Taipei, Wednesday, July 23, 2014 13:33 (GMT+8)
light rain shower
Taipei
29°C
Commentary: Long-term solar material supply contracts increase losses during industry downturns
Jackie Chang, DIGITIMES, Taipei [Thursday 3 May 2012]

Long-term solar material supply contracts seem to stabilize the financial performance of solar firms during good times, but increase the magnitude of losses during down times.

Before 2011, the solar industry experienced shortages of polysilicon. This pushed the price of polysilicon to reach above US$100/kg at one point. Fighting for material was a must for downstream solar firms. During the years of shortage, solar firms constantly needed reassuring measures to obtain continuous flow of material. Signing long-term supply contracts became the solution for this shortage problem.

The long-term supply contracts have become one of the reasons that solar firms have been suffering net losses. The firms signed contracts when the price of polysilicon was relatively high, compared to the spot price now.

Chihheng Liang, Digitimes Research analyst and author of new a report PV 2012-Expectations for the global solar market, indicated that spot price of polysilicon in Greater China last week (April 23-27) was US$22.5/kg and the spot price of polysilicon two months ago (February 20-24) was US$29.5/kg.

This means the spot price of polysilicon dropped 23.7% in two months.

In recent weeks, Europe-based material suppliers have been reportedly considering filing lawsuits against Taiwan-based downstream customers for failing to oblige to their supply contracts. Taiwan-based firms have been considering fighting the lawsuits collectively and asking the government to help.

Taiwan-based solar cell maker Neo Solar Power (NSP) recently announced its financial performance for first-quarter 2012. The firm reported net losses of NT$1.817 billion (US$62 million) which included write-offs of losses incurred from long-term material supply contracts.

polysilicon

Spot price of polysilicon hits US$22.5/kg in recent weeks
Photo: Digitimes file photo

Realtime news
  • E Ink Holdings sells CPT convertible bonds

    Before Going to Press | Jul 22, 21:46

  • Commentary: Microsoft moves to eliminate Nokia

    Before Going to Press | Jul 22, 21:41

  • Investment in production of N-type monocrystalline solar cells may take off in 2-3 years

    Before Going to Press | Jul 22, 21:38

  • TPCA urges Taiwan government to upgrade PCB industry

    Before Going to Press | Jul 22, 21:16

  • China market: Xiaomi launches new flagship smartphone

    Before Going to Press | Jul 22, 21:01

  • TSMC to offer more wafer starts to MediaTek in 3Q14

    Before Going to Press | Jul 22, 20:59

  • Apple new iPhones to come with different time tables to avoid competition

    Before Going to Press | Jul 22, 20:57

  • USI reportedly lands SiP module orders for iWatch devices

    Before Going to Press | Jul 22, 19:56

Pause
 | 
View more
DIGITIMES Translation Services
2014 global mobile application processor market forecast