In the photovoltaic industry chain, the four most important segments are polysilicon, silicon wafer, solar cell, and module. According to the latest statistics from the International Energy Agency（IEA）, Chinese companies account for over 80% of global production capacity in these four areas, and all the top ten global photovoltaic manufacturing suppliers are located in China. With the current construction speed, it is expected that by 2025, Chinese companies will take 95% of global production capacity.
According to data from the China Photovoltaic Industry Association, China's photovoltaic product exports reached approximately USD 51.25 billion in 2022, a year-on-year increase of about 80.3%. Among them, the export of modules was the largest, reaching approximately 153.6 GW. In the Q1 of 2023, the cumulative export of photovoltaic modules reached 50.9 GW, a 37% growth compared to the Q1 of 2022, indicating a lack of seasonality. With the rise of European energy crisis and the global renewable energy boom, Chinese-made photovoltaic products will continue to dominate the market in the foreseeable future.
Photovoltaic exports soar after a low tide
In the early 20th century, Europe took the lead in expanding the use of clean energy, while the domestic photovoltaic market in China was limited. Chinese photovoltaic companies heavily relied on overseas markets, especially at the two ends of the industry chain.
Before the 2008 economic crisis, polysilicon production in China's photovoltaic industry heavily relied on imports from overseas. Data shows that in 2005, the international market price for polysilicon was around USD 40 per kilogram, with production mainly concentrated in Germany, the United States, and South Korea. The annual production capacity of manufacturers in these countries exceeded tens of thousands of tons, while China's annual production of polysilicon was only 60 tons. In this situation, fluctuations in international polysilicon prices immediately affected prices in the domestic industry chain. At the same time, almost no industries in China could apply photovoltaics, and changes in demand in foreign end markets led to overcapacity or insufficient photovoltaic production. According to Economic Observer, until 2008, 98% of China's photovoltaic cells were exported overseas, indicating the vulnerability of domestic photovoltaic companies during that period.
In 2008, the international market price of polysilicon soared to around USD 500 per kilogram, causing significant strain on midstream manufacturers in China who could only survive on meager processing fees. After the increase in polysilicon prices, some domestic polysilicon manufacturers began to invest in production. However, due to long-term reliance on foreign technology and equipment, domestic polysilicon had no cost or quality advantages, leading to unsatisfactory results. After the 2008 financial crisis, the main overseas markets for photovoltaics were severely hit, leading to a contraction in the market. The price of polysilicon plummeted to around USD 47 per kilogram, causing significant impact on domestic polysilicon manufacturers who wanted to join the profitable wave.
In 2009, in order to support the struggling photovoltaic industry, the Chinese government turned its attention to the domestic market. The Chinese government launched "Solar Photovoltaic Construction Demonstration Projects" and the "Golden Sun Program" in March and July, respectively. These initiatives aimed to reduce the cost of photovoltaic applications through subsidies, expand the domestic photovoltaic end market, and help address the overcapacity caused by the impact on the international market. Due to loopholes in policies and regulatory deficiencies, there were many cases of subsidy fraud in the market. In 2013, the Chinese government stopped accepting new approvals for the Golden Sun Program, and in 2015, it issued a notice to cancel the qualifications for some solar photovoltaic construction demonstration projects and recover subsidy funds. Despite the shortcomings, a series of supportive policies for the photovoltaic industry initially had a significant effect, providing Chinese photovoltaic companies with time and space to improve technology and quality.
