Nurturing Indian Silicon Photovoltaic Material manufacturing against Chinese onslaught.

Nurturing Indian Silicon Photovoltaic Material manufacturing against Chinese onslaught.

H S Gopala Krishna Murthy, PhD, IISc., Bengaluru, India.

As a person who had developed Indian know-how and  manufacturing capabilities for producing poly, ingots and wafers at highly competitive prices way back in 1990s, I am all for Atmanirbhar Bharat for silicon.  However, there are forces outside the country constantly plotting to thwart this highly desirable ambition. Great hurdles are being put on the road of India’s efforts to start local manufacture even at a smaller scale.  This is not just Indian story.  It is universal and an economic giant like the United States of America is also prey to this conspiracy.  Europe is not very serious about self-reliance as only half-hearted attempts are being made towards this.  All of us know who the conspirator is and how stumbling blocks are being thrown regularly by this villain.

Let us begin with Polysilicon which is the starting material.  Today, Chinese p-type poly is being offered at US $ 3.9 per kg and the n-type material at about $ 4.63 per kg.  This is a ludicrous price for poly considering that Metallurgical silicon which is the basic material for polysilicon is sold at about $ 1.8 per kg in the Chinese market (and $ 2 per kg outside China.) and about 1.4 kg of this material is required for producing one kg of poly.  Further, energy consumption for polysilicon is about 46 units per kg. This amounts to about $ 1.2 to $ 1.8 per kg of poly.  This means that Met Si and electrical energy consumed combined amount to more than $ 3.5 per kg of poly.  With consideration for the cost of operation, capital cost, labour cost and others, the price of the cheapest poly is reported to be about $7 per kg.  Outside China poly price is about $ 22.  Considering that almost 98% of ingots are produced in China with Chinese poly, the price of poly outside China is irrelevant for the present discussions. The reason for offering poly at so low price—much less than cost of production is stated to be that there is a glut in the market.  Many poly manufacturers in China have shut-down their plants ostensibly for carrying out maintenance works.  However, there are projects in Inner Mongolia and other provinces of China of about 200000 tpa capacity being erected and to be commissioned by 2025.

Let us consider prevailing ingot and wafer costs.  Nobody gives cost of ingots as buyers of ingots for making wafers are miniscule.  Hence, only wafer costs are quoted.  Today an M10 wafer is being sold at less than RMB 1.7.  The reported lowest cost of manufacture of these wafers is RMB 1.9.  Hence, wafers are also being offered at less than cost price.  The reason given is that the demand has dwindled down and to keep minimum inventory and to have cash flows, manufacturers do not have any choice than to sell at less than cost price.

The reduction in the cost of the material input results in reduction in the cost of the cells and modules as well. 

In the past one year, poly prices have reduced by 40-44%.  Wafer prices have reduced by 37.5 to even 50%.  Cell prices are reported to have come down by 13 to 23% with the Topcon n-type 182 mm 130 micron cell prices coming down drastically by 37.5%.

The impact of such low selling prices of poly and wafers is stark.  All Chinese companies are predicting heavy losses in 1H of 2024.

Thus Xinte Energy a leading manufacturer of polysilicon is expecting a loss in the range of  between CNY 780 million ($96.22 million) and CNY 950 million for the six months ending June 30, 2024, compared to a CNY 4.75 billion profit in the same period last year. This is in spite of increased production of 50% and decrease in cost of production by 30%.  The reason given by Xinte is the low market price of poly.

Longi the leading ingot, wafer and module manufacturer has issued a forecast that for the 1H of 2024 it is expecting a loss in the range of  RMB 4.8 to 5.5 Billion against a huge profit of RMB 9178 during the same period last year.  The reason given for this drastic change in its performance is the low market price of its products.

The reason for the low selling prices of silicon products is attributed to high competition among the producers to maximise their production, sell the inventories in a market where the demand has  plummeted and generate some hard cash.  It is well-known that China has installed huge capacities for polysilicon, ingots, wafers, cells and modules and continues in increasing capacities.  The Chinese government which has always tightly controlled the activities of producers is allowing this drift in the prices to ensure survival of the fittest in the silicon photovoltaics.  Only those who can survive this price onslaught will survive and the others will automatically exit.  China MITI is introducing stricter norms for photovoltaic production for new capacities including efficiency, energy consumption, water requirement, financing and marketing so that it can control over capacity and allow the most efficient technologies and products to survive. 

But is this the real intention or is there some other sinister strategy to ensure the stranglehold of Chinese hegemony in the energy front?

