Answer

According to our understanding, India and US have the right building blocks in place to backward integrate in polysilicon, however the capacities will come over longer term. Given the capital-intensive nature of production, government support will be a key for this segment.

The Right to win in polysilicon and ingot wafers are as follows:

• Low cost of capital – Both polysilicon and wafer production are highly capital-intensive. According to estimates by the IEA, the capex for polysilicon production in India is approximately $140 million per gigawatt (GW), while in China, costs are 40% lower. Therefore, companies able to secure capital at a lower cost will hold a significant competitive advantage in this sector.

• Low-cost consistent power supply- In China, power accounts for approximately 50% of the cost of polysilicon production. As a result, most Chinese manufacturing facilities are located in provinces like Xinjiang and Inner Mongolia, where access to cheap power is readily available. In India, utilizing a captive distressed thermal power plant in the coal belt could be an ideal solution for reducing production costs. The Adani Group holds a clear advantage in this regard, and Reliance has also explored acquiring distressed coal plants, such as the SKS power plant. In the future, round-the-clock (RTC) renewable energy could serve as an alternative power source for polysilicon production.

• Economies of Scale – As a rule, the production costs for a large-scale polysilicon producer with a capacity of around 10,000 tons can be over 40% lower than those of a small-scale producer with a capacity of 1,000 tons. Larger plants benefit from economies of scale but require significantly more capex, highlighting the importance of raising capital at lower rates. This reinforces the competitive advantage for companies that can secure financing at a lower cost.

• Technology- The modified Siemens process is the predominant method for polysilicon production, while the Czochralski (CZ) process is utilized for ingot manufacturing. Currently, the equipment employed in these processes is largely standardized, and the stringent quality standards leave little room for significant modifications. Given that no Indian players possess the foundational technology required to initiate production, they will need to import standard equipment and collaborate with technology providers to establish manufacturing units. At this juncture, we believe that all players are essentially on equal footing in terms of technology.

• Raw Material- High-quality quartz is available in various states across India, including Andhra Pradesh, Rajasthan, and Gujarat. However, the production process also requires low-ash-content coal, which must be imported. Given the Adani Group’s extensive network of ports, power plants, and cement operations, they possess significant expertise in coal procurement and supply chain management. This capability provides the Adani Group with a distinct advantage over competitors in securing the necessary raw materials for polysilicon production.

I have three queries as below:

-Given the import duty hikes and prohibition of China specific restrictions imposed by some of the largest solar cell/module end-user countries such as US, where would the largest Chinese manufacturers e.g. Tongwei, Trina etc could dump/direct their current inventories?
-Per my current understanding solar cell manufacturing cost in India would be 4x that of China. How likely would this cost come down or be comparable to that of China in coming 18-24 months? Do we have an expected scalability projection and/or govt policy support to make that possible?

-If crude price breaks down to below 60USD sat early next year, do you see an significant detrimental impact of solar manufacturing and profitability in India?

Question

• What are the prospects for diversifying the polysilicon supply chain beyond China, considering its environmentally harmful and energy-intensive production? How feasible is it for other countries, like India or the U.S., to build competitive supply chains in this space?