Cloud Computing  Jul 15  Comment 
VeriSilicon Holdings Co., Ltd. (VeriSilicon), the Silicon Platform as a Service (SiPaaSTM) company providing IP-centric and platform based custom silicon solutions, today announced its next-generation Hantro H2 HEVC video...
Forbes  Jul 14  Comment 
The Silicon Roundabout, or Tech City, to call it by its other name, in Shoreditch, London, is thriving. Start-ups are popping up everywhere, in fact, pop-up shops are popping up everywhere! Buoyed by the tax friendly SEIS vehicles, investors are...
JCN Network  Jul 14  Comment 
Nano-sized silicon oxide electrode for the next generation lithium ion batteries
SeekingAlpha  Jul 11  Comment 
By Sean Chandler: Introduction In a market with dozens of device manufacturers, winners like Apple (AAPL) and Samsung (OTC:SSNLF) (OTC:SSNGY) easily came out on top due to their ability to vertically integrate all the way down to the silicon....
New York Times  Jul 10  Comment 
IBM will spend $3 billion over the next five years on computer chip technology, with an eye toward moving beyond the silicon era.
Motley Fool  Jul 10  Comment 
For years, manufacturers have used graphite for one of the electrodes in lithium-ion batteries, but have hankered for a way to replace graphite with silicon, which can hold 10 times more energy.
Forbes  Jul 10  Comment 
When IBM announced a $3 billion commitment to even tinier semiconductor chips that no longer depended on silicon on Wednesday, the big news was that IBM’s putting a lot of money into a future for chips where Moore’s Law no longer applies. But...
New York Times  Jul 9  Comment 
IBM will spend $3 billion over the next five years on computer chip technology, with an eye toward moving beyond the silicon era.
Forbes  Jul 9  Comment 
Ten years from now, computing will require fundamentally new systems that have yet to be invented. IBM wants to be on the forefront, and to get there, the company is investing $3 billion now.
Clusterstock  Jul 9  Comment 
Business Insider has an extra floor in our new world headquarters and  we're looking to lease up to half of it to another fast-growing  company. We're making up to 10,000 square feet available immediately for a term of one to two...




 
TOP CONTRIBUTORS

Silicon, essentially sand, is the second-most abundant element on Earth. Since the start of the Computer Age, though, silicon has been used primarily to make semiconductors, for computer chips; to be useful as a semiconductor, the stuff must be refined to a purity of 99.99999%[1], in factories that cost many millions to build and operate. This made refined silicon a commodity, since it is all essentially the same no matter who refines it or where it comes from, but a limited number of refineries means there is a limited supply.

The advent of the solar industry created a new source of demand for refined silicon; pure silicon makes up 45% of a photovoltaic cell's cost,[2] and the solar industry has grown 41% per year by MW installed since 2001.[3] At the same time, little new refining capacity was being added. In 2004, demand outstripped supply, and in 2005 supply was 30% less than demand.[4] As a result, solar-grade polysilicon prices have risen from $24 per kg in 2004[5] to $450 per kg in 2008[6]. The price of this input has wide-ranging applications, from the cost of many consumer electronics to the future competitiveness of solar power.

Who Benefits from Rising Silicon Prices

  • Silicon refiners like MEMC Electronic Materials and HOKU Scientific see higher revenue, income, and margins when the price of refined silicon rises.
  • LDK Solar, a solar silicon wafer manufacturer, is has contracted Fluor to build the largest silicon refinery in the world; started in 2007, the plant will be completed in 2009, and have an output capacity of 15,000 tons per year.[7]
  • Heavy construction and manufacturing firms, like Fluor and GT Solar that are being contracted to build new silicon refineries for companies like LDK Solar will see higher earnings increase.
  • First Solar, Ascent Solar Technologies, and DayStar Technologies (DSTI) are three solar companies that make thin-film solar cells out of materials other than silicon. This puts them at an advantage in their industry, as much of what makes PV expensive is the cost of silicon, so these companies can produce at lower cost than their competitors.

