Wacker Chemie AG (WCH) Earnings Call Transcript & Summary

Dear ladies and gentlemen, welcome to the conference call of Wacker Chemie AG. At our customers' request, this conference will be recorded. [Operator Instructions] May I now hand you over to Joerg Hoffmann, who will lead you through this conference. Please go ahead.

Thank you, operator. Welcome to the fourth installation of the Wacker Chemie Virtual Capital Markets Day series. Today, we will be focusing on polysilicon and sustainability. Please understand that we will not provide a trading update today, as we are very close to year-end. Dr. Christian Hartel, our CEO; Dr. Tobias Brandis, who is responsible for our polysilicon business, will take you through our prepared slides in a minute. The presentation is available on our web page under the caption Investor Relations. The CMD today is scheduled to last about 1 hour, with approximately 1/3 of the time earmarked for the Q&A. For the Q&A, we invite you to post your questions on Slido. Please use the code shown here on the right side of the page to access Slido. Please note that management comments during this call will include forward-looking statements that involve risks and uncertainties. Regarding risk factors, I encourage you to review the safe harbor statement contained in today's presentation and the annual report. Tobias?

Thank you very much, Joerg. Welcome from my side. I'm really happy to talk today about our polysilicon business and then later also go into your questions you may have. Polysilicon in a nutshell. What we are following is indeed a high-end strategy. We are focusing on the semi market and on the high-end market on the PV side. We do so and we can actually do so because we are the industry benchmark for quality. We provide the highest quality and the most reliable quality to our customers. And on this, we build our high-end strategy. Due to our high-end focus, we certainly also have a very strong customer focus. We want to be the partners of choice, the long-term partners of choice for our customers. And actually to continuously work also on the bottom line of our business, we have been improving significantly, and we continue to improve significantly our cost side. As you can see on the right side of the slide, obviously, our results over the past years have had some volatility. At the moment, we enjoy very good margins, very profitable business, and I will come to this in a little bit more detail a few slides further down. If you look into the setup of the polysilicon business globally, then I think we have a unique position. I mean first of all, as you all know, most of our competitors from the PV side are located in China. Wacker, by far, is the biggest player outside of China. And indeed, we have a strong footprint in both, in the United States and the U.S., with our production [indiscernible] and also in Charleston, Tennessee, in the United States. Wacker is well known and very strong in closed-loop production. What that means is we call that, actually, you know that good production, which allows us to not only be the most efficient producer, but also allows us to have the lowest waste produced during production of polysilicon. And on top of this, we are actually also partially backwards integrated. We have a great silicon metal production site in Norway. And on top of this, we have a very strong sourcing base in Europe and the Americas. Next slide. So our strategy comes actually from where are we strong? As I mentioned, we are the benchmark for quality. We are strong in quality and process stability. And that is what is needed in the high-end markets. That is what is needed. In particular, on the semiconductor side, we have 6 decades of experience there, and it's also needed in the high-end markets of solar. That is where we are strong, that is where we create value not only for us, but also for our customers and that is where we focus in our business. If you look what we have done over the past 5 years, then we can see that we have been very successful in increasing our footprint in these high-end markets. From 2017 to 2021, we could grow substantially our share of products sold and shipped to those high-end markets, in particular on the semi side and also on the n-type side. At the same time, we have been reducing constantly our cost, I mentioned that is one of our focus areas since it has this big of an impact actually on our bottom line. And you can see the results. If you look into the margins, and now I'm not comparing the more difficult years, 2019 or '20 with '21, but rather 2017 with '21, we see a huge uptick in the margin. Of course, 3 factors contributed to it: price, mix and cost. But if you look into it in a little bit more detail, as you can see on this slide, you would find out that price on the 1 side and mix and cost effects on the other side, mix and costs taken together, have about the same impact as the price side. So mix and costs are substantial drivers actually for our profitability, have been in the past, continue to be looking forward. Semiconductor. The digitalization is certainly one of the megatrends we are seeing in the world. Actually, we have been seeing semiconductor as a megatrend probably for some decades. But also looking forward, semiconductor will continue to be a driver of growth. We can talk about connectivity, about e-mobility. We can talk about the digitalization of industry, actually