Daqo Signs Deal for New Silicon-Based Facility in Xinjiang

Xinjiang Daqo, the Chinese subsidiary of the renowned polysilicon manufacturer Daqo New Energy, has recently initiated a groundbreaking investment agreement, signaling the commencement of construction for a cutting-edge silicon-based facility in China.

Located strategically in the province of Shihezi, Xinjiang, this ambitious project is set to unfold through two pivotal phases. In the inaugural phase, the project is positioned to establish an impressive annual capacity of 50,000 metric tons (MT) for polysilicon, complemented by 150,000 MT of silicon metal production. Furthermore, this initial phase encompasses the production of a noteworthy one million pieces of silicon seed rods, showcasing a substantial financial commitment amounting to nearly $1 billion.

Despite Daqo's decision not to disclose specific completion timelines for each phase, the company emphasizes that the realization of these phases is contingent upon a multitude of factors. These factors encompass, but are not limited to, market conditions, securing approval from Xinjiang Daqo’s shareholders, and obtaining the requisite government filings and approvals.

The venture comes at a time when Daqo faces challenges due to the substantial decline in polysilicon prices throughout 2023. This decline has not only impacted Daqo's overall revenue but has also influenced the average selling price of polysilicon. Despite these challenges, Daqo remains steadfast in its commitment to expanding production capacity, demonstrating resilience in navigating market dynamics.

However, the geographical location of the new facility in Xinjiang introduces complexities. It may potentially limit Daqo's ability to supply polysilicon to the US market or produce modules for export to the US. This constraint arises from the Uyghur Forced Labor Prevention Act (UFLPA), which explicitly prohibits goods produced in the Xinjiang region from entering the US due to concerns of forced labor. The UFLPA is anticipated to have a more significant impact on the US solar industry compared to previous anti-dumping/countervailing duty (AD/CVD) tariffs. In 2022, a substantial 2GW of solar PV modules were detained at the US border due to the UFLPA.

Xiang Xu, the CEO of Daqo New Energy, expressed genuine excitement about the expansion plan, underscoring the strategic significance of the silicon metal project in ensuring sustainable growth for the company. Leveraging the abundant natural resources of Shihezi and the region's appealing electricity rates, this expansion initiative aims to fortify Daqo's competitive advantages, focusing on cost-effectiveness and product quality. Additionally, the strategic positioning of the facility is intended to mitigate the impact of fluctuations in raw material prices, contributing to Daqo's resilience in a dynamic market environment.