As the domestic market showed some signs of improvement, the hammer of trade protectionism struck again in the international market. Starting in November 2011, a series of "double reverse" (anti-subsidy and anti-dumping) investigations targeted at Chinese photovoltaic companies were launched. According to incomplete statistics, countries and regions such as the United States, the European Union, Canada, Australia, and India conducted "double reverse" investigations against China between 2011 and 2014, with the investigations by the United States and the European Union having the greatest impact. In November 2011, SolarWorld, a US solar equipment manufacturer, joined forces with six photovoltaic producers to request an investigation into solar panels exported from China. In 2012, the US Department of Commerce decided to impose anti-subsidy duties ranging from 2.90% to 4.73% and anti-dumping duties ranging from 31.14% to 249.96% on photovoltaic cells exported from China to the United States. Subsequently, in 2012, SolarWorld led the establishment of the European Photovoltaic Manufacturers Alliance and filed a lawsuit with the European Commission, requesting an investigation into China's "dumping behavior." In 2013, the China Chamber of Commerce for Import and Export of Machinery and Electronic Products attempted to negotiate with the European Commission but was unsuccessful. Starting in June, the European Union imposed anti-dumping duties of 11.8% on Chinese photovoltaic products.
Meanwhile, Chinese companies have struggled in the exploration of polysilicon production. Siemens' improved technology is widely adopted by companies, but high energy consumption and excessive byproducts are the shortcomings of this technology. Around 2010, as polysilicon manufacturers began production one after another, energy consumption and environmental issues gradually emerged. An article in Economic Reference in 2010 revealed that a polysilicon manufacturer in Jiangxi consumed electricity equivalent to one-fourth of the entire electricity consumption of Nanchang City. A Reuters report in 2011 also exposed the phenomenon of cross-regional transportation and discharge of untreated silicon tetrachloride waste liquid by some polysilicon manufacturers, leading to the paralysis of urban sewage treatment. For a time, China's polysilicon production became a global hotspot. Additionally, due to high construction costs and insufficient key technologies, some companies had high debt ratios and fell into financial dilemmas. Data shows that the industry leader at the time, Suntech, quickly collapsed after facing "double reverse" investigations in the photovoltaic industry. The debt-to-asset ratio of the third-largest polysilicon producer, Jiangxi Sveck, reached 7.4 at one point and it declared bankruptcy in 2015.
The "two ends abroad" pattern has always constrained the development of China's photovoltaic industry. In 2013, China's photovoltaic industry once again hit a low point. Taking photovoltaic cells as an example, the export of photovoltaic cells by Chinese companies decreased by 42.1% year-on-year in 2012 and by 17.9% in 2013. To save the photovoltaic industry, the Chinese government introduced several opinions and notices to promote the healthy development of the photovoltaic industry and stimulate the domestic market. Starting from 2013, China's domestic installed capacity increased significantly. According to statistics from CICC, the domestic newly installed capacity exceeded 50 GW in 2017, compared to less than 5 GW in 2012.
The Chinese government guided the domestic photovoltaic industry towards a path of healthy development by adjusting subsidies and installed capacity. To break the deadlock of "two ends abroad", Chinese photovoltaic companies began to focus on improving their own technological competitiveness. The comprehensive electricity consumption of polysilicon production companies in the entire process reached 200 kWh/kg-Si in 2009, but by 2020, the industry's comprehensive electricity consumption had generally decreased by 70%, with leading companies reducing it by 75%. By using byproduct steam for power generation, steam consumption has basically decreased to zero, achieving self-sufficiency in terms of capacity. In the field of solar cell production, China's mass-produced solar cell conversion rate was only 15% in 2008, but by 2021, it had reached around 24%. Solar cell manufacturers, led by JA Solar, have repeatedly achieved technological breakthroughs. In 2022, JA Solar's 182mm N-type solar cell set a world record.
Around 2018, with the end of the sanctions, Chinese photovoltaic companies experienced springtime in the international market after a low point. Chinese photovoltaic companies once again entered the international market, partially due to the end of international sanctions and their own improved technological competitiveness, as well as the withdrawal of Chinese domestic subsidy policies. In 2018, the National Development and Reform Commission, the National Energy Administration, and the Ministry of Finance jointly issued the "531 New Policy," which aimed to reduce subsidies for the photovoltaic industry. Many companies were affected by this policy. However, for internationally-oriented companies like Longi, Tongwei, and Chint New Energy, the policy did not significantly impact their revenue and profits. This gave many companies a profound lesson that forward-looking policies are crucial for their own development and objectively promoted the globalization of China's photovoltaic industry chain.
