MEMC Electronic Materials ( WFR) may be providing a model for companies hit by rising commodity prices -- control your own supply chain.

Shares of the silicon-wafer manufacturer jumped again this week to sit at just under $20 -- a five-year high -- as investors see good things from rising silicon prices.

While MEMC makes wafers, it also makes its own polysilicon, the central building block of semiconductor chips and the main ingredient used to make the wafers used to build microchips for electronics gear.

Polysilicon has become scarce due to capacity constraints and growth of the solar energy market , which also uses the material to make solar panels. As a result, polysilicon prices have pushed up to more than $45 a kilogram from the mid-$30s just 12 months ago. And prices are seen reaching $60 a kilogram next year.

Since MEMC makes 90% of its own poly, it appears to be in great position to pass along most of these rising prices to customers.

This possibility has been apparent for months, but investors have recently flocked to MEMC's shares as the supply and demand imbalance has become more apparent. Normally an issue that remains far back in the electronics supply chain and well removed from the end customer, the dynamic is attracting increased scrutiny from the mainstream.

In July, CEO Nabeel Gareeb said during the company's earnings conference call that customers had yet to try engaging in early negotiations for 2006 contract pricing, but he expected "that instinct will start arising in people this quarter or next quarter."

He said that when poly prices last rose -- two years ago -- everyone in the industry participated, regardless of whether they were experiencing higher costs or not. "The guys that don't have poly supplies in house will get price increase passed along to them," Gareeb said, noting that customers of those companies will have to accept a lower rate of return. "We are not willing to accept that."

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