October 17, 2006 10:45 PM PDT

Solar-cell business poised for huge growth

SAN JOSE, Calif.--Any way you look at it, the solar business is going to be big in 2010, according to equipment manufacturer Applied Materials.

By then, a number of solar-cell manufacturers will be running plants with 10 production lines, and each production line will be capable of squeezing out 100 megawatts worth of solar cells a year, Charlie Gay, vice president and general manager of Applied's Solar Business Group, said on Tuesday during a luncheon briefing at Solar Power 2006, a conference taking place here this week.

That comes to 1,000 megawatts a year per factory, which is about how much electricity gets produced by a coal or nuclear plant, he said. Build a megasize solar factory, therefore, and you don't have to build a coal-fired power plant. Put another way, the entire output of solar cells made in 1980 could be produced in a day in one of these plants.

These factories, moreover, will be huge: A 1,000-megawatt solar facility will likely be 200 times larger than the typical 300-millimeter semiconductor facility. Those often cover more than 10,000 square meters. Unlike chips, solar cells don't shrink in size over time without losing efficiency.

These factories will also consume a lot of silicon. Gay estimated that each watt of power will require 7 grams of silicon, which means that each 1,000-megawatt plant will need 7,000 tons of processed silicon a year.

"If you divide that by 365 days a year, it comes to about 20 tons a day, or nearly 1 ton an hour," he said. Although the solar-panel industry right now is suffering through a shortage of processed silicon, several chemical processors in China, Japan and Korea are currently building up capacity. This should help alleviate the current shortage by mid- to late-2008, he said.

To Applied, of course, these numbers are music. The company, which is one of the largest manufacturers of semiconductor manufacturing equipment, sells solar-manufacturing equipment too. Earlier this year, the company bought Applied Films, a solar-equipment manufacturer.

Applied Materials also makes equipment for producing TFT panels, the glass that goes into LCD panels; with a few tweaks, the same equipment can be used to produce some types of solar cells. By 2010, Applied hopes that solar equipment will add $500 million to revenue annually.

Until recently, solar manufacturers often developed or at least tweaked their own manufacturing equipment, said Gay, who has worked in the solar industry for years. The rise in demand, however, is prompting more of them to look at equipment from third-party manufacturers, particularly because these third-party manufacturers specialize in high-output machines.

"A whole new set of equipment becomes interesting to the solar industry," he said.

Semiconductors and TFT glass, however, sell for more, in terms of square meter, than solar panels. A square meter of LCD glass might be worth $1,350. These manufacturers can thus afford the multimillion-dollar products that Applied produces. Some solar manufacturers at the show said it remains to be seen how much, in terms of capital equipment, solar cell manufacturers will be able to afford.

Gay, however, noted that demand is rising and that the prices of solar cells, measured in cost per watt, continue to drop. In 1980, a solar panel cost about $21 per watt. (That is, each watt produced from the panel would cost about $21 each over the life of the panel.) Now it's about $2.70 per watt.

By 2010, crystalline silicon solar cells will sell for about $1.25 to $1.50 per watt, while thin-film solar cells will sell for 90 cents to $1.30 per watt. The thin-film cells, however, will be less efficient.

He likened the cost decline to what has occurred in transistors. In 1974, a transistor cost about 10 cents to produce. Now, an individual transistor costs 5 nanodollars, or 5 billionths of a dollar. Producing an iPod back in 1974, he extrapolated, would have cost a few billion dollars.

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People do not realize that gas, in a free market, does not suddenly run out
Gas does not suddenly, in a free market run out. Prices today reflect expectations of the available supply and demand for goods and services today and tomorrow. If, for instance, the expectation is that oil supply will decrease or will be less than demand in ten years time, it will influence oil prices today. Prices today will go up. People will have the incentive to conserve (demand will decrease) and to develop new alternatives.

Actually, we are probably conserving too much, because of OPEC and Governments taxations are keeping prices higher than they otherwise would be. That oil soon runs out is a political slogan that keeps coming up to keep politicians busy. This political slogan sounds true and will, therefore, in the political market sell. Only true markets can handle this sort of complex things. Compared to markets, Governments are too simple minded and primitive, because of the fact; they lack the essential tools that are needed to solve these kind of problems. They primitively, for example, regulate car manufacturers (and in the end consumers) to produce cars which improve gas mileage and impose upon people speed limits, without knowing if these actions are good or bad. Only markets can tell if conservations are good or bad, because market prices gives people the necessary signals of supply and demand, and people can therefore compare these prices to their own values if they are profitable or not to realize. The essential tools that are needed (which Governments are always lacking) are, as mentioned, market forces and the market price mechanism. Without these mechanisms nothing can be done. For example, a scientist will not reach the truth in trying to calculate physical available quantities and compare that to what he expects physical demand will be. It is silly, it is static and mechanistic.

Every individual and every business around the whole world, with all the different knowledge, all the time, and in all possible situations, and which are directly influenced of higher prices, will conserve and try out alternatives. Even people and businesses that are not directly influenced of higher oil prices, also, have incentives to find out alternatives (these solar cell manufacturers are examples of those alternatives). These things happen all the time with all goods, services, capital and raw materials, and it run smoothly without us even noticing it. If Governments were going to replace the markets, we would probably end up with no available goods and services at all! In a sense, this would solve the conservation problem (joke).

