Korean Polysilicon Makers Shut Down Unable to Compete with Low-cost Chinese Companies

The upstream part of the solar supply chain was the only part where Chinese companies were not dominating the market completely. Due to the complex chemical processes of making high-grade polysilicon, Chinese companies imported large quantities of pure grade silicon from Germany, the USA, and Korea. The initial years of the solar boom had led to a shortage in the availability of polysilicon which is the principal raw material required to make solar wafers.

Korean companies such as OCI and Hanwha entered the business and quickly expanded capacity to meet demand from western manufacturers who dominated the solar business. These companies shifted their sales to the Chinese companies who took over market share rapidly from western companies due to their low costs and strong government support. However, the last couple of years has been bad for most polysilicon companies as Chinese companies such as Tongwei have massively expanded low-cost solar-grade polysilicon manufacturing capacity. Wacker recently recorded a large loss at its polysilicon division due to the low prices of polysilicon prevalent in the market.

Now both OCI and Hanwha have decided to permanently shut down their production facilities in Korea due to the high input costs especially electricity. The biggest cost component of making polysilicon is electricity whose costs determine the overall cost of making poly. With the Chinese government heavily subsidizing solar manufacturing, large subsidies are given to companies. The cost of power is very cheap especially in the western part of China where most of the polysilicon facilities are located. Companies such as Daqo and Tongwei have very low production cost and they are able to make poly at very low prices. The ASP of polysilicon has become as low as USD 8/kg which is lower than the cost of production of polysilicon for the Korean polysilicon makers.

While China used to completely dominate the production of wafers, cell, and modules, polysilicon was still where non-Chinese companies had a substantial market share. Now with the Koreans and the Germans shutting down, China is expected to dominate the entire value chain from the production of polysilicon to panels. USA’s polysilicon production has been shut down for a while with REC forced to lay off its workers and shut its plants due to the anti-dumping duties imposed by China on the USA in retaliation to the ADD and CVD on imports of Chinese solar cells and panel by the USA.