Over the past few years chronic oversupply plaguing the PV manufacturing industry has led to a shakeout in manufacturers, seeing some—even established companies like Suntech, a Chinese PV manufacturer that had bankruptcy charges filed against it in 2012—filing for bankruptcy, restructuring or merging with other companies. It’s been a worldwide phenomenon shaking out manufacturers in the U.S., Germany and elsewhere.
In recent years China, bolstered by inexpensive labor, has been able to produce the cheapest—albeit unfairly priced by World Trade Organization standards—modules and has ramped up production quickly in an attempt to outcompete PV from other countries. It looks like the effort is paying off. “After years of breakaway growth, China’s solar industry is poised for a big shakeout, with consolidation and failing firms. However, the changes are not going to change the Asian giant’s global dominance over the resurgent sector anytime soon,” according to a new Lux Research report.
“Since 2005, when Suntech became the first Chinese company to complete an IPO on the New York Stock Exchange, the country's solar industry has been on a tear, and now accounts for nearly 60 percent of global production, including nine of the top ten global solar module manufacturers,” Lux said. “Chinese firm’s low-cost focus has re-shaped the industry, helping drive solar module prices down 75 percent since 2007, boosting demand growth—but slashing profit margins, leading to huge losses both in China and abroad.”
“Rapid capacity expansion soon became the priority for Chinese x-Si players and hype-chasing investors, reaching a peak between 2009 and 2011,” the report, “The Great Shakeout: China's Path to a Rational Solar Industry,” said. Then in 2012 the continued international worldwide weak economy and lower PV demand culminated in a fierce price war that put a majority of Chinese players close to bankruptcy.
“Enormous oversupply and heavy debt have set Chinese solar manufacturers up for consolidation," said Zhun Ma, Lux research analyst and the lead report author. "The road ahead will be strewn with chaos and uncertainties, but the consolidation will draw a new solar landscape in China that still dominates the global solar industry.”
The report found that consolidation in the industry will benefit top-tier manufacturers like Yingli, Trina, Hanwha SolarOne and Canadian Solar. They will benefit particularly as China’s PV industry grows and becomes the world’s largest solar market. The report also contended that Chinese PV manufacturers are becoming technology leaders in the sector. “While China's solar success is often seen as driven by cheap labor, in fact top Chinese solar manufacturers increasingly boast world-class technology,” Lux said. “Non-Chinese players like SunPower and SolarWorld now need to innovate in areas including metallization, cell architectures and kerfless wafering to keep up.”
The report, part of Lux’ China Innovation Intelligence Service, also found that non-Chinese PV companies can target the domestic market there, like First Solar did with Zhenfa. Likewise materials suppliers, like DuPont, can partner with those companies, like its partner Yingli, that survive the shakeout.