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Mosel Vitelic Ends Solar Wafer Supply Contract With LDK

2010/04/06 | By Ken Liu

Taipei, April 6, 2010 (CENS)--Mosel Vitelic Inc. recently announced it has unilaterally ended a contract to buy crystalline solar wafers from LDK Solar Co., reportedly mainland China's No.1 supplier of the wafers, because of alleged LDK violation of the contract.

In 2007, Mosel Vitelic signed a five-year contract to buy LDK's solar wafers as first step to venture into solar cell manufacturing from dynamic random access memory (DRAM) chip-making and paid LDK down payment. Two signatories agreed to renegotiate prices of the supplies during the effective term when the discrepancy between contact price and spot price widens to over 10%. The contract is no longer effective when price renegotiation produces no result.

Mosel Vitelic's executives pointed out that their company agreed LDK's price-hike request in line with excessive demand for the wafers in the first half of 2008. However, LDK refused to accept Mosel Vitelic's price-cut request when the market steeply fell in the second half of 2008.

In addition, LDK failed to meet the contract to supply Mosel Vitelic sufficient wafers during peak season, thereby forcing Mosel Vitelic to turn down a number of orders.

Mosel Vitelic notified LDK it had ended the contract on April 1 and claimed through a lawyer firm in Hong Kong US$46 million in refund of its down payment and compensation combined. In response, LDK has made the dispute up for an international arbitration court in Hong Kong and is seeking a court grant of US$38 million from Mosel Vitelic.

Mosel Vitelic's executives said their company was confident that it would win in the lawsuit from the spirit of contract. They stressed the lawsuit would not affect the company's solar-cell production on ground that it also signed a US$290 million contract with South Korean wafer supplier Nexolon in 2008.

Industry watchers pointed out that brisk demand for solar cells drove up prices of crystalline silicon wafer above US$400 per kilogram worldwide in the first half of 2008, partly thanks to Spanish government's announcement that it would cut subsidization for solar cell installations in September 2008.

The market abruptly cooled down in the second half after Spain's new subsidization formula took effect and the U.S. financial crisis broke out, bringing down price of the wafer to only US$50-60 per kilogram in the fourth quarter of 2008.

Mosel Vitelic is running two production lines capable of turning out a total of 60 megawatts of solar cells. Industry watchers estimated the company's revenue from solar-cell sales for the second quarter to increase at least 10% from the first quarter's NT$990 million to NT$1 billion (US$30.9-31.2 million at US$1:NT$32) after the company announced visibility of its contracts has extended to May this year.