something we are ourselves investing a lot into automation, digitalization of our processes. We can look into artificial intelligence. You can look into virtual communication, exactly what we are doing today. You can look into cloud computing, a lot of growth drivers. Actually, when we talk about digitalization as a megatrend, we probably talk rather about the aggregation of several megatrends under the heading digitalization. Our customers are actually producing semiconductor wafers on the semi side. Semiconductor wafers come in different sizes and that is how actually the market is also defined on the semiconductor side. For us, the growth driver is the cutting-edge wafer technology, which is the biggest wafer, the 300-millimeter wafer in the past with the strongest growth, but we expect this growth to continue, in particular, as you can see from the numbers here on the 300-millimeter wafers. Why this is important? 300-millimeter is not only the growth driver, it's also the platform for driving R&D, for driving development, for driving technology. You know about the design roll development on the semiconductor side, and the design roll development, in particular, means working on smaller knots. What it means is you can put more transistors on the wafer, more transistors actually on a chip. You can increase the efficiency of chips, you can increase the speed and the power of chips, something we can experience every day when we use our newest laptop, our newest Apple MacBook or iPhone. It's getting quicker and quicker and that is actually driven by these design roll development. Today, you all know, I mean, everybody is talking about that the newest iPhone is in particular based on 5-nanometer technology that is the cutting-edge wafer technology in mass market production at the moment. Why is that so important for us? It's so important for us because these smaller nodes mean you need higher quality in your wafer and the higher quality in the wafer depends strongly on the quality of the polysilicon you put in there. So the smaller you want to go with your nodes, the more or the better polysilicon you need. And when I talk about better, 1 thing is the absolute purity of the polysilicon, which needs to improve all the time, but it's in particular for the sustainability and the reliability of the quality, which is so crucial. And when I talk about reliability of the quality, that leads to another huge, let's say, hurdle to get into this market, and that is qualification. The time for qualification indeed is increasing. We have seen that over the past decade, it's increasing significantly because customers and their customers actually need not only to be convinced that the absolute quality you can supply is okay for the application, but the consistency of the application is in line with the expectations. And that makes qualification times very significant at the moment. So why do we see the semiconductor business is such a good business environment for Wacker? It's very easy. First of all, quality really matters. It pays off what we can provide. Our know-how, our experience really pays off. There are, if you look out into the marketplace, just 3 major suppliers making up for probably 80% to 85% of the market with their polysilicon, all of them are actually located outside of China. And they supply into a wafer market, which has a consumption of roughly 35,000 tonnes in 2021, to give you a rough estimate on what the market looks like. We actually are really well positioned at all the leading wafer manufacturers. And also there only a handful is very dominating in the market. We are basing our business on long-term partnerships. So therefore, we have long-term supply agreements in place at a lot more stable conditions and terms than we know from the solar side, which is stabilizing and helping, supporting our business. We have seen, therefore, with all these assets, we bring to the table a very strong growth in the past 5 years. We have doubled actually our volume on the semi side in those 5 years. And we continue to grow very strongly in this market. We expect another 50% increase in volume in the next years to come. To get there, we need investments. As you can see, looking backwards 3 years, looking forward 3 years, we will triple our investment, our CapEx. And we will target this CapEx, in particular, to the semiconductor industry. We need more capacity. But as I mentioned earlier, we not only need capacity, we also need to improve constantly our capabilities to provide better quality. So I talked a lot about the semiconductor side, which is a great business actually to be in. It's fascinating what is happening there. So I love being there visiting customers and seeing those new developments. But I can tell you, the solar business is as interesting. Why is this the case? It's an attractive market because I believe there are just very few markets out there who have such a very stable, huge growth rate predicted for the next 3 decades, which is incredible until 2050. And actually, it's 2050 because nobody looks beyond 2050 at the moment. But I believe it has a very strong growth for the next decade to come. Why is that? I mean you all know about those PPAs and the cost for solar, which is coming down significantly over the years. And that is certainly making this market so attractive to invest into solar. But secondly, this growth is just necessary. It's