By Ucilia Wang
Suntech Power Holdings (STP) has invested about $8.1 million in Asia Silicon, which has been supplying Suntech with the raw material for making solar cells.
Suntech, based in Wuxi, China, said Tuesday it bought a minority stake from an existing shareholder of Asia Silicon, which is located in Qinghai, China.
Back in 2007, Suntech said it had signed a seven-year, $1.5 billion deal with Asia Silicon. Asia Silicon was to begin delivering the material in the second half of 2008. Suntech said at the time that the contract would give it the cheapest silicon it could find. The company also said it would pay more than $40 per kilogram for the first half of the deal, and less than $40 per kilogram for the remainder of the contract.
Asia Silicon is a new entrant in the market. The company said it began producing silicon at the end of last year, and is revving up its manufacturing pace to reach 2,000 metric tons per year by the middle of this year.
Owning a piece of a silicon company could prove a good move at a time when silicon prices are falling rapidly. The trend, coupled with the economic downturn that has softened market demand, has prompted many solar cell makers to renegotiate their contracts with silicon makers.
Silicon makers aren’t immune to market forces, however, and Suntech has seen its investments in two silicon makers, Nitol Solar and Hoku Materials, taking a dive. Suntech said last month that it would incur a charge between $49 million and $52 million in its fourth quarter financials as a result of its stakes in Nitol and Hoku.
Hoku, based in Pocatello, Idaho, recently said it could have trouble building its very first silicon factory because a few of its customers couldn’t make the advanced payments that would help to pay for building the factory in Idaho.
Suntech is scheduled to release its quarterly earnings Wednesday.