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TSMC Buys $50M Stake in Stealthy Solar Startup Stion

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The march of the chipmakers into solar continues. Taiwan Semiconductor Manufacturing Co. (s TSM) — a heavyweight in contract chipmaking — announced Wednesday that it has signed a licensing and joint development agreement with stealth San Jose thin-film solar startup Stion, and has also taken a $50 million, 21-percent stake in the four-year-old developer of CIGSS (copper indium gallium diselenide disulfide) solar panels through its affiliate VentureTech Alliance. Under the agreement, Stion will license and transfer its CIGSS technology to TSMC, and TSMC will in turn supply “a certain quantity” of solar modules to Stion using the technology.

The deal represents a big cash injection for Stion, which raised $6 million in 2006 and in 2007 raised $15 million from investors including Lightspeed Venture Partners, General Catalyst Partners, Khosla Ventures, Braemar Energy Ventures and Moser Baer Photovoltaic. It’s also the second big investment for TSMC in solar power since it announced in mid-2009 that it would be shopping in the space. In December, TMSC announced plans to take a 20-percent stake in Taiwanese silicon solar cell and wafer maker Motech Industries for an estimated $193 million.

TSMC is far from the first semiconductor giant to move into solar photovoltaic technology. Indeed, the high-volume, cost-focused world of chip manufacturing offers a lot of important expertise for solar startups trying to take innovative new technologies to mass production.

Late last year MEMC Electronic Materials (s WFR), a company that makes silicon wafers for the solar industry, announced that it would buy up SunEdison, and National Semiconductor (s NSM) acquired power monitoring software maker Energy Recommerce. Applied Materials (s AMAT) has put a lot of money into its thin-film amorphous silicon fabrication systems, which have been bought by a dozen or so would-be thin-film solar panel makers. Intel (s INTC) spinout SpectraWatt, after a few years of delay, said in March that it raised $41.4 million to ramp up production and get its first customer shipments out this year.

The move also indicates that Stion, like many of its would-be next-generation solar power technology startups, is looking for deep-pocketed partners to get them from laboratory to factory-scale production. The solar industry is expected to see the oversupply situation it faced in 2009 continue well into this year, according to a May report from Pike Research. That, along with the general economic downturn and more challenging environment for raising capital, has led solar industry analysts to predict that many startups will falter or be snapped up by larger competitors.

The world of CIGS (copper, indium, gallium, selenium) solar panels is seen as particularly open to mergers and acquisitions, since the lower-cost, yet lower-efficiency panels are just beginning to be deployed in significant scale, unlike the competing cadmium telluride thin-film panels developed by First Solar (s FSLR). CIGS developers such as Miasole and Nanosolar have taken in billions of dollars of venture capital financing, leaving investors and industry watchers eager to see commercial scale production.

Solyndra, a CIGS developer that’s ramped up production backed with a $535 million Department of Energy loan guarantee, has disclosed that its manufacturing costs are far higher than industry standards. In the meantime, high prices for silicon that made thin-film alternatives seem attractive have fallen steeply over the past year or so, making the advantages of lower-efficiency thin film panels less obvious.

Stion’s CIGSS technology adds sulfur to the CIGS mix, though the company doesn’t go into any detail on the different chemistry on its Web site, and has remained quite stealthy about how its panels are made (we’re expecting a call with Stion CEO and former Shell Solar Industries president Chet Farris shortly to provide more details). The company does claim efficiencies of 10 percent to 11.8 percent for its panels, which are aimed at residential, commercial, utility-scale and off-grid applications.

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