China takes over as US solar power firms fail

Sep 18, 2011 by Bill Savadove
A masked worker sorts silicon wafers at the manufacturing centre of solar cell maker Trina Solar in Changzhou in 2009. China's solar power firms are having their day in the sun with the collapse of overseas competitors, but the new giants are struggling with low prices and overcapacity like others in the industry.

China's solar power firms are emerging as the industry's dominant force after the collapse of foreign competitors, but the new market leaders are already struggling with low prices and overcapacity.

As the workshop of the world, China has used cheap labour and state support to build a solar industry from scratch in just over a decade as part of a broader strategy to move up the manufacturing value chain from cheap toys and clothes.

China is the world's second biggest oil consumer, and polluting fossil fuels account for 90 percent of its total energy use, but the country is making large strides forward in clean energy.

Analysts say Chinese firms now have 70 percent of the growing global market in , thanks to aggressive pricing and the collapse of three US competitors in the last two months.

"The position of Chinese players has certainly been enhanced this year," said Tang Xiaodong, a Shanghai-based analyst at independent investment advisory firm CEBM.

"Lower costs are the direction of the industry and the advantages of Chinese firms on this front have been manifested more clearly."

China's solar panel prices have fallen to around $1.2 per watt of generation, down from about $1.7 last year and much lower than the global average of about $2.0 in 2010.

But the downward price spiral has hurt revenues across the industry, and Chinese companies are themselves feeling the pain.

"Everyone is facing falling prices, increasing inventories and dire straits," said an official at Yingli Green Energy, one of China's biggest solar companies, speaking on condition of anonymity.

Critics argue that Chinese companies have unfair advantages in the form of access to cheap capital from China's state-run banks.

However, they are not alone in receiving government assistance -- the latest US solar firm to file for bankruptcy was Solyndra, which had a $535 million loan guarantee from President Barack Obama's administration.

It joined Evergreen Solar, once listed on the Nasdaq exchange, and high-profile Intel spin-off SpectraWatt.

Residents walk past a line of solar power panels installed for public electricity supply in Shenyang, in northeast China's Liaoning province in 2009. As the workshop of the world, China has used cheap labour and state support to build a solar industry from scratch in just over a decade as part of a broader strategy to move up the manufacturing value chain from cheap toys and clothes.

But even before the collapse of those three US companies, China was already home to the world's largest producer of solar panels, Suntech.

"There is a periodic murmur from industry, trade groups and elements in the US government that unfair subsidies in other countries put the US at a distinct disadvantage in the ," said US-based analysis firm GTM Research in a recent report.

China's Suntech, which is listed on the New York Stock Exchange, counters such criticism by saying consolidation of the emerging industry was natural.

"The recent high-profile bankruptcies of innovative solar enterprises are unfortunate," Suntech said in a statement to AFP.

"However, competition among aggressive and innovative companies is critical to driving efficiency, productivity, and industry growth."

Chinese companies are almost solely focused on exports, with as much as 95 percent of production sold overseas according to some estimates, and they have responded to falling prices for solar panels by ramping up shipments.

But analysts expect domestic demand for solar products to rise with the introduction of a new national "feed-in" tariff -- a price the government guarantees to pay to producers of feeding into the grid.

"The days of China's PV (photovoltaic) production being purely for export are coming to an end," GTM Research said, referring to solar power technology.

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User comments : 12

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Vendicar_Decarian
2.3 / 5 (9) Sep 18, 2011
Poor Americans... They don't seem capable of being competitive in any global market.

I guess they will have to lower their standard of living to compete with labor from Somalia.
XQZME
2.1 / 5 (7) Sep 18, 2011
All because some idiots in search of government grants created a hoax that caught the attention of ideologists who adopted their alarms to promote population control, social justice, redistribution of wealth, and global government and also caught the attention of crony capitalists as a movement to promote extremely expensive, job destroying, renewable technology for more government development and manufacturing subsidies, grants and bailouts. There are too many idiots in politics!
TheSpiceIsLife
3 / 5 (4) Sep 19, 2011
"Critics argue that Chinese companies have unfair advantages in the form of access to cheap capital from China's state-run banks." - When the other side wins they call it "unfair".

Maybe the other side is just a better player ;)
dirk_bruere
not rated yet Sep 19, 2011
The PV industry seems to be following the IC market in its boom-bust cycle. In which case, in a couple of years having a PV factory will once again be a licesnse to print money.
antialias_physorg
5 / 5 (1) Sep 19, 2011
The PV industry seems to be following the IC market in its boom-bust cycle.

This boom-bust cycle has been with us since the advent of industrializations (look up how many fledgling car, plane, or even steam engine manufacturers went from boom to bust in the early days of the respective technology)

The best player wins. In a global market that's the player that can manufacture the cheapest. Crying over 'unfair' conditions never got anyone anywhere (and as the article noted the US government wasn't above creating unfair conditions itself by handing out cheap loans - so crying 'foul' is doubly hypocritical)

For solar products the solution seems obvious: Change the marketing angle. People who buy solar panels are, for the most part, eco-conscious. Buying from a source that has strict anti-pollution laws and doesn't exploit its labour pool should be a winning argument.
frajo
3 / 5 (2) Sep 20, 2011
The best player wins.
You mean "the winner is - by definition - the best"?
VHS vs. Betamax, Windows vs. OS/2 - there are lots of historical examples where the economical winner was (and is) technically inferior.

In a global market that's the player that can manufacture the cheapest.
Read physorg.com/news/2010-12-eu-india-limit.html :
For years, generic producers have simply had to prove their medicines are equivalent to the original drug to be approved. Under new rules, they would have to conduct clinical trials, which cost millions of dollars, to duplicate the data produced by the original company.
So the sentence has to be changed into "In a global market that's the player that is allowed to manufacture the cheapest."
NotAsleep
not rated yet Sep 20, 2011
Poor Americans... They don't seem capable of being competitive in any global market.

It's difficult to compete in a market where the biggest player is willing to die to win:
http://business.b...t=ias_c2

Eventually, China's production will no longer be sustainable and the pendulum will swing back to the west. Perhaps it won't bring us back to the 80s and 90s... but the world will start to find balance
holoman
not rated yet Sep 20, 2011
How does a company receive $ 500 million and fails.

It sounds like some funny business in Silicon Valley.

Chinese are good at lowering the price to capture market
share then rainsing the prices back up.

A strategy that has worked for 20 years.
frajo
not rated yet Sep 22, 2011
Eventually, China's production will no longer be sustainable and the pendulum will swing back to the west. Perhaps it won't bring us back to the 80s and 90s... but the world will start to find balance

Depends how you define "balance". Some historians argue the world lost its balance 500 years ago, when the Occident began to subjugate and ransack the rest of the world.
Read the wiki on admiral Zheng He.
CHollman82
2.3 / 5 (3) Sep 22, 2011
Poor Americans... They don't seem capable of being competitive in any global market.

I guess they will have to lower their standard of living to compete with labor from Somalia.


We should all admire china, who's complete lack of workers rights and environmental regulations allow them to produce the cheapest widgets in all the world... at the expense of the well being of the planet and everything living on it.
CHollman82
1 / 5 (1) Sep 22, 2011
How does a company receive $ 500 million and fails.

It sounds like some funny business in Silicon Valley.


Yes and they were recently raided by the FBI to try to uncover such funny business.
Vendicar_Decarian
1 / 5 (2) Sep 22, 2011
"We should all admire china, who's complete lack of workers rights and environmental regulations allow them to produce the cheapest widgets in all the world..." - CHoll

It is the beauty of a free and unregulated market.

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