Who Loses from Rising Silicon Prices

Causes of Silicon Price Fluctuations

Silicon Demand

Simple microeconomics states that if demand for silicon rises, the price of silicon will rise; conversely, if demand for silicon falls, the price of silicon will fall. Silicon is primarily made into semiconductors. Semiconductors are used to make all microchips and anything that receives radio waves; this ranges from car radios to WiFi cards. They are also used to produce photovoltaic cells.

Demand for Computer Chips and Radio Transmitters

Though silicon costs are a small part of the cost of a computing device, when computer chips are made by the hundreds of millions, the effects on the market add up. Big growth prospects for the computer industry, coming from technologies like the smartphone, as well as worldwide economic growth enabling millions to purchase cell phones and computer mean millions more computing devices - with their silicon chips - will sell in coming years.

The Advent of the Smartphone Will Increase Demand for Semiconductors

Though Research in Motion's Blackberry phone brought the "smartphone" to enterprise consumers, who were thrilled to be able to check their email and browse the web wherever they were, the release of Apple's iPhone has sparked an all-out smartphone war by showing that the audio, video, and data ("triple-play") functionality of more complex phones appeal to the masses (much in the same way the iPod revolutionized portable music). Smartphones use silicon in their central processing unit, but often have more silicon chips like multimedia processors, memory cards, and video encoders/decoders, as well as radio chips for wireless and Bluetooth connectivity, so future demand for these products will have a tangible effect on the demand for silicon.[8] Globally, less sophisticated cell phones with fewer semiconductors have penetrated nearly every market; there are approximately 3 billion cell phone users worldwide, and in developed countries, penetration rates can actually be higher than 100% (i.e. people have multiple phones)[9], so smartphones are the industry's attempt to increase sales growth. Researchers have predicted that smartphone sales will grow at a compounded annual growth rate of 30% until the end of 2012, outstripping single-digit growth of normal cell phones; already, there are more smartphones in the world than laptops.[10]

Emerging Markets are Increasing Worldwide Demand for Computers

Worldwide PC shipments are predicted to rise nearly 11% in 2008, driven in large part by demand from emerging economies. In the fourth quarter of 2007, PC shipments to emerging markets grew 22% and accounted for 60% of global growth.[11] As economies like those of the BRIC countries (Brazil, Russia, India, China) grow, institutions like corporations, schools, and the government both need and can afford better technology. At the same time, growing middle-classes mean increasing demand for consumer technology. As demand for computer technology increases around the world, demand for silicon will rise as well.

The Personal Computers are Prone to Replacement Cycles, Causing the Market to Fluctuate every 4-6 Years

PC replacements are the cause of 60% of worldwide PC shipments, and 80% of U.S. PC shipments. The last major replacement cycle occurred from 2004-2005, according to research firm, Garter, Inc., and the next one is predicted to begin in 2009.[12] Despite growth fueled by demand from emerging economies, the number of PC shipments will skyrocket once the next replacement cycle occurs and consumers in developed countries, who can afford new, expensive technologies, trade in the old for the new.

Demand for Photovoltaics

About 45% of the cost of a solar panel comes from the silicon used to make the surface semiconductor[13], so demand for solar cells plays a huge part in the demand for silicon. Crystalline silicon PV cells make up about 90% of the PV market[14], and use about 10 grams of silicon per watt[15]. Since 2001, the solar industry has grown at a rate of 41% per year[16], with worldwide PV installations rising from 1.7GW to 2.8GW between 2006 and 2007.[17] This means that the amount of silicon demanded just from the solar industry increased from 17 million kilograms to 28 million kilograms in a year, and thanks to rising energy prices, fears of climate change, and the desire for energy independence, world demand for PV cells are projected to increase at similar rates for the next few years[18], pressuring silicon demand upwards.

Companies like First Solar and Suntech produce thin-film solar cells that use little-to-no silicon. Even makers of solar panels that aren't thin-film are working to reduce silicon use; SunPower, for example, uses 6.3 g/watt[19], and Evergreen Solar uses 5 g/watt.[20] As solar cell manufacturers adapt their panels to the high-silicon-price environment and reduce their use of the material, demand growth for it will slow.

Silicon Supply

The supply of silicon affects silicon prices in the opposite way of silicon demand. As supply rises, prices fall, and as supply falls, prices rise.

