After stocks in Motech Industries Inc. and E-Ton Solar Tech last year became the hottest on Taiwan’s over-the-counter GRETAI Securities Market, reaching share prices in excess of NT$900 and NT$1,200, respectively, the solar power sector has continued to electrify investment markets.

“The age of solar power generation has officially arrived,” Neo Solar Power Corp. vice chairman and CEO Quincy Lin animatedly declares.

Lin had only recently retired as information officer of Taiwan Semiconductor Manufacturing Corp. (TSMC) in March 2005 when Powerchip Group chairman Frank Huang approached him about beginning a new entrepreneurial life, at the age of 56, in pioneering the formation of Neo Solar Power Corp., an enterprise to be engaged in the manufacture of solar cell wafers. By the following year, after leasing plant facilities in Hsinchu’s Hukou Industrial Zone and purchasing plant equipment, Lin had brought the new company’s manufacturing facilities online within a fiscal quarter – a record time for both reaching mass production and achieving profitability.

And Lin isn’t the only one breaking records. Gintech Energy Corp. chairman Scott Kuo, who joined the Formosa Plastics Group in his early 20s, becoming a key player in Formosa Plastics’ sixth naphtha cracker project, and was one of the founders of Formosa Petrochemical Co., also left his original employer in 2005, at the age of 60, to embark on a new venture. At the urging of Epistar Corp. chairman Y.F. Yieh and former Chinese Petroleum Corp. (CPC) and TSMC managers, Kuo bade farewell to the traditional fossil fuels energy sector to turn a new career page in the alternative energy sector of solar power.

Similar to the experience of Neo Solar Power, Gintech and under Kuo’s leadership was turning a profit within a fiscal quarter of its establishment in 2005, after purchasing turnkey plant equipment.

There has already been a flurry of personnel defections, whether from the semiconductor industry or the traditional energy sector, to the teams backing pioneering solar energy figures such as Lin and Kuo, and recent years have increasingly seen middle and upper managers from TSMC, Formosa Plastics, CPC and other leading enterprises jumping ship to throw their lot in with the solar energy sector.

Supply-driven Gold Mine

So just what is it about solar cells that is proving to be such a powerful draw? And how has it come to pass that so many new players in Taiwan and China have arisen to join the solar energy fray like mushrooms after a rainstorm since Motech Industries formally entered the field in 1999?

“If you have the capital to buy turnkey [manufacturing] equipment from overseas, it’s an immediate gold mine,” says Motech CEO Y. Simon Tsuo, who has been in the vanguard of Taiwan’s solar energy industry. The proliferation of mainland Chinese companies scrambling to enter the solar energy field is akin to flowers blooming everywhere, Tsuo says.

Driving along the highway in China’s Jiangsu Province that runs from Jiangyin through Wuxi to Nanjing provides something of a glimpse of the future, as glistening in the sunshine on the rooftops of many of the residences in the small towns scattered along the route are solar cell-powered water heaters.

Solar cells are not only coming into wide use among the residents of small-town southern China; domestic Chinese companies producing them have rapidly proliferated as well.

In June of this year Yingli Green Energy Holding Co., Ltd. became the fourth solar power enterprise from China to list on the New York Stock exchange, following the example of China’s largest manufacturer of solar cells, Wuxi Suntech Power Co., Ltd., which listed in late 2006. The manufacture of solar cells has indeed become the hottest money technology in China.

Even without the solar power boom in China, Taiwan would still have considerable presence in the solar cell manufacturing industry (see Table 1). “The [chief] consideration in our industry right now is speed,” Gintech’s Kuo says candidly, observing that companies can waltz right in to the solar power industry and are able to immediately turn a profit, precisely because the industry is facing a shortage of upstream materials. “If you can get your hands on the polysilicon raw materials, you’ll have endless business,” Kuo asserts.

To understand the scramble for scarce raw materials, one must take a look at the solar cell chain of production. Building one solar power generation unit requires a lengthy process, including securing the single crystal silicon or polycrystalline silicon for wafer production, as well as wafer slicing, solar cell production and final assembly. But there are currently only about eight foreign firms involved in the production of the needed polysilicon raw materials, and production capacity has been expanding at a snail’s pace. Thus the current dilemma manufacturers face is “whoever gets the raw materials is who will make the money,” Sino-American Silicon Products Inc. chairman Lu Ming-kuang concedes.

