General Sector-Specific Conditions

We supply products to a wide range of industries. Our main customers are in the semiconductor, photovoltaic, chemical, construction, electrical-engineering and electronics sectors.

Semiconductor Market Narrows

2012 was another difficult year for the semiconductor industry. Market weakness was primarily due to slow demand for consumer electronics (such as mobile phones and computers) and price pressure. Market researchers at Gartner expect sales for 2012 to be down some 11 percent at US$9.48 billion. Compared with this decline, demand for silicon wafers edged only slightly lower, with volumes falling 1.0 percent year over year. Silicon-wafer demand, in terms of surface area sold, is estimated at about 60 billion cm². Business varied greatly, depending on wafer size. Demand grew for 300 mm wafers, but decreased for <300 mm wafers. Price pressures on all wafer sizes intensified yet again last year. Siltronic’s overall market share remained at about 15 percent.

Photovoltaic Market Dominated by Excess Capacity and Strong Price Pressure

The photovoltaic market continued to expand in 2012. UBS estimates that over 32.1 gigawatts (GW) of capacity were installed worldwide (2011: 29.7 GW), up 8 percent on the prior-year period. Despite reduced feed-in tariffs, Germany remains one of the largest markets for photovoltaic systems. According to Germany’s Federal Network Agency, the installed output continued to edge up slightly to 7.6 GW (2011: 7.5 GW). Market conditions tightened further last year. Global production capacity continues to outstrip demand. Amid strong price pressure throughout supply chains, several companies have become insolvent or have exited the market. This situation has also affected some of our customers. In such cases, we have retained some advance payments from long-term contracts and received damages. The consolidation phase continues. Moreover, anti-dumping complaints in the USA and Europe against Chinese solar companies have added to market uncertainty. The Chinese government is contemplating similar measures against US, European and South Korean polysilicon manufacturers. Taken together, these developments have left their mark on WACKER’s polysilicon business. After the first half-year, when volumes picked up following 2011’s weak fourth quarter, deliveries and prices have dropped significantly since the second quarter.

Chemical Industry’s Momentum Weakens – WACKER’s Chemical Divisions Expand

In 2012, the chemical industry did not show the momentum of previous years. 2011’s global output had totaled €3.6 trillion – with Asia contributing nearly 50 percent, Europe 25 percent, and the Americas 20 percent. For five years, global chemical sales had increased by 8 percent annually. This pace of growth pace was not repeated in 2012. The German Chemical Industry Association (VCI) expects chemical production in Germany to have declined by 3 percent. Capacity utilization at German chemical plants was 83 percent. Sales were flat, staying at the previous year’s level of €184 billion. Growth was primarily driven by Asia. As in the past, China remains the most interesting growth market for Germany – even if €4.8 billion in chemical exports to China has not yet ranked it among the German chemical industry’s top-ten export destinations.

WACKER’s chemical divisions performed well in 2012. WACKER POLYMERS again generated substantial sales growth. It benefited not only from the substitution of styrene-butadiene by VAE dispersions, used chiefly in the US carpet industry, but also from the robust growth of dispersible polymer powders in the building sector. WACKER SILICONES generated some sales growth compared with the previous year, and WACKER BIOSOLUTIONS also posted positive sales figures.

Spot-Price Trends for WACKER’s Key Raw Materials

The pressure on raw-material costs eased in 2012. On average, silicon metal was 6 percent cheaper than in the previous year, and vinyl acetate monomer (VAM) was 8 percent less expensive. The price of ethylene increased by 7 percent over the previous year, and methanol by 8 percent.

Construction Industry Grows in 2012

Globally, the construction industry grew by 2.3 percent to US$6.1 trillion in 2012. The pace of growth was impeded, though, by the euro crisis and by weaker momentum in emerging economies. Global Insight’s market researchers revised their original prognosis of 3.3 percent by one point downward. The largest increase was in the infrastructure sector, which expanded by 3.8 percent. Growth in the private-housing sector remained relatively modest, climbing 1.7 percent.

Southeast Asia again delivered the strongest performance, growing 5.4 percent. China – at US$1.1 trillion – remains the largest market worldwide. In the US, the property market continued to stabilize in 2012, spurring the construction industry, where volumes rose by 5.8 percent. In Western Europe, business declined by 3.8 percent. Sales in the German construction industry fell in real terms to US$281.6 billion (2011: US$296.7 billion).

Global Construction Industry by Region in 2012

Source: Global Insight (Nov. 2012)

At WACKER POLYMERS, we achieved further sales growth with construction applications. New products played a significant role, including waterproofing membranes for use in bathrooms, showers, swimming pools and basements. They stop water penetrating from the outside and allow internal water to evaporate. High-quality building-protection systems were launched on the renovation market. Demand for dispersions was robust in not only the building-material and tile-adhesive sectors, but also the plaster, interior-paint and carpet industries. We generated the strongest year-on-year growth in India, at 40 percent. Sales also grew in the USA (23 percent) and in Southeast Asia (14 percent). In China, growth was flat due to new requirements in the facade-protection sector. Overall, we sold an additional 25,000 metric tons to the construction industry.

At WACKER SILICONES, construction-application sales were 1 percent lower. Price pressures weighed on our standard products, especially sealants, where revenue was down 5 percent on the previous year. Conversely, hybrid silicone products performed very well. Sales of hybrid polymers, which are used for example in wood-flooring adhesives, rose by around 20 percent. Over 20-percent growth also came from cartridges traded under our own brand name. The Lucky-Silicones brand (sealants) – focused on the South Korean market – posted a solid increase on the previous year. Strong gains were achieved by a new water repellent for use in construction chemicals. Based on silicone fluid emulsion, it protects mineral wool (including glass wool) more effectively against moisture. WACKER SILICONES anticipates strong growth potential for this product, especially in China. On the regional front, year-over-year sales were below the prior year in Germany (-3 percent) and in Western and Southern Europe (-16 percent). We grew in China (16 percent), the Middle East (6 percent), South America (10 percent) and the USA (6 percent). Business edged up in Eastern Europe.

Electrical and Electronics Industries Grow in Emerging Markets

With global sales of €3.4 trillion, the electrical and electronics industry continued its uptrend in 2012. The German Electrical and Electronic Manufacturers’ Association (ZVEI) estimates worldwide growth at 5 percent for 2012. The emerging markets were the main driving force here, expanding around 9 percent. In Germany, the fifth largest market worldwide, sales were down 2 percent to around €173 billion, according to the ZVEI’s estimates. WACKER has three business divisions that supply customers in the electrical and electronics industry. At Siltronic, sales to semiconductor customers declined compared with the year-earlier period, mainly due to lower prices. During 2012, WACKER POLYSILICON sold 15 percent of its polysilicon capacities to customers in the electronics industry. In total, we supplied 38,000 metric tons of polysilicon, up 20 percent on the previous year.

WACKER SILICONES, which supplies diverse industries, reported sales at the prior-year level due to lower prices. Its sales grew in the following segments: transparent liquid bonding for notebook displays, media-resistant potting compounds, and highly specialized silicone rubber grades for automotive electronics. There was a slight drop in demand for wind-turbine power modules and for LEDs. In regional terms, sales rose in the USA (8 percent). By contrast, sales in Asia fell slightly (-3 percent).