Solar-grade silicon is made from silica, a ubiquitous material that makes up nearly 26 percent of the earth's crust. Before it can become a solar cell, its impurities have to be removed in a complicated refining process. Table 1 gives a partial list of the public companies that do this.

Table 1: Silicon Suppliers

Purified silicon is processed into ingots, which are then cut and polished into wafers by the companies listed in Table 2.

Table 2: Silicon Wafer Suppliers

The microchip industry contains a similar supply chain (hence the name "Silicon Valley"). Before the solar boom, silicon was already the main raw material for microprocessors, which have evolved from specialized, expensive brains of large computers to cheap, ubiquitous brains of everything from toasters to wristwatches. Because demand was soaring, the companies in the microchip supply chain tended to periodically overexpand, causing a pattern of booms and busts in which silicon prices would spike and then plunge, taking the earnings and share prices of the various players along for the ride. In this decade, the solar power boom caused by German and Japanese subsidies amplified the wave, sending silicon demand far beyond suppliers' capacity. The shortage caused solar-grade silicon prices to soar, which sent the profits of the silicon makers through the roof. This in turn caused everyone in the business to add capacity, and now a glut is projected for the final two years of the decade.

If the glut occurs, the silicon makers will see their margins contract as rising supply pushes down prices, while the solar cell makers will respond to falling silicon prices by embarking on a price war of their own. The year 2009, in short, may not be the most auspicious time to buy into the silicon supply chain. But within a couple of years this excess supply will be soaked up by soaring PV demand around the world, and the cycle will begin again. Knowing the players will be very helpful.