The existing situation of polysilicon price
Last July, due to an accident that happened in the factory in Xinjiang, a large amount of polysilicon production capacity was reduced, leading to a small increase in polysilicon prices, but prices fell back after a few months. Shortly, the glass price began to rise. From June 2020 to March 2021, the price of 3.2 mm photovoltaic glass almost doubled. At the end of March 2021, glass prices suddenly dropped by more than 30%, but the price of polysilicon then recovered quickly and doubled from 90 yuan/kg in February to 180 yuan/kg.
The short supply of polysilicon
There are three main reasons for the sudden price spike across the supply chain. One is the supply of polysilicon, the biggest factor affecting the entire PV system. Currently, the capacity of polysilicon is far lower than the demand for silicon ingot and wafers. After a massive capacity expansion since 2019, silicon ingot and wafer capacity has increased from 135 GW in 2019 to 161 GW by the end of 2020. However, China’s polysilicon supply capacity can only support about 140 GW, while sources outside China can only meet 20GW. This relative shortage of supply is the root cause of the price rise.
Besides, corporate monopolies also play a role. Polysilicon are highly monopolized by the six manufacturers, especially Tongwei and GCL with the largest production capacity. They have strong bargaining power and control the price of polysilicon at the back. The silicon ingots and wafer products downstream are also monopolized by Longji and Zhonghuan Semiconductor.
A zero-sum game of the entire industry
The third reason is more like a zero-sum game played by the entire industry. Upstream suppliers have transferred cost pressures along the supply chain to the terminal component manufacturers. But the latter refuse to bear all the costs and want to pass price inflation on to their downstream customers, including project investors, a group that manufacturers have never considered. The installation targets of those state-owned power companies that invest in photovoltaic projects are directly linked to the country’s 2030 carbon peak commitment and the 2060 carbon neutral target. These investors know that meeting targets is more important than achieving profits, and their upstream suppliers understand as well.
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