Despite the recession, Dow Corning Corp. and Hemlock
Semiconductor LLC plan to invest up to $3 billion in new
polysilicon manufacturing in Michigan and Tennessee to serve
customers in the solar industry.
Separately, Dow Corning will begin producing monosilane gas that
is used to make thin-film solar panels and liquid crystal displays
in a facility adjacent to the polysilicon factory in Hemlock,
Mich.
(This story also appeared in Clean Technology Insight, a daily
newsletter and information service published by Dow Jones &
Co.)
The companies will invest $1.2 billion to add 10,000 metric tons
of annual production to their polysilicon factory in Hemlock, which
currently has 19,000 tons of capacity. They will also start
building a new polysilicon factory in Clarksville, Tenn., which
will have up to 13,000 tons in capacity for an investment of as
much as $1 billion. That factory could be expanded to up to 21,000
tons of annual production.
Construction on all projects will start immediately, the
companies said.
"When the global markets are down, we view that as actually the
time for the strongest companies to step forward," said Rick
Doornbos, president and chief executive officer of Hemlock, in an
interview.
The move is also significant as the solar industry is entering
what many observers expect to be an oversupply of polysilicon, with
many new Chinese manufacturers adding capacity even as demand for
solar panels is suffering because of the economic downturn.
Polysilicon, which has been scarce and registered very high prices,
has lost about 40% of its price over the past month or so. Hemlock
and Dow, however, are pursuing a wide expansion in polysilicon
production.
"We believe that long term trends in the solar industry continue
to be very attractive," said Doornbos.
The companies committed to make the $2.2 billion "initial
investment" in the additional polysilicon production, Doornbos
said. Further investment will depend on market conditions and could
reach a total of $3 billion.
Hemlock is a privately held company, in which Dow Corning holds
a 63% stake, with the remaining 24.5% in the hands of Shin-Etsu
Handotai Co. and 12.25% belonging to Mitsubishi Materials Corp.
(5711.TO). The companies declined to specify how much of the
financing will come from Dow Corning, which itself is jointly owned
by Dow Chemical Co. (DOW) and Corning Inc. (GLW). The companies are
already in the middle of a $1 billion expansion in polysilicon
production that was announced in May.
"Hemlock and its customers will be sharing the financing costs,"
said Gary Homan, vice president of sales and marketing for Hemlock,
in an interview. He declined to go into detail, but it is common in
the solar business for buyers of polysilicon to make prepayments,
which the manufacturer uses toward production expansion. "Outside
capital will be involved, but much of the costs will be shared. The
majority will be handled this way," Homan said.
The additional capacity in Michigan will come online by the end
of 2010 or in early 2011, Doornbos said. It will require 800
workers for construction and about 300 to run the plant
permanently. The Tennessee plant, although it will be started
concurrently, will take longer to develop, as it is on a green
site. Production there will be ready in early 2012, according to
Doornbos. The companies expect that 1,000 construction workers will
build the plant, which will later employ up to 800.
The company is projecting that by helping its customers to
procure polysilicon in bulk and at cheaper prices, the industry
will be able to move to a point where solar energy costs as much as
fossil-fueled power, what the industry refers to as "grid parity."
At that point the market demand could explode once again and
manufacturing take off. Hemlock executives said that the expansion
plans are driven by customer demand and interest in placing
additional orders.
"We are confident that over the next several years major solar
manufacturers will in fact have reached parity relative to
fossil-based power. We are preparing for what we believe is a very
rapidly expanding solar industry once grid parity is achieved,"
said Homan. He added that his assessment comes from having seen the
cost projections of Hemlock's main customers.
The Tennessee location for the new plant reflects the companies'
view that solar manufacturing in the U.S. will take off.
"With the current environment in the U.S., with the green
movement that's underway, there will be a significant increase in
sales [for Hemlock] into the U.S. market," Homan said. "And not
only Hemlock. Our major customers that are based overseas are
evaluating moving to manufacture in the U.S." Today Hemlock's
primary markets are in Europe and Asia. The company declined to
break out how much it ships where.
The companies evaluated more than a dozen sites globally for two
years, according to the executives. "We ended up choosing the
location in Tennessee for a variety of reasons," said Doornbos,
"including access to very attractive energy costs, the overall
business climate, access to a quality labor pool and financial
incentives that were offered" by the local government. Electricity
costs are especially important for the companies as polysilicon
production consumes a lot of power.
Equipment for Hemlock is made by outside manufacturers to its
own specifications. Doornbos declined to say who will provide the
additional reactors and other machines necessary for the
expansion.
Dow Corning's move into silane production comes as the thin-film
industry is growing rapidly. Currently Oslo-based Renewable Energy
Corp. is the main producer of silane gas. That company noted
recently that demand has driven prices of silane up. "This is new
for Dow Corning, as we don't currently provide those materials on
the merchant market," said Jarrod Erpelding, Dow Corning spokesman,
in an e-mail.
Dow Corning provides many other materials to the solar market,
including metallurgical-grade silicon, coatings and encapsulants
for solar cells, and sealants for solar module frames.
-By Yuliya Chernova, Dow Jones Newsletters;
Yuliya.chernova@dowjones.com
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