driven by our need for decarbonizing the industry and our life, for fighting climate change successfully, for implementing really the Paris Climate Agreement and make it reality. It's so interesting if you look back into the forecast for 2050 and see what experts out there tell us about how much solar actually do we need in the marketplace to decarbonize the world? At the moment, the most recent one shown here by IRENA actually predicts 14 terawatts of capacity in 2050. If you go a year back, actually, it was much lower this number. It's so interesting because I believe it's still a young industry. And also the idea of decarbonization is relatively young, which means experts gain a lot more knowledge year-over-year and that knowledge, how to decarbonize, what is really necessary to get our lives free of CO2, this addition of it certainly leads always to increased predictions. But only if you just take those 14 terawatts, which is already a very impressive number, actually, we are not yet by 1 terawatt of installed capacity overall. If you take this, you need something going forward of more than 500 gigawatts of installation per year, which is a huge amount, which translates into something like 1.5 million tonnes of polysilicon consumption. So just to show you it's a huge growth market. It's a market which is really necessary to make the world sustainable. It's relatively young technology with a lot of potential to further develop. So it continues to be an interesting market. So if you look into the development of the market, you can see a picture, which always reminds me of the semiconductor industry. You see a huge trend into new technologies. You all remember the shift in the 16, 17 years, 4, 5 years ago, from monocrystalline to multicrystalline technology. It was huge and it was at very high speed. That's very typical. Once the technology is ready at a relatively acceptable cost base, the shift happens quickly. So we are now in the, let's say, time of monocrystalline wafers. They are completely dominating the market. But 90% of this monocrystalline market today is still based on p-type. The next step in efficiency, the next big step in efficiency is possible with n-type. It already has its market share, but we expect that over the next 5 years, it's going to become much more relevant and we will see a trend towards n-type dominating the market, because it has such better efficiency levels, which allow for, in the end, cheaper, more efficient PV modules, PV installations, PV investments. And again, very similar to the semi side, we see also an increasing demand in quality once we get to the next step of technology. And again, we are not talking only about the absolute quality level. We're, in particular, when we talk about n-type, talking about the consistency and the reliability of the quality, which is provided to customers. And that is something where we not only are strong today, but I'm sure, and that is one of my personal targets really, we want to ensure to remain the benchmark at these quality levels. Today already, we have certainly more than 50% of the market share in the entire market. So when we come to the question, what do we do then on the solar side regarding capacities? We have invested quite a bit into our capacities over the past decades, and I believe we have invested in regions outside of China. So having a footprint which is unique at the moment in this world. We do not have concrete plans in our CapEx to spend more on solar capacity unless there would be a compelling business case to do so. That means, in particular, for me, we need to see customers outside of China. 95% of the customers for wafering today are in China. Unless we find and see those investments in wafer capacities outside of China, for sure, there is no business case. And then obviously, I mean, the other fundamentals must be then right as well, which means pricing, volume, commitments, to offtake, but also the political and regulatory side needs to be attractive. But overall, the economics pay off and then we would be ready certainly to invest also into more capacities on the solar side. So with this, if you come to the summary of our strategy and how we are going to implement, you can see that we continue very clearly with our path towards high-end, seeking a 100% load for those high-end markets by 2025. And with all the force and all the innovation power we have, all the experience of the past 60 years, we are continuing this tremendous pass down on the cost road map to support with lower cost, our bottom line to be prepared for these volatile markets, we see, in particular, on the solar side. So focus on the high-end markets. We continue to increase certainly CapEx on the semi side to be meeting our customer demand on capabilities and capacities. And the cost reduction continues to be in focus. And my last point really is, we also continue to leverage our great position in sustainability. I mentioned our closed-loop production, I mentioned our best-in-class energy efficiency we have. That is something which is becoming more and more important, not only actually to our customers, it's getting more and more important also if you want to be successful with our CO2 reduction targets we have globally, as you can see from the Paris Climate Agreement. And with this, many thanks for listening. And I'm looking forward to your questions, and I hand over to Christian.

