Average costs for vertically integrated Tier 1 makers are forecast to fall 6% in 2014 to a record low of $0.20/W, according to the NPD Solarbuzz Polysilicon and Wafer Supply Chain Quarterly report.
Since 2008, solar PV wafer manufacturing costs – the combined costs of polysilicon and wafer processing – have declined more than 16% per year, the report says.
Charles Annis, vice president at NPD Solarbuzz, comments," Wafer costs are only a third of what they were five years ago, and even though the rapid pace of cost reduction is starting to decline, the severe oversupply and extremely low selling prices are forcing polysilicon and wafer makers to continue to find ways to lower costs to previously assumed impossible levels."
With NPD Solarbuzz having recently upgraded its PV industry end-market demand forecast to between 45 GW and 50 GW for 2014, the reduced cost basis should help support improving profitability at polysilicon and wafer makers, the company believes.
At 45 GW to 50 GW, the seven polysilicon makers NPD Solarbuzz defines as Tier 1 (GCL, Hemlock, OCI, REC Silicon, SunEdison, Tokuyama and Wacker) will all likely return to high utilization rates, which will help amortize fixed costs over increased shipments, according to the report.
Strong end-market demand will also enable some wafer makers to ramp up equipment previously purchased but never used, says NPD Solarbuzz. Some suppliers are already acquiring previously mothballed lines or competitors' capacity, and larger ingots and improving wafer plant productivity will also help meet growing demand, the company explains.
Increasing demand should help firm up both polysilicon and wafer prices, says the report. In some cases, such as high efficiency wafers, supply tightness may enable price increases, but the company still assumes extreme competition and production sufficiency will restrict broad-based polysilicon and wafer price increases.
NPD Solarbuzz says that compared to the very challenging past couple of years, increased productivity that enables wafer manufacturing costs to be this low – along with firm pricing and rapidly growing shipments – is expected to create a substantially more optimistic opportunity for polysilicon and wafer makers next year.