MEMC Electronic Materials

MEMC Electronic Materials (NYSE – WFR) is a leading and well-positioned semiconductor wafer maker that plans to ramp up its growth by entering into silicone wafer production for the fast-growing solar energy industry. Currently, solar companies are responsible for 10% of MEMC’s sales. As a result, MEMC is rightfully getting the attention of investors looking for exposure to the growth of the solar photovoltaic market.

MEMC is the fourth largest manufacturer of polysilicon and silicon wafers for the semiconductor industry worldwide (13-15% market share).

Unlike its competitors in the semiconductor wafer market, MEMC is a vertically integrated supplier. In addition, the company has a reputation as being the most efficient capital user among major wafer manufacturers; to meet capacity goals the company reuses existing facilities in lieu of building new ones.

Suppliers of polysilicon currently have strong pricing power in the semiconductor and solar industries, as demand has outstripped supply. Analysts project this shortage will last until 2008. It is important to note that solar companies are currently willing to pay upfront to secure polysilicon supply.

MEMC recently announced an agreement to supply solar wafers to Motech, a Taiwan based producer of solar cells beginning in July. According to the agreement, MEMC will supply wafers on a take or pay basis over the next 8 years generating a minimum of $1.6 billion in revenues. Analysts believe additional partnerships could be announced before the end of the year, which would further drive revenue and profit estimates.