Yes. Thank you, Tobias. This is Chris. A warm welcome from my side, ladies and gentlemen. So polysilicon, a strong contribution to sustainability from Wacker with most efficient processes and enabling the digitalization of the world and also the energy transformation. Today, I would like to talk about sustainability. And for Wacker, it's both. It is commitment, and it's a value driver. And I'm really excited to bring you today our new Wacker story. Sustainability in all its facets is a matter that is really close to my heart, and it's very high on my CEO agenda. So protecting the climate and reducing global warming, they are vital, they are essential for human kind. And yes, it is a mammoth task, and Wacker is committed to take both its share and to generate value out of it. Sustainability is not a new topic for us. We started with something that today would be called super innovative; access green energy at low cost to produce modern and innovative products, and that was more than 100 years ago with our hydropower in Burghausen. And today, this topic is more important than ever. And we have established ourselves right in the middle of that as a technology leader, enabling resource saving and CO2 abatement with our product portfolio. Let me make 1 thing very clear. Sustainability is a clear commitment from Wacker. We want to improve our footprint and take our share to save resources, to reduce CO2, and thus fighting actively the climate change. I will come to our new and, in my view, very ambitious target on this in a minute. But sustainability is also a huge opportunity. It's a business opportunity for us, and I'm absolutely convinced about the potential. It's a fundamental value driver for Wacker. Why is that? It's because our products enable and support our customers for sustainable future technologies, reducing CO2 and saving resources, and it's an integral part of our, the Wacker business case. Talking about our own targets and ambitions. And you know, we have targets on sustainability, on our own footprint. You can see here the recent targets we have and also the progress we made, and I think we did some really good progress. If you look at our footprint side, so far, we focus solely on specific targets, meaning they are volume related. What we did in the past few months, we listened to the market, and now we went also with absolute targets going forward. You can see this on the next slide. Here are the new and, in my view, again, very ambitious targets for 2030, and I would like to draw your attention on the middle part first, that is footprint down. And the first one, we introduced a target of reducing our own CO2 footprint by 50% to 2030. I think this is a very ambitious step, and it's based on last year. So it's not based on 2008 or 1987 or whatever, it's based on the last year, or 2020. Also, the second one we introduced for the first time, the target on water saving. We have a target on specific energy consumption and 0 accidents that has been and is an extremely important goal for us. And I always tell our people, safety is a prerequisite. Priorities might change, but prerequisites are there to last. So these footprint targets are a clear commitment to the Paris 1.5 degree target. And as you know, we joined Race To Zero, and we are also an active part of the Stiftung Foundation, KlimaWirtschaft or 2 degrees, as it was formerly called, and our targets are being cross-verified and validated by science-based targets. We also set ourselves new targets for the value-add part. And as you may remember, we had a target of having 90% of a sustainable portfolio. We made a clear call here and said, "No, we want 100% of our product to fulfill sustainability criteria." And it's an easy to remember number, 100%. And on the third pillar, collaboration. We also expect a lot from our suppliers because frankly, climate change is nothing that the company or even a single country can do alone. We need to collaborate here. And here, you can see we have high expectations on the reduction of greenhouse gas emissions from our customers. And of course, we want all our customers 100% to follow the same standards that we follow. Let me add 1 other point on circularity. Our key contribution today really, also what Tobias mentioned, is our unique structure in our production. So avoiding waste and reusing side streams. And that is not something that we introduced in recent years, that is something which we deal with since many decades. On the next slide, you see a clear path forward on our footprint down targets on CO2 reduction. As I mentioned, I think it is pretty ambitious what we have here in mind, but there is a clear strategy and a clear plan behind it. And also, we anticipate growth. So that is something that comes on top of the footprint, which needs to be compensated. And the 3 pillars, they are CO2-neutral silicon metal, they are process transformation, and they are green energy. And of course, after 2030, there is a plan to become net zero in 2045. If you look on the next slide, we can see these 3 pillars in a little bit more detail. So the first pillar, the CO2-neutral silicon metal. That is very much focused on our old site in Norway, in Holla, where we want to change to biocarbon and biomass utilization in the process of producing silicon metal. But we also want to explore opportunities to store or utilize the CO2, which is emitted at the site. The second important pillar is process transformation, and you may know all this, project Rhyme Bavaria, which we want to start in a few years just, which uses CO2 from a sidestream, which uses green hydrogen, and which produces green methanol out of that. Of course, we gain from energy efficiency and CO2 reduction methods, which we did also in the past, and we want to further increase our electrification level. One component of that would be, for