As the semiconductor industry prepares to post a rare drop in revenues, with another decline expected next year, it’s no wonder that many chip companies are shifting their hopes to solar power.
Last month, Hemlock Semiconductor announced plans for a $3 billion expansion of its polysilicon production, mainly for solar cells, which some industry watchers said could signal a solar boom ahead. While chips are a matured industry, solar is just getting started — in June, research firm iSuppli predicted that investment in solar-cell production would match investment in semiconductor manufacturing by 2010.
Over the last year, semiconductor companies have seen the opportunity and rushed into the brighter industry. The overlap between the two industries is clear: chip companies have long histories of building low-cost manufacturing processes to shape and slice silicon, the key ingredient in traditional solar modules.
And the trend is global. Intel (s INTC) spun out a solar-cell startup called SpectraWatt and invested $37.5 million in German thin-film solar company Sulfurcell. IBM (s IBM) partnered with Tokyo Ohka Kogyo to develop thin-film solar panels. National Semiconductor (s NSM) launched a solar-inverter technology called SolarMagic. Semiconductor Manufacturing International (s SMI) announced plans to make polysilicon for solar cells, and Tokyo Electron and Sharp also announced a joint venture to develop new solar-manufacturing equipment.
But it’s unclear whether the solar industry really makes sense as a semiconductor savior. After all, a number of analysts have predicted that the solar market could be darker over the next few years, with a solar-panel oversupply, and a drop in module prices likely coming. The slowing of global economies also means more businesses and home owners — and even government agencies — could delay or reject spending the upfront costs needed to install a solar-power system.
Subsidies in the hottest solar markets, like Spain, could also shrink as those markets mature more. Spain’s new solar program, approved in September, set a 500-megawatt limit for solar incentives next year and a 460-megawatt cap for 2010, which could significantly slow installations in the country. And while programs in the United States, Italy, France, Portugal and Greece will take up some of the slack, they probably won’t be able to pick up all of it, according to Jenny Chase, senior analyst with New Energy Finance.
Not all semiconductor insiders believe that solar is the way to go. Novellus Systems (s NVLS) CEO Rick Hill in September said he doesn’t believe that solar makes the most sense for chip companies. Mark LaPedus at the chip industry publication EE Times wrote this week that he’s “a little disappointed” with the adoption rates in solar and thinks that green for the chip industry is “somewhat overrated.” And Cypress Semiconductor (s CY) bucked the trend in September when it gave away its remaining shares of solar-manufacturer SunPower (s SPWRA).
But with all the activity, it’s clear that many semiconductor companies believe they have something to offer. And in a soft semiconductor market, where layoffs are the order of the day, it wouldn’t be surprising if even more companies turned to solar to hedge their bets. Aaron Thurlow, global sales channel manager for National Semi’s renewable-energy segment, said he expects that will happen. “It’s probably still early [in the shift] for some of the large companies, but it’s starting now and it’s very exciting,” he said.
The trend has long been met by both welcome and trepidation from companies already in the semiconductor and solar markets. At least since Applied Materials (s AMAT) bought Applied Films in 2006, solar companies have been wondering if chip companies will bring in more competition and higher volumes of modules into the market.
It’s unclear how much of a leg up the silicon manufacturing background gives chip companies when they enter the solar market. Some analysts, such as Ron Pernick, a principal with Clean Edge, think that the natural advantage of chip companies in solar is significant. Others, such as Michael Rogol, managing director of Photon Consulting, say it depends on the size of the company, and that big companies may lose out to smaller ones on cost and flexibility.
Either way, Julia Hamm, executive director of the Solar Electric Power Association, said semiconductor companies’ involvement is important for helping solar companies deliver solar power at the holy-grail cost of grid parity. Companies that have reached high volumes in other industries can help speed solar toward larger scale and drive costs down, she said.
In addition, household names could help make consumers more comfortable with solar, she said. “There is value in name-brand recognition, to be able to go into a room of people who previously know nothing about the solar industry, and say ‘Intel, BP, Applied Materials, GE.’ People say ‘What, those people are in the solar industry?’ And suddenly people listen.”