[SMM Analysis] U.S. Senators require silicon wafers to be included in local manufacturing restrictions

On February 28, several U.S. senators wrote to U.S. Treasury Secretary Janet Yellen, requesting the re-formulation of the additional tax credit rules and guidelines for domestically produced content in the Inflation Reduction Act (IRA) and ensuring that appropriate incentives will be given to the production of silicon wafers and polysilicon in the U.S.

In the IRA's additional local manufacturing credit rules, it is clearly stipulated that the value of domestic manufacturing in the United States accounts for more than 40% of the "manufactured products" that constitute the system, and the proportion will increase to 45%/50%/55% year by year from 2023 to 2025. Products that meet the requirements can get an additional 10% subsidy. However, only photovoltaic trackers, photovoltaic modules, and photovoltaic inverters are classified as "manufactured products." Among them, photovoltaic modules must have U.S.-made materials including photovoltaic cells, frames, backsheets, glass, etc. to receive full deductible. There is no clear request to use domestically produced silicon wafers or polysilicon materials for manufacturing.

"China currently controls nearly 100% of global silicon wafer production and nearly 80% of polysilicon production, the two most labor- and capital-intensive links in the solar supply chain," the senators wrote in the letter. To encourage new investment in these industries in the United States, regulations for domestic manufacturing content incentives must appropriately consider the value contribution of domestic wafers and polysilicon to finished solar products. Regulations must also evaluate solar products separately from other technologies used in projects, such as energy storage. "

The senators demanded that photovoltaic modules should not be considered American-made unless they use American-made silicon wafers. This requirement is more stringent than the current regulations. The senators believe that only by vigorously encouraging and supporting domestic silicon wafer manufacturing can we completely break away from and break the dominance of China's photovoltaic supply chain.

According to SMM, only Qcells is currently building solar-grade silicon wafer production capacity in Cartersville, Georgia, US, with an expected production capacity of 3.3GW and is expected to start production at the end of 2024. Qcells may become the first manufacturing company in the United States to integrate silicon ingots, silicon wafers, cells, and modules. Six other companies that may build silicon wafer production capacity in the United States are still considering plans or site selection.

In the cell production process, after the introduction of the IRA policy, 3SUN, Heliene, Maxeon, Meyer Burger, Qcells and Silfab jointly announced plans to produce batteries in the United States. Currently, there is not a large amount of active crystalline silicon cell manufacturing capacity in the United States. Cell production companies including Suniva (with a production capacity of about 1GW) and Solar4America, a subsidiary of SPI Energy (with a production capacity of about 1.5GW), are not expected to start production until mid-2024. Other companies are still in the stages of considering planning, site selection and construction, and it is expected to start production in 2025.

Currently, the only U.S. photovoltaic manufacturing company that can receive additional IRA advanced manufacturing subsidies is First Solar, which makes thin-film solar modules. Regarding the letter from the senators, due to the serious lack of domestic industrial chains in the United States, although the U.S. government may increase incentives for production capacity investment in order to improve the domestic photovoltaic supply chain, it will still take time. U.S. module manufacturers or cell manufacturers still need to rely on products from overseas photovoltaic manufacturers, mainly China, for production.