GCL Poly Energy Holdings, the world's largest manufacturer of the wafers used in solar power panels, plans to reduce production costs by a quarter this year to protect its profit margins as prices drop. The Jiangsu-based firm wants to reduce solar wafer production costs, excluding materials, to 20 US cents per watt by the end of the year from 27 cents a year earlier. It will expand output to gain economies of scale, bring some outsourced parts production in-house and use more advanced manufacturing techniques. The company also plans to trim the production costs of the raw material polysilicon to US$20 a kilogram from US$22.50 this year, chief financial officer Tong Yee-ming said. It also aimed to maintain profit margins, he said. GCL Poly Energy is one of the world's largest makers of polysilicon. The company said its average price for wafers slipped 7.3 per cent to 76 US cents during the first quarter from 82 US cents in last year's fourth quarter. DBS Vickers Securities analyst Dennis Lam quoted management as saying it did not disclose its profit margin because it did not want its customers - such as solar-panel makers, who are suffering from a margin squeeze due to overcapacity - to ask for price cuts. 'This suggests GCL's first-quarter margin was quite good,' Lam said. 'I think it can maintain its profit margin due to savings from integration of polysilicon and wafer production.' GCL's rival Comtec Solar Systems Group, which produces wafers but not polysilicon, saw its gross margin fall to 30.5 per cent in the first quarter from 32.4 per cent last year, as higher polysilicon costs ate into profits. Lam expected its margin to continue to fall in the second quarter. GCL's average polysilicon price rose to US$62 a kilogram in the first quarter from US$60 in last year's fourth quarter, and US$50 in last year's first quarter. The company plans to raise annual wafer output capacity to 6.5 gigawatts by the end of this year from 3.5 GW a year earlier, and polysilicon capacity to 65,000 tonnes in the middle of next year from 21,000 tonnes at the end of last year. The company has 55 GW of wafer orders to be delivered by 2016.