Tokuyama gives up on Malaysian silicon plant

Japan’s Tokuyama will transfer ownership of its troubled solar silicon subsidiary in Borneo, Malaysia, to competitor OCI of South Korea. Tokuyama says it’s giving up on the plant because of engineering difficulties and the deterioration of the global polysilicon market.

When Tokuyama first announced the project in 2009, it anticipated spending $775 million to build a 6,000-metric-ton-per-year plant. The company later decided to put in $1 billion more to increase capacity by 14,000 metric tons. Tokuyama selected the site in the rainforest-covered state of Sarawak for its water and cheap electricity.

The first plant, when it came on line in 2013, was not able to deliver polysilicon of acceptable quality. As for the second plant, owing to plunging polysilicon prices, Tokuyama concluded that it would never be profitable. The company booked losses equivalent to what it had invested in both plants in 2014 and January this year.

It does not appear that OCI is paying anything for the facilities. In fact, Tokuyama says the share transfer to OCI will cost it an additional $80 million. Tokuyama reported a net loss of about $1 billion on sales of $3 billion in the fiscal year that ended March 31.

Tokuyama is not the only company to have abandoned a polysilicon plant in recent years. Hemlock Semiconductor, a subsidiary of Dow Corning, decided in late 2014 not to open a $1.2 billion semiconductor plant it had just finished building in Clarksville, Tenn. Dow Corning blamed the decision on a global oversupply of polysilicon and a solar cell trade war between China and the U.S.

From a peak of around $80 per kg in 2010 and 2011, polysilicon prices have plummeted to around $14 currently, Tokuyama reports.