example, power to heat. And the third lever that is utilizing green energy. We have a high electrification ratio already today of about 60%, which I believe is quite unique for the chemical industry. So what we need now is, in the next step, green energy procurement. The more green energy we procure, the better it will be for our footprint, and we want to utilize on this. As I mentioned, also we expect a lot from ourselves and from our teams, but we also expect a lot from our suppliers. First, to comply with corporate responsibility guidelines. That is, for example, on social, environmental, safety and compliance standards. And second, that is also very important, we want our suppliers to reduce their CO2 footprint, at least by 25% until the end of the decade. That is something we cannot directly influence, but, of course, we put all our influence into our suppliers to achieve these targets. On the next slide, it shows again, we talked about the first part. So we want to do a lot on our own footprint. That is our commitment. And now we come to the maybe even more exciting part of that story. Sustainability is a key value driver for Wacker. You can see here, these are the biggest CO2 emissions on the planet. And for essentially all of them, Wacker offers a solution. We have a great portfolio of products that both enable and support CO2 abatement technologies and resource savings. And maybe let me briefly explain these 2 parts, what we mean by that. With enable, we mean that the Wacker product is the key component. It's the essential part for a new technology. And of course, you all know the most prominent example would be polysilicon for PV. You need polysilicon to make an efficient solar cell or you could use our powders in a water mix, which reduces the sand and the cement usage in the final product. If you want, you can call it also a direct impact. And we also have a lot of products that support. So Wacker products support the development and the success of new technologies because it makes them even better and also more competitive versus incumbent technologies. And one example would be our silicones that make electric vehicles more efficient; it could be bonding paste for wind mills, so you can produce a bigger rotor blade. If you want, you can call it more an indirect impact. Now we come to a very exciting slide. We made an analysis on our portfolio, on our products, and we were categorizing them into products which enable or support resource saving and CO2 abatement technologies. And you can see that all of our divisions have a high share of contribution and that as a group, we believe we have more than 2/3 of our sales that address resource saving and CO2 abatement technologies. And we also get that feedback from our customers. And we are getting pushed by our customers to proceed even further and improve day by day. And on the next couple of slides, I brought you some examples of these products. And if you start with silicones, as you know, with the broad portfolio and applications we have for silicones and the many products we offer to our customers, there's also a broad range of solutions. Take coatings for durable and insulating and longer lasting and therefore, resource-saving coatings for buildings. We see new and highly efficient building technologies, like prefabrication of components, where you need high performance binders to put these products together in fast time. I mentioned the silicones for electric cars, supporting the technological breakthrough against combustion-driven cars. A big area is the energy sector, where we, with our products, be it insulators, be it windmills, be it on the heat transfer fluids side, enable and support technologies. But also for the huge area of industry, we offer a lot of solutions. And what I'm very excited about is on the right-hand side in the middle part, silicones, that either enable for a reduced water consumption in laundry care or reduce the amount of surfactants used in laundry care by just adding a little bit of highly innovative silicones from Wacker. And of course, we also offer renewable-based raw materials for our products, which many customers also are demanding. If you go on the next slide, you see the examples for polymers. And you know many of these, for example, the Etex, the insulation of buildings, which is a huge area for saving energy and thus CO2, and these are supported by different Wacker adhesives in a total solution concept. You have the powder paint, where you avoid to ship large amounts of water around the street and therefore reducing CO2. We have the classic powders that reduce motor need for tiles. And we also have additives for strongly improving biodegradable polymers like polylactic acid, which is otherwise hard to process. From plastic to paper, supported by water-based or solvent-free additives also from Wacker. If we go for the polysilicon category, I think it is very clear, semi and solar, these are enabling and supporting green technologies to a huge extent and are absolutely vital for fighting climate change. But also our BioSolutions division has a lot to offer. And I guess, I don't need to explain that biopharma and the bioingredient business itself is 100% sustainable in nature, but also the life science chemicals, which we offer, they support sustainable technologies in the field of agriculture and pharma. So ladies and gentlemen, with this, I come to an end of my presentation. And I would like to tell you, sustainability at Wacker is both a strong commitment and the value driver also for future growth. So it comes high on my CEO agenda, sustainability and profitable growth, it comes on top of my agenda. We see a lot of potential to grow in the next years. And we're really happy to share this exciting story with you on our group's CMD at the end of March, hopefully, in person. Thank you.