To make an example of this lack of knowledge and the belief that you can ignore markets, look at the so called Club of Rome, a group that made fools of themselves in the 70s with their book Limits to growth <a class="jive-link-external" href="http://www.answers.com/the+club+of+rome?gwp=11&#38;ver=;method=3" target="_newWindow">http://www.answers.com/the+club+of+rome?gwp=11&#38;ver=;method=3</a>
If their predictions were right, we would barely, even, live today!

Alex Kozinski wrote and I quote;

The Limits of Growth made some very concrete and highly
alarming predictions: there will . . . be a desperate [arable] land shortage before the year 2000 we would run short of gold by 1979, of silver and mercury by 1983, of petroleum by 1990, of zinc by 1988, of tin by 1985 and of natural gas by 1992. The books forceful message was that we were headed for a world-wide calamity, and must fundamentally  and immediately  change the way we live. Nor was this merely a question of physical survival; at stake was humanitys very
soul: The crux of the matter is not only whether the human species will survive, but even more whether it can survive without falling into a state of worthless existence.

<a class="jive-link-external" href="http://notabug.com/kozinski/gorewars.pdf" target="_newWindow">http://notabug.com/kozinski/gorewars.pdf</a>

Björn Lundahl
Göteborg Sweden
Posted by Björn Lundahl (253 comments )
Reply Link Flag
Short sighted
Oil and gas are a resource that takes millions of years to produce, so it is a bit short sighted to say it will never run out. At the rate we are consuming oil and gas they will effectively run out. By effectively I mean the cost to acquire and process will be prohibitive and alternative energy sources will be more cost effective.
This is independent of any market forces.

Solar energy is generated every day and so can be effectively created on a continuous basis without depleting the reserve. As market forces and development continue to reduce the cost of solar energy there will at some point in the future be a point where it could be more cost effective than fossil fuels.

The same goes for other energy sources like wind, wave and bio-mass. For bio-mass we can grow new energy crops so the fuel is renewable.

I am actually looking forward to a time when alternative energy sources are being taken seriously and we start to fix the damage we have and continue to create by burning fossil fuels
Posted by ahickey (177 comments )
Link Flag
You Are Missing The Point!
Global warming is a fact. I have heard all of the arguments and the fact remains the temperature is rising quickly. Even if it isn't fossil fuel combustion byproducts that are the main cause, we need to make an effort to try to stop or slow this trend. Also, there are other forces than market forces driving the fossil fuel industry. Lobbyests and special interest groups are creating influence based on money, not logic, with politicians. Car manufacturers also make a point of researching and patenting better technologies so they can shelve them and perpetuate their lucrative business without having to convert production to alternative technologies as long as possible. do you really believe that if the market comes back down to where it was two years ago that prices will follow? Oil companies are experts at taking the public's short memory and make them feel like they are getting a bargain when they are actually still getting gouged. Look at prices now. Consumers are thinking "Wow prices are low" without considering where they really should be. Only when government mandates are firmly made will the car industry truly improve gas mileage. Average gas has only improved one mpg since mandates over 20 years ago. There is something really wrong when one commercial after another brags about 30 mpg as if it is something to write home about. Car companies need to adjust the public's "choices" and not play the pricing game where buyers don't save money on an ugly Prius over the life of the car compared to money spent at the pump (unless they drive a hell of a lot).
Posted by matt_parker (52 comments )
Link Flag
A good point, but I have some reservations
Thanks for presenting this explanation of why things are not likely to change suddenly or catastrophically in terms of fossil fuel availability and for calling attention to the fact that market forces alone can produce transitions as the economics of alternatives change.

My main objection to your argument deals with the simplistic assertion that "only true markets can handle this sort of complex things." I certainly share your reservations about the efficiency of direct Government controls, especially over the long term.

But I think that some readers may not understand that in a "true market" each producer must take into account the indirect costs to society of his actions as well as the long term costs of his actions rather than just the immediate costs and immediate profit.

Experience teaches us that some businesses, particularly ones which are controlled by reasonable and ethical founders, are very good at taking into account the indirect and long term costs. But other businesses, controlled by unethical individuals or stockholders without a long term view of the company's success, let alone the social costs, may very well make short term choices which would not be optimal if all costs were considered. (The most extreme example I can think of would be the case of a confidence man who does not even have a business, but has investors and runs off with the money. Dealing with this sort of thing has been a traditional role of Government, just as running a similar confidence game has also been a traditional role of Government.)

Where the real debate comes is in defining the proper role (if any) of Government and other forces in taking the long view and also forcing the consideration of indirect costs.

Various techniques from regulation to tax penalties or subsidies and credits are available, and one of the most promising in letting the market mechanism work is the one which has been proposed for trading in depletion credits, polution credits and greenhouse gas emission credits to balance the market forces and let the market mechanism work.

I don't want to take this thread of commentary into a deep economics or government discussion, but I did want to see the additional complexity of real world market economics presented to the readers.
Posted by internetdog (8 comments )
Link Flag
Is this a typo?
In the second to last paragraph, should it be megawatt, not watt?
Posted by extinctone (214 comments )
Reply Link Flag
Posted by matt_parker (52 comments )
Link Flag
I wonder
Do solar cell companies use solar power?
Posted by Andrew J Glina (1673 comments )
Reply Link Flag
Solar Electrons and LEDs
The oncoming LED lighting revolution is going to lower the electric requirements of Lighting to a point
where Solar Systems could fully serve that electron requirement in Millions of homes and businesses.
Posted by star power (1 comment )
Reply Link Flag

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