In the production chain, Sino-American Silicon Products fills the niche between the suppliers of the polysilicon raw materials and the end manufacturers of the solar (photovoltaic) cells, by producing polysilicon rods and ingots, growing crystals and slicing and polishing wafers. In Taiwan, the Tatung Group also has considerable interest in this sector, having last year invested in another new company, Green Energy Technology Inc., whose major business mirrors that of Sino-American Silicon Products – supplying Taiwan’s ever-growing legion of solar cell manufacturers.

Once production moves from “[raw material] supply driven” to “demand driven” and the industry becomes more robust, a number of the current players will likely fall to the wayside.

Numerous industry veterans, such as Motech’s Tsuo, estimate that the current shortfall in raw materials will continue until around 2009 before improving. “At that time the industry will definitely undergo a major reshuffle,” Tsuo predicts.

Regardless of the time frame companies are generally predicting for the materials shortage, U.S.-based Hemlock, Germany’s Wacker, Japan’s Tokuyama and other polysilicon suppliers are already actively expanding production lines. Although the current raw materials shortage has enriched more than a few players, Taiwanese businesses nearly unanimously agree that for now they’ll tough it out until that future day when the raw materials flow freely.

1st Key to Competitiveness: Inking the Contract

When raw materials are in short supply, the position of major raw material suppliers is naturally strengthened. At the end of 2005, Motech was involved in negotiations to enter into a raw materials supply agreement with MEMC, the world’s number five polysilicon producer. Talks broke down, however, and MEMC immediately turned to the embrace of China’s Wuxi Suntech, concluding a 10-year agreement to supply Wuxi Suntech with the equivalent of five billion watts worth of raw materials.

“Nobody can predict where the price of raw materials will be in 10 years – that’s the risk,” says Motech’s Tsuo, who spent 19 years researching solar energy at the U.S. National Renewable Energy Laboratory.

But Taiwan isn’t exactly lacking in such actively spendthrift companies as China’s Wuxi Suntech. Gintech Energy, for example, has concluded an agreement with MEMC for the supply of NT$100 billion in polysilicon raw materials for the manufacture of solar wafers over the next 10 years, a deal that also includes MEMC’s purchase of a 10 percent stake in Gintech.

2nd Key to Competitiveness: Technological Alliances

“This has been my sense of the energy industry since I was in my 20s,” says Gintech’s Kuo. “You may call me a gambler, but I say it’s an opportunity not to be missed.”

On 26 February 2007 E-Ton Solar Tech announced it had concluded a three-year research and development agreement with the University of New South Wales in Australia. E-Ton hopes the agreement will help take the energy conversion efficiency of its solar cells to the next level.

New South Wales University is the current world record holder for solar cell energy conversion efficiency, having achieved a conversion efficiency of 24.7 percent for a single crystal solar cell, considerably higher than the industry standard – an average energy conversion ratio of between 15 and 16 percent.

This is, however, still in the experimental stage. E-Ton and the university are hopeful they can bring that kind of solar energy conversion efficiency from the laboratory to the production line.

In his first media interview, DelSolar Co. Ltd. chairman and CEO R.C. Liang added that once equipment becomes standardized, a company’s actual technological prowess will become the major barometer of competitiveness.

Raising solar cell energy conversion efficiency by just one percent would be equivalent to reducing production costs by seven percent, thereby boosting profit margins by a corresponding seven percent, Liang says. “That one percent increase in conversion efficiency cannot be taken lightly; it is the ultimate source of competitiveness for all manufacturers of solar cells,” says Liang, who was lured back to Taiwan from the U.S. by Delta Electronics chairman Bruce Cheng specifically to take charge of DelSolar.

Liang, holder of more than 100 electric and electronic-related patents worldwide, is unwilling to go into detail regarding DelSolar’s technological capabilities. Yet while the best among the industry has currently achieved an energy conversion efficiency of 16 percent, “DelSolar’s energy conversion efficiency has reached a standard of 17 percent,” he claims cryptically, with a laugh.

Among veteran players and newcomers alike, Taiwan’s solar energy industry is broadly seeking cooperative arrangements abroad while striving to consolidate the scope of its capabilities at home. And all involved are possessed of a self-confidence that those overseas cannot see, a self-confidence fueled by Taiwan’s cumulative successes across the whole range of the semiconductor industry over the past 30 years. “This will prove to be the crucial element in the development of [cutting-edge] solar technology in Taiwan,” Motech’s Tsuo confidently asserts.

Translated from the Chinese by Brian Kennedy

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Chinese Version: 太陽能產業英雄榜