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The intense luminosity emanating from China’s solar panel industry may be fading. In less than one year, the industry nearly collapsed from its prominent position as a new energy source.
Data provided by China Nonferrous Metal Industry Association showed the price for domestic-made silicon wafers, a major component of solar cells, plummeted by 52 percent.
“I had to stop production because of the price plunge,” said Zhou Jianming, owner of Zhejiang Mingfeng Electronic Technology Co. Ltd.
Problems at home and abroad have hindered the industry’s growth. Demand from Europe, China’s major solar cell market, decreased as a result of lowered subsidies for solar energy. Seven American makers of solar panels also filed a broad trade case in Washington against the Chinese solar industry in October. Meanwhile, blind expansion has brought serious overcapacity of the domestic solar panel industry.
China’s photovoltaic industry will be going through a reshuffle in the next three to five years, said Li Junfeng, Deputy Director of the Energy Research Institute under the National Development and Reform Commission (NDRC).
Protecting domestics
U.S. solar panel makers have accused their Chinese counterparts of using billions of dollars in government subsidies to help gain sales in the American market. They also accused China of dumping solar panels in the United States.
“If the filing turn out to be successful, the door to the U.S. market for Chinese photovoltaic enterprises will be completely shut,”Li said.
China’s Suntech Power Holdings Co. Ltd., the world’s largest maker of solar panels, based in Wuxi, Jiangsu Province, said in a statement, “Each individual company, including Suntech, will respond in accordance with International Trade Commission & Department of Commerce guidelines. As a global company listed on the NYSE, we are confident in our position and well-prepared to substantiate our strict adherence to fair international trade practices.”
Yingli Green Energy Holding Co. Ltd., based in Baoding in north China’s Hebei Province, said it was reviewing a trade complaint filed by U.S. solar panel makers against Chinese rivals and plans to mount a vigorous defense.
“We would like to remind everyone that these petitions obviously present only the views of one side, and only a partial view of a very complicated story,” Yingli said.
Despite the fact that the U.S. market only accounts for approximately 10 percent of Chinese solar equipment exports, the anti-dumping accusation may soon spread to the EU.
Europe is the biggest export market of China’s solar panels, accounting for 70 percent of the total exports in 2010, according to Li.
One of the seven companies who filed anti-dumping and countervailing duty petitions is SolarWorld, the largest U.S. producer of crystalline silicon photovoltaic products. It is actually a Germany-based company.
“If the filing succeeds in the United States, Europe will surely follow. It is terrible for Chinese solar enterprises since the European market makes up a lion’s share of Chinese exports,” Li said.
But are anti-dumping and anti-subsidy filings real remedies to save the solar industry in the United States?
To limit exports from China will further push up the price of solar energy in the United States and do harm to the new energy plan that the Obama administration vows to boost, said Li.
A senior official with the Bureau of Fair Trade for Imports and Exports of the Ministry of Commerce (MOFCOM) told Xinhua News Agency that China currently registered a deficit of $1.88 billion with the United States in the trade of solar products and the raw materials and equipment in making clean energy products.
The official warned that if the United States slaps punitive tariffs on Chinese exports of solar panels, it would also hurt U.S. exports of raw materials and manufacturing equipment to China.
“If the U.S. Government files a case, adopts duties and sends an inappropriate protectionist signal, it would cast a shadow over world economic recovery,” an unnamed official said in a statement posted on the website of MOFCOM.
Blind expansion
In addition to being the scapegoat of failed U.S. solar cell makers, the Chinese solar industry is also going through difficult times at home.
Although Suntech denied recent rumors of its bankruptcy, the fact is that its

net profit plunged nearly 50 percent in the second quarter of this year, according to its company report. LDK Solar, Asia’s biggest polysillicon solar wafer maker, based in Jiangxi Province, saw its gross profit margin decline to 2.2 percent in the second quarter of this year from 31.5 percent in the previous quarter.
China’s photovoltaic industry is suffering loss, no matter big or small.
“Things will be even worse in the third and fourth quarter for many Chinese solar companies,” said Wang Yuming, an analyst of the photovoltaic industry with Beijing-based financial consultant Snowball Finance.
Even though China’s solar industry is the biggest in the world—five of the biggest solar panel manufacturers are Chinese—quantity does not necessarily mean quality.
“China has a big, but not a strong solar sector. The high-profit segments, like silicon material, are controlled by foreign companies. Most Chinese companies are engaged in the processing and assembly which create meager profits. What makes the Chinese solar industry more vulnerable is that more than 90 percent of its solar products were exported. Once the market fluctuates, China would be the biggest victim,” said Xu Ang, an analyst with the Beijing-based Adfaith Management Consulting Co. Ltd.
Even in this vulnerable industry, too many players have made the competition very fierce.
Official data showed that so far China has more than 500 photovoltaic enterprises, five times more than three years ago.
“The expansion last year was crazy. The market is not so big to hold all this production capacity and reshuffling cannot be avoided,” said Shi Limin, Vice Executive Secretary of China New Energy Chamber of Commerce of All-China Federation of Industry and Commerce.
The report by Solarbuzz, a market research firm based in San Francisco, said global photovoltaic equipment spending has reached a “historic peak” of $13.1 billion thus far in 2011, and projected a “continuous shakeout” of uncompetitive photovoltaic cell manufacturers around the world.
“Almost half of photovoltaic equipment spending in 2011 has been stimulated by new entrants to the industry or from existing Tier-2 or Tier-3 manufacturers seeking to increase revenues simply by adding more capacity,” the report said.
Official data showed that 80 percent of photovoltaic overcapacity was from China.
“High profit margin allured many investors to join in solar industry,” said Zhou. In October 2010, the Zhejiang-based famous hosiery manufacturer LangSha Group decided to march into the solar energy industry, establishing a photovoltaic company with an investment of 1 billion yuan ($157.48 million).
Nationwide, industrial insiders said, more than 50 photovoltaic companies have closed down. Others are on the verge of closure.
Despite a business slowdown and an oversupply in production facilities, some Chinese photovoltaic companies are still investing in new projects. LDK Solar announced that the government of Hohhot, capital of Inner Mongolia Autonomous Region, held a ground-breaking ceremony on November 1, 2011, for a polysilicon manufacturing facility with an annual output of 30,000 metric tons in its Jinsan Development Zone.
Shen Fuxin, Secretary General of the Zhejiang Solar Energy Industry Association, predicted that the mainland photovoltaic industry will see some 30 percent of its member companies close down over the next two to three years.
When the bubble breaks
Small and medium-sized companies will suffer the most. Out of 210 photovoltaic enterprises in Zhejiang, 60 percent were small and medium-sized, according to Shen.
“It is much harder for small and medium-sized enterprises to obtain lending from banks than big ones, especially in tough market,” said Du Jun, General Manager of Changzhou Jiangnan Photovoltaic Technology Co. Ltd.
The whole photovoltaic industry will go through a reshuffle in the next three years and some small enterprises will be eliminated once their outside financing collapse, Shen said.
To avoid low-end repetitive production, Diao Shijing, Vice Director of the Department of Information Technology under the Ministry of Industry and Information Technology, suggested that China support the research and development of high-end photovoltaic battery technologies.
According to Diao, China’s photovoltaic production accounted for nearly half of the world’s total in 2010, but its domestic installed capacity was only 2 percent.
“China’s solar panel market has not been developed yet. Too high dependence on overseas markets poses problems for our photovoltaic industry,” Diao said.
While easing dependence on overseas markets, boosting the domestic market could be a real remedy to save the industry.
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