Well, everybody, we're now ready to begin with the Q&A. We would like to ask you to post questions on Slido and we will read out those questions and the presenters will then respond to those questions. So are we ready to go? Okay.

All right. Welcome, everyone. This is [ Kevin Hollister ]. I'm part of the IR team here. Thank you very much for submitting your questions. We have a number of questions this morning already. Andreas Heine from Stifel has a few questions on polysilicon. Tobias, how do you see the risk that the Chinese Tier 1 players enter the semi grade market in the coming 2 to 3 years?

Yes. Let me start with saying that we indeed have seen a great development of our Chinese competitors in respect of the solar business. I think in a relatively short time, they have achieved quite a bit. But if you compare the solar business and, in particular, compare quality necessary for solar and semi grade, there are worlds in levels between solar and semi. And I personally believe that there still are years to go for Chinese competitors to be able to supply similar quality or usable quality for 300-millimeter applications. So I don't see that as a realistic scenario that in the 2 to 3 years we see Chinese, even Tier 1 players, with any substantial or meaningful volumes in the end market. I want to add at this point because I expect that there might be more questions, we should bear in mind that semi and solar are very distinct businesses. And when I say that, the solar business was built from ground in the past 20 years. And China was investing to this business from the very beginning. While the semiconductor business is a very old, grown, experienced business. And all of the big customers for semi-grade polysilicon are outside of China, which is very different. When it comes to our own business, there is also a very big distinction. And that is we have really long-term agreements in place for these businesses, which would make it a lot more difficult for competitors to enter. And even if they would be ready, which I don't think they would be by any means in 2 to 3 years, I can tell you, it's a very, very lengthy qualification period. I mentioned that during my presentation. And if you just take into account the qualification period, those 2 to 3 years are completely unrealistic to see them as a real competitor in the market.

He had a question also about CapEx in semi grade capacity. What additional CapEx is required to increase semi grade capacity to participate in the upcoming growth in the semiconductor market?

Okay. Yes, you have seen from my chart that we are going to triple over the next 3 years investments. And as I mentioned, I mean, of course, we always take safety seriously and sustainability seriously and invest also in those areas. But the majority of these investments go into semiconductor expansion of capacity and capabilities. And that is what we plan for. And I think once that is done, we have a very good position then for the next decade to supply the semiconductor market with the quantity and the quality the market needs.

Okay. Great. So now moving on, we have a number of questions from Jaideep Pandya from On Field Research. This is also relating to the solar industry. Could you share your capacity increase plans in n-type? How big do you expect this market to be in 2025? And what is the extra cost for producing n-type?

So on our end, to start at the end of your question, there's really no difference regarding the cost side in producing n-type material. We are very proud of having this technology, which allows us to produce the necessary quality levels and do that at a very, very reliable and sustainable level, which means every kilogram we produce can meet those standards. If you look into the question regarding capacity, then I mentioned during my presentation that we have huge capacities available. And today, we don't use them at 100% level for n-type, and that is certainly something we are striving for. So we do not plan to build new capacities for n-type, but rather shift our existing capacities completely in the direction of supplying the n-type market. You asked about the size of the n-type market. I mentioned that we believe, in 2025, the market is going to be significantly bigger than by now. There are a lot of different opinions on the expert side. I personally believe that it's certainly going in a 50% direction regarding n-type demand in 2025.

Currently, solar grade pricing is almost at semi-grade pricing. With a sharp rise in 2021, will this have an impact on the semi grade pricing in 2022?

So I mean, first of all, I mentioned that the semi business just works differently. And that means we have long-term agreements with stable prices and no comparable volatility. What I can say is that not so much the solar market, but in particular, the really high demand on the semi side, you all have heard about those planned or started investments in new wafer capacities of almost all wafer players on the semi side out there, that is very much driving demand and in particular, driving demand for the highest quality polysilicon, and that certainly also has an impact on pricing. But that is not year-over-year pricing, but rather pricing you see reflected then in newly entered into long-term agreements.

So there's a follow-up question there about the Chinese market in particular. Have you seen any impact from the independent rooftop project for solar in China?

So in China, you have seen, first of all, that for this year, [indiscernible] have rather taken down the estimate of installations, but have been very, let's call it, bullish on installations over the next years. And all of those individual projects, I think contribute to this increase in expected growth over the next years.

And then 1 last question and then we move on to some safe sustainability question. Separately, what is the outlook for capacity announcements in wafer ex China?

On the solar side?

On the solar side.

I see. Yes. Okay. On the solar side, there are some announcements. We already saw some investments as well. You all remember that Jinko has started operation for solar wafers in Vietnam. But otherwise, we know that there are a lot of discussions going on. You all know about all these planned projects, for example, in India, but also in the U.S., a lot of discussions are going on, but no further concrete plans are really out there.

All right. Perfect. Now we have a question from Thomas Swoboda from So Gen. This is regarding sustainability. Is it possible to eliminate silicon metal that was produced from coal-based energy from Wacker's sourcing?

Thomas, yes, this is Chris. Well, that's a good question. I mean, that's actually our target. So first of all, we would like to produce CO2-free silicon metal. I mean that's the overall target. We have our own plant in Norway, as you know, and there, we want to start increasing the amount of biocarbon and biomass, which we use in our process to come to a CO2-neutral product. And of course, we would very much like our suppliers to do the same thing. There are a few already in the market on the world today, and we would highly appreciate that they would increase their capacities and that we see this trend towards renewable silicon metal all over the world. But we believe we have to do it also ourselves to really reach our targets.

