Makers of solar-power cells in China are gearing up for fiercer competition in the huge, but underdeveloped, domestic market. Some are expanding their industry chains while others are choosing advanced technologies as raw-material prices soar.
Canadian Solar Inc, a Nasdaq-listed Suzhou-based solar firm, is building a 1.2-billion-yuan (US$169 million) solar wafer plant in Luoyang City, central China, as it moves upward in the photovoltaic (PV) cell industry chain. It recently launched an industry park in Changshu, Jiangsu Province, to house its support and applications for the solar industry.
"We are doing vertical integration," said Chairman and Chief Executive Officer Shawn Qu. "CSI started as a solar module system player, but it has moved upward to the PV cell manufacturing and wafer business."
Solar wafers are thin sheets of crystalline silicon which are integrated into PV cells. Qu said the company's long-term strategy is to supply half the PV cells it needs for the module-system business, and always cap its wafer capacity below its PV cell capacity.
"On one hand, this could help control the industry chain, and on the other, we leave room for some business with partners to maintain the relationship," Qu said. "Over the next 30 years, Chinese solar firms will create several successful business models, and this fits CSI best."
The PV industry value chain starts with the manufacture of polysilicon and ingots.
But due to robust demand from the solar industry and tight supply, the price of polysilicon is now US$250 to US$270 per kilogram in the domestic market, against US$20 to US$30 in 2003, according to Dongguan Securities.
"In today's PV industry value chain, the upper positions enjoy the largest added value and the biggest profitability," said Dongguan Securities analyst Yu Chunyan.
Profit threats
Soaring polysilicon prices have been threatening profit margins in traditional solar firms, although industry analysts estimate the situation will ease within two years as more capacity comes on stream worldwide.
