WFR: Can Tight Polysilicon Supply Really Result in Lower Prices?
According to Digitimes, Polysilicon spot price drops 20% in two weeks:
Most industry players buy expensive polysilicon because they have scrap materials to mix with it, the sources explained. Most of these scrap materials are sourced from semiconductor companies, with overall volume being very limited. The brisk demand from the solar sector has also led to a surge in the price of scrap materials from US$100-200 per kilogram in 2006 to US$200-300 per kilogram in 2007. The average price of scrap materials currently is above US$300 per kilogram.
Tight polysilicon supply, combined with favorable long-term contracts with solar players, is a key reason MEMC Electronic Materials (WFR) is my favorite semiconductor play. I think the current situation, where the price went so high as to actually reduce demand, will be short-lived. Longer term, the supply and demand will meet at a clearing price. As long as the price is a solid one, MEMC should benefit.
Disclosure: At time of publication, William Trent has no position in the companies mentioned.
Disclosure: William Trent has a long position in SMH.
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