A Study On Optimal Scale And Optimal Competition Of Silicon Solar Cell Industry In Taiwan

This paper aims to investigate the optimal scale and optimal competition of the silicon solar cell industry in Taiwan through the application of workable competition.Firstly, the qualitative method of Value Net is adopted for analyzing the industry structure and indicates that cell companies have greater negotiation power over their upstream suppliers due to conditions of current global oversupply and inferior negotiation power to their downstream customers as the solar module market remains a seller’s market. The entry barrier of the solar cell industry, in terms of technology and capital investment, is not high. Therefore, for those interested in entering the solar cell business rapid acquisition of the necessary technology and equipment is possible. Because of the limited demand for solar products in Taiwan, the production of silicon solar cells has been targeted for export in the past. The market structure for this section can be categorized as middle-degree to high-degree competition. New compound and organic solar cells, the substitution goods for silicon solar cells, are gradually gaining attendance in marketplaces and becoming more commercially applicable.Based on the analysis above, this study suggests that Taiwanese silicon solar cell companies actively implement strategies to improve and shift the market environment from competition to cooperation by utilizing the game-theory technique of PARTS proposed in the theory of Co-opetition as a path to optimal competition.Secondly, Data Envelopment Analysis (DEA) and Malmquist Productivity Index (MPI) are the two methods employed to conduct quantitative analysis for seeking the optimal scale using collected data (for the period of2010-2013) from eight public silicon solar cell companies traded in the Taiwanese stock market. The input variables for DEA and MPI include total asset, cost of goods sold, operation expense and R&D expense. The output variables are net sales revenue and net income before tax. The production scale of the most efficient company under DEA and MPI analysis will be regarded as the benchmark for the optimal scale in Taiwan’s solar cell industry according to the theory of Survival Technique introduced by US economist George Joseph Stigler. Additional to determining the optimal scale, this study will also present related elements for reaching the optimal scale.The above mentioned empirical analysis suggests that the most efficient silicon solar cell companies in Taiwan are not the companies with maximum production capacities. This outcome may serve as a meaningful indication for solar companies that are presently seeking the expansion of their empire through active mergers and acquisitions.Finally, this paper studies strategies for reaching an optimal scale and optimal competition for solar cell companies, and also examines three dimensions which are beneficial for attaining workable competition for the solar cell industry from the perspective of stakeholders. These elements consist of the value-added actions taken by stakeholders, efficient industry polices introduced by the government and friendly policy environment attributed by related societies.