The price of polysilicon, a core material for solar modules, has plummeted by more than 50 percent in less than one and a half years. Korean polysilicon producers, who have been suffering from a price war that was sparked off by Chinese companies more than a year ago, are being pushed to the point of considering suspending their business.
The polysilicon price posted a record low of US$8.12 per kg this month, market researcher PV Insight said on July 8. It was US$17.7 in January last year. In May last year, it plummeted from US$15.14 to US$12.21 due to the Chinese government's announcement of a plan to reduce solar power subsidies. In November last year, it went below the psychologically important US$10 barrier. If this trend holds, it will fall to the US$7 level by the end of this year. Industry analysts estimate that the breakeven point (BEP) for polysilicon producers is US$13 to US$14. This means that the more polysilicon Korean companies produce, the more losses they will suffer.
OCI, the largest polysilicon producer in Korea, posted 43.2 billion won in operating loss in the fourth quarter of last year and 40.1 billion won in the first quarter of this year. The company is expected to post 20 billion won in operating loss in the second quarter of this year. It posted 106.3 billion in operating profit in the first quarter of last year.
OCI is responding to the steep drop in polysilicon prices. The company plans to increase its low-cost polysilicon production capacity by expanding its Malaysian plant as it can utilize low electricity bills and cheap labor in the Southeast Asian country. It will also be able to produce about 5,000 tons of polysilicon for semiconductors by 2022, but the most urgent issue for the company is whether it will be able to survive the chicken game for years to come.
Woongjin Energy, the only solar power ingot and wafer maker in Korea, applied for the commencement of a workout in May. Hanwha Q CELL, the world's No. 1 solar module maker, is desperate to keep Chinese companies in check. It has filed patent infringement lawsuits against Chinese companies in the United States.
The deterioration of the solar power market is due to an offensive by Chinese companies. The Chinese government exempts companies from corporate tax for three years when they build a new solar power material and equipment plant, and provide subsidies and tax breaks to the plants. So, Chinese companies have stronger price competitiveness than their Korean counterparts. By contrast, when large Korean companies enter the solar power business, they can enjoy a tax deduction rate of only 1 pecent, and their electricity cost is twice as high as that of Chinese companies. If the current price trend is maintained for many years, the Chinese companies will be the final winners, dominating related markets.
Experts in the Korean polysilicon industry say that it is necessary to lower electric charges and cut down on taxes for the photovoltaic industry including polysilicon makers. "Like Germany investing heavily in the renewable energy industry, Korean polysilicon makers have to receive financial support for electricity," said an official of the Korea Photovoltaic Industry Association. “With electricity cost accounting for 30 percent of the cost of polysilicon, Korean polysilicon makers can hardly secure competitiveness,"