**Abstract**
Under the pressure from the import of polysilicon from the United States, Europe, and South Korea, China's polysilicon industry has faced a severe downturn. Out of the 43 companies that had previously invested in polysilicon production, only six are still operating today. However, with the majority of domestic polysilicon production concentrated in Xinjiang—where there are significant resource advantages—the industry may be approaching a turning point.
A key factor driving this potential shift is the cost of electricity. In energy-intensive industries like polysilicon manufacturing, electricity typically accounts for 30% to 50% of total production costs. As a result, finding regions with low energy prices has become crucial for the industry’s survival and growth. Interestingly, mainland China is not necessarily the most favorable region for polysilicon production globally, as electricity prices in the U.S., South Korea, and Taiwan are generally lower.
Currently, several major players, including Daxin Energy and TBEA, have turned their focus toward the western part of China, particularly Xinjiang. Daxin Energy has already launched a new 5,000-ton polysilicon production line in Xinjiang, which became fully operational in March this year. Meanwhile, TBEA’s 12,000-ton facility in the same region is expected to be completed by September.
**Xinjiang: A Low-Electricity Hub**
Daxin Energy, one of the largest solar energy producers in Chongqing, specializes in the research, development, and sales of polysilicon and silicon wafers. The company currently operates two production sites—one in Wanzhou, Chongqing, and another in Xinjiang. The Chongqing plant produces 4,300 tons annually, while the Xinjiang facility is set to expand to 12,000 tons by the end of 2014.
According to Yao Gongda, CEO of Daxin Energy, Xinjiang offers some of the lowest electricity prices in the country. For instance, the electricity price in Shihezi, where the company is based, is approximately 0.33 yuan per kWh. This is significantly lower than the 0.5 yuan per kWh charged in central and eastern China. The reason behind this affordability is Xinjiang’s abundant coal resources, which make up over 40% of the nation’s total reserves.
“Shihezi was chosen because it has an independent power grid and can offer more favorable electricity pricing,†Yao explained.
According to data from Shenyin Wanguo, the average production cost of polysilicon in China is around $7.6 per kilogram. In contrast, Daxin Energy’s Xinjiang line has managed to bring its cost down to $4 per kg.
While the traditional Siemens method remains the dominant process for producing polysilicon, it faces inherent limitations in terms of energy efficiency. On average, it requires about 80 kWh of electricity per kilogram of polysilicon produced.
However, Daxin Energy has made significant progress in reducing its costs. By the second quarter of this year, the company reported that its Xinjiang production line had brought the cost down to $15 per kg. “We aim to reduce it further to $14 per kg by the end of this year and below $12 per kg by next year,†Yao said.
In addition to low electricity prices, Xinjiang also benefits from cheaper steam, which is essential in the polysilicon production process. According to Yao, the steam price in Shihezi is roughly one-sixth to one-fifth of that in central and eastern China. Combined with other cost-saving measures such as liquid chlorine usage, these factors help keep overall production costs low.
Analysts from Shenyin Wanguo expect TBEA’s Xinjiang polysilicon line to reach a cost of $13.3 per kg this year. Meanwhile, GCL-Poly, the world’s largest polysilicon producer, currently has a cost of around $18 per kg.
**Polysilicon Supply Gap**
Despite these positive developments, the polysilicon industry is still navigating turbulent waters. According to a report from the Silicon Industry Branch of the China Nonferrous Metals Industry Association, domestic polysilicon output fell by 23.6% year-on-year in the first half of this year, reaching 28,000 tons. The spot price remained around 130,000 yuan per ton, a 4.2% decline from the previous year.
Notably, nearly 78.6% of the 28,000 tons produced came from a single subsidiary of GCL-Poly, indicating that the rest of the industry struggled to maintain supply.
However, the release of preliminary results from China’s “double reverse†policy could change this dynamic. Zhou Xuhui, an analyst at Shenyin Wanguo, believes there is now a gap in polysilicon supply. “There is a demand-side need, and certain catalysts, such as policy support, could help drive the market forward,†he said.
Industry insiders note that, unlike the volatile downstream PV module sector, the upstream polysilicon industry has largely consolidated. Surviving companies are well-positioned for future growth.
Wang Cheng, CFO of Sunshine Solar, predicts that by the end of 2013 or the beginning of 2014, there will be a shortage of polysilicon with a production cost below $20 per kg. At that point, the surviving enterprises may finally reach a turning point.
As a key raw material for photovoltaic cells, the cost of polysilicon directly affects the price of solar power. If solar energy can achieve grid parity sooner, it could trigger a surge in adoption, ultimately lifting the entire solar industry out of its current crisis.
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