Taiwan's technology firms are pushing into the USD 35 billion global solar energy market as they leverage their expertise in chip and LCD manufacturing and eye new growth prospects beyond maturing chip and panel businesses. Chipmakers TSMC and UMC and LCD firm AU Optronics are among firms buying up smaller players or building solar cell plants in a strategy that also dovetails with the Taiwan government's initiative to develop green businesses.
Taiwan's technology firms are pushing into the USD 35 billion global solar energy market as they leverage their expertise in chip and LCD manufacturing and eye new growth prospects beyond maturing chip and panel businesses.
Chipmakers TSMC and UMC and LCD firm AU Optronics are among firms buying up smaller players or building solar cell plants in a strategy that also dovetails with the Taiwan government's initiative to develop green businesses.
Competition is also heating up.
Japanese makers such as Sharp are betting on a new type of thin film technology that is cheaper to produce than silicon wafers.
"A new window of opportunity opens up and solar can create new sales," said Sean Kao, a senior solar analyst at the Market Intelligence & Consulting (MIC) Institute in Taiwan.
"There is a big chance Taiwan can move from No.4 to No.3 and even to No.2, very likely next year."
The expansion could boost Taiwan's share of the global silicon solar cell market to 15% in 2011 from last year's 12%, overtaking Germany and Japan to be the world's No.2 maker behind China, analysts said.
In June, Taiwan Semiconductor Manufacturing Co Ltd (TSMC), the world's largest contract chipmaker, said it will invest USD 50 million in a 21% stake in US based solar start-up Stion Corp.
That followed AU Optronics Corp's agreement in May to set up a USD 700 million venture with US based SunPower Corp.
"We want to be a green solution provider, so we've been thinking how we can reach out from our core business to other sectors," said AU President L.J. Chen.
Industry analysts say silicon-wafer process technology or thin-film materials can also be used for solar cells, giving chip and LCD makers an edge in research and manufacturing.
"Like the PC industry, Taiwan companies really know how to cut costs and increase volume," said Alex Huang, director of the research department at Mega International Securities.
"That's why Taiwan will have a chance to duplicate its success in the solar market."
However, investors seem in no rush to buy into the solar dream. So far this year, TSMC and AU shares have fallen 6% and 26% respectively, versus a 10 percent fall in Taiwan's main TAIEX share index.
"The timing might not be ripe to pick up these shares because it is really not easy to see some quick, meaningful returns from their solar investments," said Robyn Hsu, a fund manager at Capital Securities Investment Trust.
In the longer term, analysts say Taiwan players might find it hard to get the needed economies of scale without a vertical structure combining the sale of photovoltaic wafers, cells, panels and installation used by some bigger players such as Trina Solar in China.
Taiwan has fashioned itself into a leading chipmaker after it lost its crown as the top toymaker to China. It is now ready for another transformation as chips and PC margins come under pressure and solar firms in Europe, Japan and the US increase outsourcing.
Taiwan's government is allocating T$20 billion (USD 625 million) for energy-related research in the next five years.
US research firm iSuppli Corp forecasts global photovoltaic (PV) installations will nearly double to 13.6 gigawatts in 2010, and rise further to 45.3 gigawatts in 2014.
Last year, TSMC said its green energy business would garner revenue of USD 2 billion by 2018 when its core foundry sales would hit USD 14-USD 15 billion, while AU forecast its solar business would make up 10% of total revenue in the next few years.
Sanyo Electric plans to spend 170 billion yen (USD 1.8 billion) on its rechargeable battery and solar cell operations in the next three years.
Japanese solar firms will also benefit from strong domestic demand, thanks to about 70 billion yen (USD 745 million) in state subsidies for solar installations up to 2011. Taiwan's domestic demand is negligible.
South Korea's Samsung Group would also invest 23.3 trillion won (USD 20.6 billion) by 2020 in new businesses that include green energy technology.