Will Solar Cells be Outsourced like Semiconductors?

Brian Coppa | Friday 5th February 2010

[caption id="attachment_8069" align="alignleft" width="357" caption="Solar Cell Farm at Nellis Air Force Base in Nevada. Credit- defenseindustrydaily.com"]

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As stated in a recent article, the case supporting the increasing trend towards a fab-less outsourcing model for semiconductors was laid out. The question is whether this trend is likely to spread throughout the solar cell industry as well. Major foundries such as the Taiwan Semiconductor Manufacturing Company are ramping up process lines at this time hoping to attract business from companies without sufficient resources for the production of solar cells. In order to deal with this potential outsourcing issue, a review of the dynamics of the solar cell market is necessary to draw a prediction. There are actually many differences between the role of government and the flow of capital with respect to these two markets, even though many semiconductor companies also produce solar cells.

In the case of semiconductors, ie. microchips, there is significantly less government spending in the U.S. from both a research and development (R&D) and end-user subsidy perspective compared to solar cells, which reap the benefit of enormous stimulus funding and numerous tax credit programs for customers globally. Moreover, President Obama's proposed 2011 budget allocates a 34 percent increase from $225 million to $302 million in solar funding by the federal government, $152 million of that total, the largest chunk, dedicated to photovoltaic (PV) solar cells, while China is also moving in a similar direction. Out of the approximately 394 solar cell companies globally, and those in the U.S., a much higher percentage are considered small businesses compared to the advanced semiconductor market.

Thus, these domestic solar companies will be eligible for the slew of job creation tax incentive and loan programs being considered in Congressional legislation to jumpstart the U.S. economy. Furthermore, clean energy manufacturing has been proclaimed a high priority of the Obama Administration for the country's economic competitiveness in this decade, which will elevate support for bills such as the Solar Technology Roadmap Act and the Solar Manufacturing Jobs Creation Act.

In addition, the overall capital costs for developing the most advanced microchip technology at a company such as Samsung or Intel is orders of magnitude higher compared to the latest high-efficiency PV solar technology. It costs as much as $5 billion to fully equip a modern high performance microchip facility, while most PV companies spend less than $100 million on R&D. What's more, the solar cell industry is much more fragmented, since there is less commonality across companies in terms of materials, design, and processing methods, which vary from traditional silicon films and substrates to flexible substrates or virtually exotic materials. In comparison, high performance semiconductors benefit from a streamlined supply chain and many common fabrication steps, mainly on crystalline silicon substrates. Thus, it is more difficult to outsource solar cell production, especially in the case of highly innovative materials and designs.

Even though there is an analogous trend in terms of Moore's Law between shrinking the dimensions of transistor for a microchip and the thickness of a solar cell with respect to scaling from one generation to the next, the capital budget to make that happen is orders of magnitude different. As more countries, including the U.S., invest in clean energy such as solar manufacturing for its economic, environmental and national security benefits, it is less likely that companies will follow the pervasive fabless outsourcing model of the semiconductor industry.

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