Lower silicon production in China may increase chip production costs

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Rising silicon metal prices could become a major problem for Apple and other major manufacturers, with declining production in China raising the price of the material by 300% in less than two months.

Silicon is an important part of the technological environment, it is used for the production of chips, as well as in other industries, including the production of glass and even concrete, as well as silicone products. However, the supply of material seems to be declining tremendously, despite the fact that silicon is abundant enough to make up 28% of the earth’s crust.

Although problems ranging from higher demand for chips and water shortages have so far affected device vendors, in what is called global chip shortages, silicon itself is a growing problem area. In the author’s report Bloomberg, the decline in production in China has forced the price of materials to triple compared to the previous two months.

The cuts are caused by China’s attempt to reduce energy consumption in the country, whose by-product is a reduction in production from suppliers, including those working on silicon.

The Chinese province of Yunnan, the second largest producer in the country, was ordered to reduce production by 90% below August levels from September to December, leading to sharp increases. Whereas previously it was between 8,000 yuan and 17,000 yuan per ton ($ 1,200 to $ 2,400), prices are now up to 67,300 yuan per ton.

Lack of materials has already hit the solar industry, and solar-grade polysilicon jumped 13% on Wednesday, its highest price since 2011.

The price of silicon is expected to remain high for a long time, and Shanghai Metals Market analyst Yang Xiaoting expects high levels by summer 2022. Then greater production availability will open for the second half of the year.

Until then, it is likely that the additional cost of purchasing silicon could affect production and the final price consumers pay for goods.

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