Thomas has a follow-up question. What do you think about the cost development, especially in energy, looking into 2022?

What I think about the cost development? Well, I mean, if the cost goes up, I think it's not a good thing to see. We saw in the fourth quarter, a steep rise in energy costs all over the world. To some extent, in some parts of the world, we also see already a relief. And I think it will normalize over time definitely.

So Thomas had a question about polysilicon. And in polysilicon, he was wondering, is the planned volume growth in semis going to be at the expense of the solar production capabilities?

Okay. Very good question. No, the reason is the expansion also in respect of capabilities, not only capacities in particular on the finishing side. And the finishing side is really very distinct from what we are doing on the solar side. So that has no impact, neither on capacities, nor on capabilities for the solar production.

The next question is from Sebastian Bray at Berenberg. How will Wacker achieve CO2-neutral silicon metal without full backward integration? How many euros for CO2 neutrality and higher integration in silicon metal?

Well, as I said regarding also the question to Thomas, we have a dual strategy. On the first side, we want to do it on our own backward integration to come to a CO2-neutral silicon metal, but we also want our suppliers to go in that direction, so that we can achieve this target. You asked for the investments that would go with such steps? What I can tell you, there's definitely a cost associated with it. But we also see it as a future license to operate where we have to invest. We definitely see it as a value driver, and we see a strong demand from our customers for these products. And yes, there is a cost, but we are absolutely convinced that at the end of the day, it'll pay off.

He has a follow-up question. What is the current annual cost in euro millions arising from the need to buy CO2 emission certificates in Europe? How does Wacker expect this to develop in the future?

So what the annual cost arising? I mean, of course, the CO2 cost is an increasing chunk of cost which we are facing because that is also part of the EU legislation. And well, we do have to cope with this. But no, I don't think we can disclose any details on this.

We have a question from an anonymous investor, which we definitely respect. Is achieving sustainability target part of management compensation?

Yes, it is. And I think it is necessary that it is and all these targets need to go together. Clear yes.

So we have another question from the same investor also about sustainability. Secondly, to achieve the new sustainability and greenhouse gas emissions by 2030 and 2045, what will the CapEx spend be?

Well, again, as I said, there is definitely a cost associated with it. We believe it is significant, but it will pay off. And what I would like to propose is we will have our CMD in March for the whole group. And there we will tell about our targets also for our growth ambitions till year 2030. And in that context, we will talk about also investments which are necessary and sustainability is part of that. So I would rather revert to that event in March.

Now the next question comes from Kyle [indiscernible] at Citigroup. This is about polysilicon. Given China supply, if the barriers to produce n-type versus p-type is relatively low, is there a danger of a greater price erosion for even this high-end market?

Yes. I mean that's a good question. Looking forward, I would say, if today, you already look into the index prices, which gives very distinct prices also for different qualities, you can see certain gaps. I personally believe that some of this gap always will remain and that has to do with 2 factors. First of all, on the n-type side, with the higher efficiencies, there is certainly less price sensitivity compared to p-type. And the second reason is that, indeed, the supply for n-type-ready material needs still to increase because it might seem that the barrier is low, but the Chinese competitors first need to then also increase their volumes, which can go into n-type. And as long as the n-type market is growing this quickly, I don't expect that this gap will go away.

We have another question on polysilicon from Sebastian Satz at Barclays. Can you elaborate on pricing in the semi market? Are prices fixed for the duration of the contract? How do you deal with cost increases from higher silicon metal?

Okay. So first of all, we have a lot of different contracts in place. As I mentioned, we cannot go into all these details of our pricing strategy. Also, those contracts are not all entered into at the same time, but have overlapping period at a different time. But as a general message, I can say that there is no volatile price index out there for semi grade polysilicon. So yes, our LTAs typically provide for somewhat fixed prices. And if we look into the increase in silicon metal, also, again, not all our contracts are the very same. They are negotiated individually, entered into at different times. But for sure, we have some protection also regarding the volatility of the raw material going into our polysilicon.

He has a follow-up question. I mean, there's a lot of discussions about the re-regionalization of supply chains in the solar industry. What are your expectations for new solar wafer capacity being built in the EU or the U.S.?

