Silicor Materials, a Redwood City, Calif.-based solar startup, just closed on $4 million of a $10 million VC debt round.

It sounds like good news: a solar newcomer picking up an early round.

But the fact is that Silicor is the renamed Calisolar -- and that firm has already spent more than $200 million in VC funding since its founding in 2006 to produce upgraded metallurgical (UMG) silicon. Previous investors included Globespan Capital Partners, Ventures West, Yaletown Venture Partners, SDTC, Hudson Clean Energy and ATV.

Silicor Materials' current board and its most recent debt round is dominated by Hudson Clean Energy. ATV and Globespan no longer list the firm as part of their cleantech portfolio.

Metallurgical silicon normally has too many impurities for making solar cells and is traditionally used for making aluminum alloys. Purifying metallurgical silicon into "upgraded metallurgical silicon," or UMG, creates a cheaper alternative. The challenge, though, is to refine it enough for it to be made into cells that rival conventional solar cells in conversion efficiency.

Calisolar once focused on building multi-crystalline silicon solar cells from the lower-purity polysilicon, but then pivoted to produce polysilicon as an (arguable) response to the plunging price of polysilicon and solar panels. The firm auctioned off cell-making equipment in July of this year. The firm also bought a Canadian silicon purifying firm, 6N Silicon, in 2010, and recently passed on a DOE loan guarantee.

The UMG value proposition might have made sense in 2008 when Calisolar closed its largest funding round and polysilicon cost $500 per kilogram. It makes less sense with polysilicon at its now-rationalized price of $20 per kilogram. A VC at Tallwood Ventures once remarked to GTM that it was a bad idea to invest in the high price of a commodity like silicon staying high.

In January of this year, the firm laid off more than 30 employees and halted its expansion plans. One of Silicor Materials' largest customers was Suntech, a module manufacturer with its own set of survival challenges.

An industry insider told GTM, "I am not as pessimistic about the long-term viability of UMG as many others are. I think the big issue right now is whether any sort of PV startup, regardless of technology choice, could shoehorn into the market with reasonable investment. It would take a really big advantage to overcome the scale of the majors, coupled with the current low gross margins in the industry. But hey, that doesn't seem to stop people from trying."

One could wonder if this small round of funding is to grow the company or keep the company afloat until more capital is raised.

Silicor Materials' CFO John Beaver commented to GTM today. He claimed that Silicor expects to be the "lowest cost producer of solar silicon" with "a cost structure much lower than GCL or OCI." He noted that their Ontario facility with an annual capacity of 1,300 metric tons has been moved to "R&D mode" as it is "too small to be cost competitive." The firm expects to break ground at its Mississippi facility in the second quarter of 2013 with a first phase capacity of 5,300 metric tons, eventually expanding to 16,000 metric tons per year.

Shyam Mehta, GTM Research Solar Analyst, said, "There is a price point at which UMG makes sense, but it is probably prohibitively low given where prices for Siemens are ($20 per kilogram blended by EOY 2012) and where costs for UMG are likely to be at this point in time."

"Aside from this is the issue of risk-reward. Given that UMG is lower quality and still relatively unproven, there is some risk associated with using it (even if it is heavily blended with Siemens as one would expect it to be). Given how low Siemens prices are, the risk is not worth the reward -- and we expect this to be the case over at least the next few years," added Mehta.


Hear more from solar industry experts and GTM Analysts at U.S. Solar Market Insight in San Francisco, Calif. later this month.