Solargiga eyes energy market on mainland
Solargiga Energy Holdings is eyeing opportunities to enter the mainland's solar systems installation market after the price plunge of a key raw material made solar power much more affordable, says chief executive Hsu You-yuan.
The price of polysilicon, a purified form of silicon - the world's second most abundant element - has dived from a high of just over US$430 per kilogramme in last year's second quarter to US$130 at the end of last year and about US$100 now.
This came after the credit crunch cut off the credit lines of downstream producers of photovoltaic cell modules and solar panels, severely curtailing their demand for upstream materials such as silicon ingots and wafers.
'With polysilicon becoming a buyer's market, China's solar power market will grow rapidly and we must watch the development closely,' Mr Hsu said in an interview, adding Solargiga might enter the solar system installation business on the mainland should it become lucrative.
Solargiga is the mainland's second-largest producer of monocrystalline silicon ingots, which are made by melting and crystallising polysilicon. It also slices the ingots into wafers, a key component in solar panels.
As the global economic downturn deepened, product prices of the entire industry chain sank.
The selling price of Solargiga's silicon wafers has dropped to 20 yuan (HK$22.71) to 25 yuan each, compared with an average of 48 yuan in last year's first three quarters.
This saw the company write down its raw material and final products inventory by 220.2 million yuan last year, the biggest contributor of the 71.5 per cent decline in its net profit to 83.4 million yuan.
Mr Hsu said excluding the write-down, gross profit margin has also fallen, but Solargiga expects to more than offset this through higher sales volume as lower prices are expected to stimulate demand.
'With the cost of polysilicon coming down rapidly, solar power can become cost-competitive compared with fossil fuel electricity much earlier,' he said.
'Before, I expected this point to be reached by 2012, now this may come next year.'
Polysilicon accounts for about 50 per cent of the company's operating costs.
At more than US$400 per kg, the material's production used to be extremely lucrative compared with its production cost of just US$30 to US$40 per kg because of a supply bottleneck.
The credit crunch has accelerated an expected price drop, with the number of suppliers forecast to rise and new plants to come on stream on the mainland and elsewhere in the next few years.
Prices could remain volatile this year depending on the rise in demand, Mr Hsu said.
Solargiga had planned to expand silicon ingot output capacity by 2,000 tonnes annually to 10,000 tonnes by 2012 from 2,000 tonnes currently. For this year's expansion, it has started work on a new factory building and placed orders for new equipment.