Trump's Polysilicon's Tariff: Follow the Silicon, Not the Sun

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Last week, President Trump signed an executive order specifically targeting polysilicon and “polysilicon derivatives” (which is a fancy way of saying intermediate and final products that incorporate polysilicon as a major raw material.) The order imposes a default 15% tariff on such derivative goods (adjustable by country, at the administration’s discretion) while setting a price floor on raw polysilicon ingots and wafers as well. 

Solar stocks saw a knee-jerk bounce on the news, only to subside after investors had time to apparently think through the implications. While imported polysilicon-based solar panels from China might be disadvantaged, this boost for U.S. manufacturers would be largely if not entirely counterbalanced by the tariffs on polysilicon ingots and wafers that they rely on. As has been the case for Trump tariffs on products like steel, apparel, and consumer electronics, there isn’t nearly enough domestic production of polysilicon to meet demand.

That’s why reliance on Chinese polysilicon still exists despite the heavy import restrictions former President Joe Biden imposed on the material during his administration, and despite the ethical concerns raised by the alleged use of Uyghur forced labor to produce it. 

The Trump duties might even be a short-term headwind for U.S. companies: the 120-day window before the new duties take effect are likely to cause a surge in solar-panel imports as installers and developers build up stockpiles. (One noteworthy exception: First Solar FSLR, which eschews polysilicon altogether in favor of cadmium telluride thin-film cells. Although the U.S. cannot source raw materials for cadmium telluride domestically either, they are readily acquired from allies like Canada and Germany.)

To me, it was always unlikely that Trump had any interest in helping the U.S. solar industry, what with his well-known antipathy for renewable energy. However, polysilicon is also the raw material from which silicon cylinders and blank wafers are made, and encouraging domestic production of the material dovetails nicely with the efforts he (and former President Joe Biden) have made at bringing chip fabrication back to U.S. soil. 

The importance of domestic chip manufacturing means that the older, more energy intensive process for manufacturing raw polysilicon, known as the Siemens Method, is likely to remain the standard due to the higher potential purity it can deliver. That means demand for new polysilicon plants, equipment, and perhaps more importantly, the supplies that keep a plant going. 

Two companies stand out as not just major manufacturers of polysilicon, but also manufacturers of materials or equipment used in the process. Wacker Chemie AG WKCMF, runs one of the largest U.S. polysilicon plants in Charleston, Tennessee. (Notably, though it didn’t get the naming glory, Wacker was a key player in developing the Siemens Method.) It also manufactures some of the intermediate chemicals used in the process, such as trichlorosilane gas.

Meanwhile, Corning GLW owns an 80% stake in Michigan-based Hemlock Semiconductor, one of the largest producers of high-purity polysilicon, and it also manufactures some of the specialized heat-resistant and corrosion-resistant quartz and glass materials that line the furnaces where polysilicon is made. 

Materials companies that could benefit include those that make specialized heat- and corrosion-resistant, inert materials used in plant equipment include Germany’s SGL Carbon SGLFF and France’s Mersen CBLNY.

Similarly, Air Liquide and Linde plc are the major suppliers of the feedstock gases that go into making trichlorosilane. They also supply the high-purity hydrogen, nitrogen, and argon needed to ensure that absolutely no oxygen is in the reactor and deposition chamber. (That’s necessary so that the highly combustible silane gas doesn’t explode.) 

And of course, while Siemens SIEGY no longer holds the patents to the method it developed in the 1950s, it remains one of the leading providers of specialized software and systems that go into a polysilicon plant. 

While press attention with regard to the polysilicon tariffs seems to have focused on the solar angle, the real story ultimately leads back to tech, as it tends to do these days.

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