Tue, Jun 26, 2012 - Page 13 News List

Motech renegotiates long-term materials contract

LIGHTENING THE LOAD:The solar cell maker wants to adjust contracts agreed to before an industry-wide glut and fall in demand, but said it would not affect finances

By Kevin Chen  /  Staff reporter

Motech Industries Inc (茂迪), the nation’s biggest solar cell maker, said it had terminated long-term supply contracts of silicon wafer with an unnamed foreign company because of a change in market conditions, according to a stock exchange filing yesterday.

Motech, in which the world’s largest foundry operator, Taiwan Semiconductor Manufacturing Co (台積電), owns a 20 percent stake, said it would renegotiate terms, including product quantities and prices with the foreign company, which was not named in the filing because of contract agreements.

The filing did not say when the unnamed foreign manufacturer would again start supplying wafers to the Greater Tainan-based Motech.

During the boom period a few years ago, solar cell manufacturers often signed long-term contracts with upstream polysilicon and silicon wafer firms to secure a stable supply of the key raw materials and avoid possible shortages.

However, since the industry hit a downturn in the past one to two years because of an industry-wide glut and weak market demand, spot market prices were well below the prices agreed in the long-term contracts and it became in downstream companies’ best interests to make contractual adjustments with suppliers.

Motech said in the filing that the company had included the write-off of losses incurred from its long-term material supply contracts in last year’s financial report, based on generally accepted accounting principles.

“As for the company’s decision to renegotiate terms and prices with the customer this time, the company will book the financial discrepancy from previous estimates in this quarter’s financial report,” Motech said. “The termination of the contracts is not expected to have a significant impact on the company’s finance and business.”

Motech’s consolidated revenue dropped 4.01 percent to NT$1.58 billion (US$52.7 million) last month due to falling average selling prices, ending four consecutive months of rises.

Last month’s figures were down 26.51 percent from a year earlier.

In the first five months, revenue totaled NT$7.11 billion, down 50.14 percent year-on-year, company data showed.

Motech’s latest deal came after the company announced late last month that it was disposing of its loss-making US polysilicon manufacturing unit, AE Polysilicon Corp.

The company’s shares closed down 0.12 percent at NT$41 yesterday on the GRETAI Securities Market.

So far this year, the stock has declined 22.79 percent, compared with the over-the-counter market index’s increase of 11.98 percent.

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