Chinese photovoltaic companies have shifted some of the early advantageous intermediate links, such as solar cell production, to Southeast Asia. At the same time, companies like Longi and Tongwei have actively expanded their business upstream and downstream to mitigate risks. Currently, these leading companies in the photovoltaic industry have a complete industrial chain from upstream silicon material production to downstream power station construction, effectively overcoming the disadvantages of "two ends outside." In recent years, the implementation of environmental protection policies and the energy crisis caused by the Russia-Ukraine conflict have stimulated the demand for photovoltaics in Europe once again. According to Ping An Securities, photovoltaic modules have become the main product in China's photovoltaic export field, replacing the first wave of the solar cell export frenzy.
Preparing before the crisis
In the Q1 of 2023, China's cumulative export of photovoltaic modules reached 50.9 GW, a 37% growth compared to the first quarter of 2022, displaying the phenomenon of a "non-slack season." After the passage of the US "Inflation Reduction Act," concerns were raised that Chinese photovoltaic companies would once again be hit. However, the impact of these policies has not been significant. Chinese photovoltaic companies, which have experienced policy changes, have already taken the lead.
The "Inflation Reduction Act" in the United States aims to support domestic photovoltaic companies through subsidies. In reality, US photovoltaic companies are weak and have no ability to compete with Chinese companies. The Wall Street Journal commented that in the future, the US photovoltaic industry may gain advantages in some small areas, but the overall photovoltaic industry will still rely on China. After the passage of the act, Chinese industry leaders, in order to avoid policy risks, have chosen to establish factories in the United States. First Financial reported that JA Solar has announced a USD 60 million investment to build a photovoltaic module factory in Phoenix, Arizona, and Longi Green Energy is collaborating with US clean energy developer Invenergy to build a photovoltaic module factory in Ohio, United States.
EU and India's series of anti-subsidy measures are not only targeted at China but the entire world. The EU has also proposed producing 40% of its capacity domestically, and India is supporting domestic companies as well. If Chinese companies can successfully build factories in regions implementing trade protection measures, it may actually benefit China's global layout. Ultimately, the advantage of Chinese products lies in their competitive prices. According to data from One Yuan Energy, the cost of Chinese photovoltaic products is 10% lower than that of India, 20% lower than that of the US, and 35% lower than that of Europe. Moreover, with the decrease in the prices of some raw materials such as polysilicon and silver paste, the cost of Chinese photovoltaic products will further reduce, making them more competitive in the international market.
In the future, it is a trend for Chinese photovoltaic companies to invest in establishing factories in other countries in order to avoid trade protectionism and secure industry subsidies. Another trend is the rise of emerging markets, leading to a decrease in the concentration of export markets.
Currently, the European market remains the main market for China's photovoltaic exports. Before the rise of China's photovoltaic industry, Europe was the center of the global photovoltaic industry. An employee from RockTech IoT Division told EqualOcean that due to the continuous energy crisis in Europe, the demand for photovoltaic power generation and related energy storage is increasing, which is expected to drive further expansion of the industry.
According to data from Info Link, there has been a significant change in the destination of China's photovoltaic exports in the first quarter of 2023. Brazil, Thailand, Pakistan, and Vietnam have entered the top ten countries for Chinese photovoltaic exports. The market share in the Middle East and Africa is relatively small, but it is growing rapidly. It is expected that with the shift in national diplomatic and economic policy focus, coupled with the implementation of anti-subsidy and local manufacturing protection policies in Europe, Chinese companies' exports will be affected. In the future, the proportion of Europe and the US in China's photovoltaic exports will decrease, while the Southeast Asian market will continue to accept industrial transfer and investment of Chinese photovoltaic companies. Latin America, the Middle East, and Africa will become new growth points.
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