By Phil LoPiccolo, Editor-in-Chief
At a recent Applied Materials investor meeting in New York, CEO Mike Splinter announced the company’s entry into the rapidly growing solar photovoltaic (PV) market, outlining a strategy to capture a major share of PV equipment revenues by leveraging its experience in related technologies to help the industry drive down the cost of solar modules. The company believes that the solar industry presents the best opportunity for new-market growth, because of the cost reductions possible using technology similar to what Applied has supplied to integrated circuit and flat-panel display manufacturers for more than 40 years.
Manufacturing PV modules is a different ballgame than making ICs or FPDs, Splinter acknowledged, in that the challenge is to minimize the cost/watt of electricity. Today, making a PV module costs between $3-$5/W, and that has to come down dramatically. “In various countries, the crossover point between distributed solar energy and fossil fuel energy is somewhere between $2 and $3 per watt, if you look at interest rates, cost of capital, sunlight hours, and so forth,” he explained. “Driving this down to $1 per watt will help drive this technology into most applications by making make it cost-competitive without incentives or any help from any governments.”
This is a challenge worthy of the semiconductor industry. If you look at the history of solar cell technology, you see that the ‘learning curve,’ measured in terms of module cost reduction/watt vs. the cumulative volume of watts produced, has been about 18%, said Splinter (see chart above), while the curves for ICs and FPDs have been about 28% and 25%, respectively. One of Applied’s goals “is to move this learning curve closer to the level we’ve been accustomed to,” he said.
To give a sense of the potential for growth of the solar industry, Splinter showed that solar electricity production currently represents less than 10 terawatt-hours (TWh) of the world’s more than 10,000TWh of annual electricity consumption (see chart below). If the global demand for energy rises at the same rate as population growth, and if the use of solar energy continues to grow at 20%-30% per year as it has for the past several years, solar will produce close to 20% of worldwide electricity consumption in another 35 years, he said.
Moreover, in terms of electricity at peak power, given a 20% annual growth rate, by 2040 solar capacity would increase from 5GW today to some 5000GW. In such a scenario, the demand for manufacturing capacity would be enormous. Considering that the size of a factory’s annual production is currently about 100MW, and that over time the typical factory might grow to about 1GW, over the next 35 years that means there will need to be 5000 of those 1GW factories.
How much of the PV equipment market is Applied expecting to capture? In the foreseeable future, in terms of PV manufacturing equipment, total industry revenues are estimated to triple from about $1 billion today to more than $3 billion by 2010, noted Splinter. “I don’t see any reason that Applied Materials can’t capture between 15%-20% of this total capex over that period, and grow a business that is profitable at $500 million.” — P.L.