A Shortage of Refining Capacity is a Shortage of Silicon

Silicon is the second-most abundant element on Earth, making up 28% of the crust by weight[21], so silicon shortages don't happen because of shortages of the raw materials. To be used in semiconductors, however, silicon must have a purity of 99.99999%[22], and to be used in solar cells it must have a purity of 99.9999%.[23] Purifying silicon requires expensive capital equipment; a 1 million kg/year refinery owned by Sharp Corporation cost $40 million to build in 2007.[24] If yearly demand for refined silicon outpaces refinery capacity, as it did when the solar market started to expand in 2001[25], then there won't be enough of the stuff to go around, causing prices to go through the roof. When prices rise, however, silicon refiners have more incentive to invest in increasing production. Many analysts expect that by 2012, so much new refining capacity will have come online that there will be an oversupply, and prices will fall.[26]

Notes

  1. Global Technology Forum: "The chips are down in Silicon Valley"
  2. Solar Buzz: Fast Solar Energy Facts
  3. Renewable Energy World: " Industry Growth and Policy Progress on the Agenda at Solar 2008"
  4. Solar Power Industries: "The Opportunities and Challenges of the Pennsylvania RPS RPS—A Solar Cell Manufacturer’s Perspective" Slide 11
  5. China Nuvo Solar Energy Inc., "Industry Information"
  6. SeekingAlpha: "Solar Investors, Understand Silicon Supply"
  7. Green Chip Stocks: "Investing in Silicon Suppliers"
  8. WirelessWeek.com: "Smartphones vs. Mobile Internet Devices"
  9. MyTreo.net: Cell Phone Junkie Releasing 100th podcast
  10. In-Stat: "Size and Growth of Smartphone Market Will Exceed Laptop Market for Next Five Years"
  11. Garter.com: "Gartner Says Worldwide PC Shipments to Grow 11 Percent in 2008, Market Could Fall Victim to Weaker Global Economy"
  12. Garter.com: "Gartner Says Worldwide PC Shipments to Grow 11 Percent in 2008, Market Could Fall Victim to Weaker Global Economy"
  13. Solar Buzz: Fast Solar Energy Facts
  14. Solar Buzz: Fast Solar Energy Facts
  15. SeekingAlpha: "Solar Investors, Understand Silicon Supply"
  16. Renewable Energy World: " Industry Growth and Policy Progress on the Agenda at Solar 2008"
  17. Solar Buzz: Fast Solar Energy Facts
  18. SeekingAlpha: "Solar Investors, Understand Silicon Supply"
  19. The Motley Fool: "SunPower Deflowered"
  20. ESLR News Releases, "Evergreen Solar Announces Fourth Quarter 2007 Profitable Results"
  21. HighBeam Encyclopedia: "silicon"
  22. Global Technology Forum: "The chips are down in Silicon Valley"
  23. DOE: EERE: Solar Energy Technology Program: Silicon
  24. Energy Solar Central Forums: "The Silicon Shake-Up Solar Companies That Dealt With Shortage Early Prosper"
  25. Renewable Energy World: " Industry Growth and Policy Progress on the Agenda at Solar 2008"
  26. SeekingAlpha: "Solar Investors, Understand Silicon Supply"
Wikinvest © 2006, 2007, 2008, 2009, 2010, 2011, 2012. Use of this site is subject to express Terms of Service, Privacy Policy, and Disclaimer. By continuing past this page, you agree to abide by these terms. Any information provided by Wikinvest, including but not limited to company data, competitors, business analysis, market share, sales revenues and other operating metrics, earnings call analysis, conference call transcripts, industry information, or price targets should not be construed as research, trading tips or recommendations, or investment advice and is provided with no warrants as to its accuracy. Stock market data, including US and International equity symbols, stock quotes, share prices, earnings ratios, and other fundamental data is provided by data partners. Stock market quotes delayed at least 15 minutes for NASDAQ, 20 mins for NYSE and AMEX. Market data by Xignite. See data providers for more details. Company names, products, services and branding cited herein may be trademarks or registered trademarks of their respective owners. The use of trademarks or service marks of another is not a representation that the other is affiliated with, sponsors, is sponsored by, endorses, or is endorsed by Wikinvest.
Powered by MediaWiki