In 2008 1,500Mt poly-Si capacity. Planning for 10-times!      
Green Energy Technology Yes, into modules Taiwan Silicon wafers and a-Si modules. No c-Si cells! 192.17 74.32% 23.58%
Hareon Solar Yes, into cells and modules China 200MW by 2009 capacity      
Jetion Holding Yes, into cells and modules China 181.29 141.17% 16.26%
Jiangxi Trinity Material Yes, cover chain from polysilicon to modules China      
Konca Solar Cell No China Expansion to 300MW ingot prod      
LDK Solar Hi-tec No China 1,187.50 213.67% -1.73%
Lite-On Semiconductors No South Korea      
Long Energy Yes, into cells and modules China Module capacity 80MW      
Longi Silicon Materials Corp No China Capacity 2008: 150MW, to be 300MW by 2010      
M Setek Also offer manufacturing equipment Japan Focus on semiconductor industry
Clients include Suntec, Isofoton, E-Ton, Sunpower, Sanyo
     
Motech Industries Yes, into cells and modules Taiwan One of the largest PV cell manufacturers 499.01 45.59% 14.69%
Nexolon No South Korea 500MW wafer capacity by 2009, 1GW by 2011. Long-term contract to supply Gintech      
Nitol Solar Yes, into polysilicon Russia Plan to build 3,800Mt production facility in 2009. Newcomer?      
NorSun No Norway Capacity wafers 200MW by 2009      
PV Crystalox No UK Production of ingots in England, production of wafers in Germany and Asia. 75% sold to Asian market, 25% to Europe. Would like to integrate into Silicon production. 274.10 4.05% 47.76%
Q-Cells  Yes, into cells Germany 1,290.00 47.82% 31.91%
REC ASA Yes, into cells and modules Norway 2008: Capacity: 225MW for cells, 150MW for modules. Plan: 780MW for cells, 740MW for modules. Silicon produciton in USA 909.85 23.32% 79.23%
Renesola Ltd Yes, into polysilicon China New poly-silicon facility. Also in recycling of si 484.37 169.26% -2.13%
Rineng Zhongtian Yes, into cells and modules China      
Sanyo Component Europe GmbH Yes, into cells and modules Germany HIT Technology: Thin c-Si with ultra-thin a-Si: Cell efficiency 19%, module efficiency 16.6% 571.52 5.39%  
Semi Materials Co Also offer manufacturing equipment South Korea Ingots, wafers, but also CVD reactor and slim-rod      
Shanghai Comtec Solar Technology Co Yes, into cells China Solar ingots and wafers. Also produce chip-grade material      
Solar Cells Hellas Group Yes, into cells and modules Greece Capacity 60MW total      
Swiss Wafers AG No Switzerland Silicon wafer production for PV - 180MW capacity      
Trina Solar Yes, into cells and modules China Capacity of 350MW each in wafers and cells. Rapidly expanding globally. 601.08 175.63% 19.77%
Vector Japan Co Yes, into polysilicon Japan Plans to manufacture cells      
Yingli Green Energy Yes, into cells and modules China 200MW for cells, 200MW modules. Plan to increase capacity to 600MW in 2009 797.99 86.07% 21.58%
Znshine PV-Tech Co Yes, into cells and modules China      

 

Downloads: Download comprehensive list of ingot & wafer producers including financial ratios, revenues and other information.

ReferencesAll company information has been obtained from company websites, Reuters and Factiva database. For comparison, currency amounts have been converted using exchange rates as of 20/06/09.

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