Hanwha invests in REC Silicon – “First step to US value chain”

Hanwha Solutions, whose photovoltaics subsidiary was the world’s sixth largest solar module supplier in 2020, will invest NOK1,402.1 million (US$160.35 million) for a 16.67% stake in Norway-headquartered and U.S.-based polysilicon manufacturer REC Silicon. “I am excited to report this first step in the creation of a low carbon solar value chain in the United States,” says Tore Torvund, chief executive officer of REC Silicon.

The transaction is expected to close in January 2022. Hanwha has also expressed a strong interest in being represented with one member on the Board of Directors of REC Silicon. The shareholders of the latter will decide on this proposal at a yet to be scheduled extraordinary general meeting.

According to a press release from REC Silicon, Hanwha Solutions’ solar business unit Hanwha Q Cells has a global cell production capacity of 10 GW. In the United States, the company is running one of the largest solar module factories with a capacity of 1.7 GW and holds a market share of 25%.

Hanwha abandoned its inhouse production of solar wafers in 2017 and of silicon ingots in 2018. The company’s polysilicon plant with a capacity of 15,000 metric tons (MT) in Yeosu in South Korea was closed in 2020, under the weight of high industrial electricity rates in South Korea and the pressure from low-cost polysilicon plants in western China.

Signs of new wafer production capacity outside China

According to REC Silicon, Hanwha’s investment will ensure the necessary resources to reopen REC’s fluidized bed reactor (FBR) plant for granular polysilicon in Moses Lake, Washington “during 2023.” Before it was mothballed in July 2019, the plant had a production capacity of 20,000 MT. The passage of the Solar Energy Manufacturing for America (SEMA) Act currently under discussion in the U.S. Congress would “support the parties’ ambitions to establish a comprehensive US solar value chain, from production of polysilicon to fully assembled solar modules,” REC Silicon says.

That can only mean that Hanwha is considering the establishment of wafer manufacturing capacity in the USA – or elsewhere outside China – to close the gap in its value chain. Otherwise, the investment in REC Silicon wouldn’t make sense: Global solar wafer production is almost completely concentrated in China and U.S.-made polysilicon has effectively been shut out from China through prohibitive import duties.

However, a spokesperson of Hanwha Solutions only said: “Signing the SEMA bill into law, and other policy incentives for the solar industry, will boost the value of those companies capable of manufacturing polysilicon in the US. Capitalizing on our expertise in polysilicon production in Korea, we will generate synergy with REC Silicon production in the US.” That is not – yet – an indication of any wafer plans, maybe due to Asian caution or to tactical behavior before Congress has passed the SEMA Act.

In contrast, a press release from Hanwha Q Cells called things as they are: Hanwha’s initiative “will gain a further boost if the US congress passes its SEMA legislation by the end of the year. (...) Given that the Company operates a solar module factory in Dalton, Georgia with an annual production capacity of 1.7 GW, the passage of the legislation will boost the Company’s investments into a comprehensive solar value chain, from the production of polysilicon through to fully assembled solar modules.” Hanwha would make those investments “throughout the solar value chain in the US.”

Wafers made of material from REC Silicon would provide Hanwha with a supply chain untainted by forced labor in the Xinjiang Uyghur autonomous region in northwestern China. On June 24, the U.S. Customs and Border Protection agency issued a so-called Withhold Release Order against goods using silica-based products from Xinjiang-located Hoshine Silicon, the world’s largest manufacturer of metallurgical-grade silicon, the main feedstock for polysilicon. Since then, several solar panel shipments from Canadian Solar, Trina, Jinko and Longi have been detained by the U.S. customs.

Hanwha could benefit from REC’s polysilicon in still another way. The FBR deposition process consumes very little electricity and the plant in Moses Lake uses renewable hydropower. The resulting low carbon footprint is a definite advantage in Hanwha’s Korean home market: In June 2020 the Korean Ministry of Trade, Industry and Energy introduced carbon footprint criteria for the promotion of PV installations.