Naturally, such crash in the Chinese prices will have an impact on the world.  Countries like India and the US and to some extent Europe have been providing tariff protection and incentives to local manufacturing of  silicon modules.  India has reintroduced the ALMM tariffs on imports of cells and modules to bolster local manufacture and push its ambitions PLI schemes.   Though this appears to be justifiable, its impact is disastrous.  We know that just before the ALMM was introduced, huge quantities of modules were imported from China with the result that last year we had a record installation of solar power plants.  However, after its introduction this year, such installations have dwindled for two reasons.  The first is local modules prices are higher and hence, project costs are higher.  Secondly, the availability of local modules is much lower than the demand.  Project developers are therefore forced to import modules by paying import duty.

India has recently taken an ambitious subsidy supported residential solar roof-top projects to encourage households to become self-sufficient in electricity on the one hand and also reach the ambitious goal of 50 % electricity generation by renewables by 2030 as committed in COP 28.  For this and for many other government funded projects, only locally made modules have been made mandatory.  However, as local manufacture of wafers and cells is as yet taking baby steps, local modules are greatly limited with the result that there are delays in implementing such projects.   Moreover, there are complaints that locally made modules are not efficient and reliable compared to imported modules.  Added to this Indian producers of modules are exporting a great part of their production to USA which has banned imports from China and South Asian countries.  Naturally good quality modules are exported leaving poor quality modules for local needs.  It is reported that some unscrupulous parties are exploiting the situation by resorting to using second-hand and refurbished modules.

The scene has become precarious for local production with the crash in the prices of Chinese cells and modules.  Even after levying import duties, Chinese modules have become cheaper than local modules.  Thus imported modules are available at about Rs. 13.5 per watt whereas local module are pricier at more than Rs. 22 per watt.  And to add salt to the injury, local modules are not available in adequate quantities.

So, what should the country do?  How to tackle the Chinese aggression against local production?  Should we completely ban imports of modules from China but allow import of poly/ingots/wafers to make local cells and modules and rapidly go for backward integration?  Today we do not know the status of the firms which have been sanctioned PLI schemes for poly/ingot/wafers/cells and modules as they have not been regularly reporting about their progress in implementing the PLI schemes and when they are going to commission their production units.  We do not even know whether they have slowed down because of the low import costs.  Hence it would be not possible to know local production capacities we will have in the next two years so that further planning cannot be made to increase capacities. The government should make an assessment of the progress of these PLI licensees and ensure that they meet at least their targeted date of implementation if not advancing the dates.  The Government should also assure these units that their production would be lifted first before resorting to imports to meet the shortages.  It should develop a mechanism by which the local modules are distributed to all stake holders equitably so that no one would try to avoid using these local modules because they are priced higher than imported modules.  Fortunately a new government is in office and will be administering the country for the next five years.  Hence policy continuance for the next five years is assured.  The government should assert its commitments to achieve Atmanirbharata in silicon solar PV and encourage other stake holders to make investments in technologies and capital in a big way so that India will be able to have scale of operation which will ensure that the cost of manufacture is low.   The Government should serious consider more and better incentives to entrepreneurs to encourage more investments.  I should mention here that some NRI’s who wanted to set up production in India have decided to go to USA as the incentive given there are better than in India.

The Government should also form a technical committee comprising industrial leaders, technocrats, experts in silicon from India and abroad and academics (no bureaucrats!) to monitor the developments in the field and give timely suggestions. This committee should also set up an R & D facility to study all aspects of silicon manufacture, particularly, poly, ingots, wafers and cells which are the most expensive stages of manufacture.  The stakeholders-once they have started manufacturing- should provide funding and projects to this set up to solve their problems and improve the process and products.  This is what China did to come to this level of advancement in silicon.  Many developments which were in laboratory like FBR poly, CCZ and diamond wire sawing which had been developed in the USA and Europe were made commercially successful by the Chinese in a remarkable way.  If one sees the number of publications by Chinese Academia and Industry in the past two decades on various aspects of silicon technology one will understand their strategy for development, innovation and success.  India should emulate China here.    The committee should also take the responsibility of developing local expertise for making critical equipment like crystal growing furnaces, wire saws, consumables used in these processes like fused silica crucibles, diamond wires etc.

We should realise that China has on several occasions used this ploy of flooding the market with cheap products when there are initiatives to localise production.  Chinese manufacturers will also start negotiating with other countries to set up local production units.  In this way they  ensure that local entrepreneurs will not enter the field. The gullible entrants get frightened and abandon their efforts. Once the field is clear, the Chinese hike the prices and make huge profits.  Like what they have been doing in our northern borders, slowly creeping in to our land, in the same manner, the Chinese are resorting to all sort of methods to browbeat us and establish their dominance.  We should not succumb to such tactics and establish good manufacturing base in our country for silicon.  As energy is a strategic asset we should not be dependent on others. As we have plenty of solar and wind energy bestowed on us throughout the year we can tap these to become energy independent even from the fossil fuels which we do not have in adequate quantity.