Top Reasons Behind the Surge in Silicon Prices

December 22, 2021

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For decades, silicon has established itself as an essential upstream raw material for various industries. Despite being the second most abundant element in the Earth’s crust, silicon suffers a global production shortage. The recent significant increase in silicon prices has sparked a heated discussion on the material and the different industry chains.

significant increase in silicon prices impact the semiconductor industry

Silicon Price Surge and the Reasons Behind It

First-tier Manufacturers Hoarding Silicon  

Experts confirm that one of the primary reasons behind the current price hike is the imbalance between the supply and demand that the sectors in the industry chains worsen. In response to silicon’s rising cost, the first-tier manufacturers typically sign long-term orders to hoard this raw material and mitigate the risks. For instance, silicon wafer manufacturers buy more polysilicon raw materials and solar cell manufacturers purchase more silicon wafers.

This eagerness to stock goods affects the long chain of sectors across various types of industries. All the hoarding substantially amplifies the demand for silicon and leads to a significant increase in the prices of this raw material.

Energy Consumption Controls in China

Did you know that China is the largest global producer of silicon metal? However, the lack of coal in China has triggered a cut in producing the refined silicon used in manufacturing microchips, transistors, car engine blocks, solar panels, and medical implants. Chinese provincial authorities implement carbon emission reduction measures by imposing energy consumption controls.

For this reason, the major silicon metal producers in China’s Yunnan province have been operating at 10% of the output they had in August of 2021. The Chinese government’s introduction of power cuts to meet energy consumption targets has forced multiple facilities to operate just a few days per week.  

With the widespread electricity rationing, silicon metal production becomes even more limited while the demand for the raw material steadily increases. As a result, the price of the shiny metal has spiked 300% within such a short period.

the surge in silicon prices affect the semiconductor manufacturing industry

Do You Want to Learn More About Silicon Prices?

Are you looking to find top-quality silicon wafers at a reasonable price? Contact Wafer World today for inquiries or to request a quote.