The agreement between SFC and MEMC’s affiliate, MEMC Singapore, will see a new facility built in Ulsan. Production is expected to begin in 2013, with an initial annual polysilicon capacity of 10,000 metric tons: the potential to expand this will exist. Both parties will put up 50 percent of the capital investment.
Commenting on the agreement, Hyun-min Hong, executive director of SFC’s Strategic Planning Division, says: "This joint venture signals SFC’s entry into the fast moving renewable energy market and establishes a new engine for long-term growth."
According to industry analysts at Jefferies & Company, Inc. the long term benefits of the JV "modestly outweigh the near-term ~$250M equity investment".
Samsung enters solar
The move marks Samsungs entry into solar. The analysts go on to say that it "should be viewed as an industry positive for the long-term growth prospects of PV." They add: "Samsung competency is mass production, market share domination, and low price. It is clear that with Samsung in the equation of polysilicon supply/demand, polysilicon prices will head lower longer term. It is unclear whether Samsung will accelerate its entry into cells/modules."
Benefits and threats
In terms of benefits to MEMC, Jefferies states: "Samsung represents a partner with high purity chemical processes that can offer MEMC a global manufacturing base to support the MEMC solar wafer business in Asia. Samsung also makes plant financing easy. We believe MEMC is buying significant amounts of polysilcion from other polysilicon vendors, and clearly more internal production at a lower price is a good thing even though the incremental impact to the balance sheet is $250M."
However, all is not plain sailing, with Jefferies believing there are also a number of concerns. The analysts note: "It is unclear if MEMC can hold onto its proprietary technology in a JV structure, though some IP protection can be expected. We believe the MEMC equity contribution will be 25 percent to MEMC, 25 percent to Samsung, and 50 percent bank debt to the JV, which sits on the JV balance sheet.
"The polysilicon will not ramp until 2013, and thus the near term impact is $250M of spend without additional polysilicon. That $250M may have allowed MEMC to secure polysilicon at low prices from Hemlock or Wacker with delivery in 2011."
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