They might not admit it, but companies are "quaking in their boots" after this week’s announcement that Intel (NSDQ: INTC) is entering the solar sector, according to Navigant Consulting analyst Paula Mints.

The semiconductor giant announced Monday that it is spinning off a solar-cell startup called SpectraWatt and helping to fill its coffers with $50 million.

Some analysts pointed to the news as an indication that a long-awaited trend – the chip companies are coming – is here.

“We’ve been saying for a long time: This is the domain of the semiconductor guys,” said Ron Pernick, a principal with Clean Edge. “If Intel can take intelligence out of its semiconductor operations, spin it out and deliver on funding, who better to scale up manufacturing than one of the largest makers of chips on the planet?’’

And when behemoth-size technology companies take a plunge into solar, the solar industry reaction is going to be "Oh, my god, we're dead," Mints said.

"I think it's normal industry anxiety," she said.

After all, the solar industry is still in its infancy, with companies only breaking even four years ago after about 30 years of losses, and the game hasn’t been won yet.

And Intel isn't the only semiconductor company jumping into solar.

IBM also announced this week a joint venture with Tokyo Ohka Kogyo to thin-film solar technology (see Companies Crowd Into CIGS Space). Companies such as Applied Materials and Oerlikon Corp. have brought about a tremendous amount of fanfare and billions of dollars in orders.

But solar companies shouldn't freak out. Just because Intel carries a lofty name, it doesn't mean it (or rather its spin off) will definitely dominate, Mints said.

SpectraWatt will still have to confront the same issues as every other solar-cell manufacturer, which includes the tough task of developing the technology and bringing it to market.

According to Intel, SpectraWatt will manufacture and supply silicon-based solar cells to panel makers and focus on "advanced solar cell technologies." Intel is not sharing details at this time about what it means by advanced cell technology, said Amy Kircos, Intel spokesperson.

For the most part, Intel isn't sharing much about SpectraWatt, except that the company will break ground on a 60-megawatt manufacturing plant later this year in Hillsboro, Ore.

Kircos also said SpectraWatt has enough money to get the company to commercial production in 2009.

Additional details have emerged, including that SpectraWatt will look to drive silicon-based cell costs down to 50 percent, according to Jesse Pichel, a senior research analyst at Piper Jaffray. Intel has been working on the solar technology now absorbed by SpectraWatt for three years.

SpectraWatt investors include Intel’s global investment organization Intel Capital, the Goldman Sachs Group subsidiary Cogentrix Energy, PCG Clean Energy and Technology Fund and Solon AG.

Pernick views the moves by Intel and other chip players as a sign that the sign of larger scale is coming.

“This is really the time of scale,” he said.

But it’s not a sure thing that Intel and other semiconductor companies can deliver on their potential.

“We’ll have to wait and see,” he said.

After all, SpectraWatt’s initial project is fairly small, especially compared to the 500 megawatts of production capacity that SolarWorld expects to have by the end of next year.

John Langdon, vice president of marketing at HelioVolt, said he's not too concerned about chip companies coming into the solar market. 

"It increases the competition, but it also validates the market," he said. "Right now, the market is growing so fast that if the cost is driven down significantly, we won't be able to produce enough to meet the potential market demand, even if everyone meets their [production] plans."

Still, while Mints said it’s not yet time to be worried, Rick Hanna, an equity analyst for Morningstar, doesn't want current solar players to get too relaxed either.

"You always have to take them seriously," he said about big-name tech players breaking into solar and their ability to leverage deep pockets, strong R&D prowess and a strong brand. "Those can be powerful door openers," he said.

For many analysts, like Jed Dorsheimer of Canaccord Adams, it's not surprising that Intel or other traditional semiconductor companies are getting into solar. They already work with silicon and there is a crossover opportunity with their intellectual property.

Other likely candidates could be Samsung, LG Electronics and possibly Advanced Micro Devices, he said.

But regardless of whether a company is an Intel or a smaller company like solar-cell- and panel-maker Evergreen Solar, they all face the challenge of expanding and continuing to innovate to capture market share, Hanna said.

Find out the forecast for Concentrating Solar Technologies at our seminar at Intersolar North America July 14, 2008 in San Francisco. Click here to register or for more details.