We have a lot of discussions on this. We know about these huge capacities in China. We know that it's very capital intense to build wafer capacity outside of China. So it's very difficult to give you their concrete expectations. I know that a lot of discussions are going on. And I'm convinced that at some point in time, we certainly will see some investments. But it's very difficult to really predict their concrete numbers.

And maybe if I can add to this, Tobias? I mean if you look at the political landscape, of course, we see that there is a high demand from the politics in Europe and in the U.S. to favor such industries, for example, for PV in the U.S. and in Europe. But hey, I mean, we are there with our capacities. What is needed is more capacity from our customers on that. And you have to ask them how fast it goes.

So we have a question from an anonymous investor, and they would like to know about the price premium or the potential price premium for CO2-free products. Can you achieve a premium for these products, i.e., can prices in silicones with lower CO2 be higher than prices of standard silicones? Are customers paying for this?

Well, first of all, I would like to make a statement that we really don't want to sell standard silicones, but all the silicones that we sell, especially going forward, will be specialties. So you have to differentiate then between CO2-free or lower CO2 footprint specialty silicones and kind of normal ones. Whereas, again, I would say that because of our processes, our products already today have a pretty competitive footprint. Can you achieve a premium? Very good question. And what we do see, there is movement with our customers. A couple of years ago, it was pretty hard to reach for price premiums, but we see more and more customers that are willing to pay more for these CO2 neutral or lower CO2 footprint products. And again, I would say this is really then coming to this essence of being a value driver also for Wacker.

So Markus Mayer from Baader Bank. He has a question about our silicon metal facilities in Norway. Do you have plans to increase your capacities there to ensure your CO2-free silicon metal supply?

Well, I mean, our plant in Norway, these guys, they did a tremendous job in recent years. We added new capacities, world-class capacities. And that helps us also on the footprint side, but also on the cost side. So yes, we have plans to further increase the capacities there and move them to CO2-free.

We have a question here from Sam Perry at Credit Suisse. And he would like to know -- it's about polysilicon. Is the increased semi CapEx largely aimed at improving your product quality or increasing capacity? Can you give an indication of regional end markets for semi grade?

Yes. And to the first question, whether it's targeted towards rather capabilities or rather capacities, I can say, it's indeed both. I mean we increased significantly capacities and at the same time the capabilities. You can hardly distinguish which dollar of the investment goes only into capabilities and which goes into capacities. So that is definitely both and it's not really possible to give you exact numbers on what goes into what. And if you look into the regional end market for semi grade. So for sure, on the wafer side, the biggest markets are Asia. And across Asia, there are a lot of capacities in the, let's say, major countries in Asia, which is, for example, Japan, Korea, but also in Singapore there are huge capacities for semi wafers, and then also in Taiwan. I think that is probably the biggest countries. If you look into investments and where capacity is growing, certainly, China is adding also wafer capacities. We have a very large footprint with our product also in China. And then I want also to mention Europe. We have still some very sizable production facilities in Europe for semi grade wafers, where we ship our products, and also in the United States, although they are relatively small, in particular, compared to the Asian capacities at the moment.

All right. Well, we have 1 last question on sustainability in our energy production. Can you increase your hydro production capacities in Burghausen or invest in clean energy power production to change your mix?

A very good question indeed. On the hydropower plant in Burghausen, of course, what we can do is optimize the set up and that's also what we do. That doesn't give you a huge increase in capacity. If you would increase capacity, you would take out more water, and then you end up in a highly regulated segment of politics in Germany. We strive for this. But I think that's also a task for the new government in Germany to enable and to fasten these processes in regulation for expanding renewable energy. Do we want to invest further? As I mentioned, our clear priority is in the procurement and in long-term procurement of renewable energy because we also have a lot of great ideas for investing into our products, which enable and support sustainability for our customers.

Perfect. Well, I mean, that's the end of the questions. We've also reached the hour here. So Joerg, if you have a few statements, please?

Absolutely. Thank you all for joining us today and for your interest in Wacker Chemie. Before we leave, let me point you to our updated web pages on sustainability. The web page covers our sustainability goals, shows our products combat climate change and gives details on our specific measures and projects for the 2030 targets that we presented here today. In addition, the site also features our sustainability policy library holding an overview of all relevant information. We wish you all a great holiday season and a good start into the next year. Goodbye.

Ladies and gentlemen, thank you for your attendance. This conference has been concluded. You may disconnect.