Solarfun Enters Silicon Supply Seal

Solarfun to Purchase $230 Million in Solar Wafers From Korean Company
January 03, 2008: 07:47 AM EST

NEW YORK (Associated Press) - Solarfun Power Holdings Co. said Thursday it has agreed to purchase $230 million worth of silicon wafers from a Korean conglomerate over a seven-year period.

Solarfun did not disclose the name of its partner.

Under the agreement, the solar-power system maker will receive the wafers starting this month. Volumes will accelerate to products with 30 megawatts worth of annual generating capacity by 2011.

A one-megawatt plant running continuously at full capacity can power 778 households each year, according to the U.S. Department of Energy. Solar technology has lower capacity since its power generation is constrained by availability of the sun.

Prices will be fixed, but decline through the contract's term. Fixed-price contracts are favored by solar-product makers since spot prices for polysilicon are much more expensive. As more capacity comes on line to produce the costly solar and semiconductor component, analysts and the industry expect prices to ease.

As part of the deal, the Korean company also receives options to purchase back a certain percentage of the wafers as full solar systems beginning in 2009.

Solarfun Chairman Lu Yonghua said in a statement that the contract will help the Qidong, China-based company meet its goal to manufacture products with 360 megawatts worth of generating capacity by mid-2008.

It also allows the company to "explore OEM as a possible addition to our business model," Yonghua said. OEM, or original equipment manufacturing, is an agreement in which multiple companies partner to manufacture a product, but sell it under one brand.