China, as the world's largest photovoltaic manufacturing country and consumer market, has achieved remarkable and far-reaching development over the past two decades. During this period, China's photovoltaic industry experienced ups and downs, driven by its integration into global supply chain and the backdrop of China-US competition. The series "China's Photovoltaic Go Global" focuses on the competitive advantages, strategic layout faced by Chinese photovovoltaic industry.
This article specifically focuses on the development of China's photovoltaic industry during the era of its initial global expansion, also known as "Phase Ⅰ" (before 2010). During this decade, China's photovoltaic industry seized the opportunity of substantial subsidies in major European and American markets, emerging as the world's largest photovoltaic manufacturing country. However, behind the short-lived glory, there were underlying structural contradictions. The operating model of Chinese photovoltaic companies, characterized by "four heads abroad," and the inherent lack of technological accumulation, became hidden pitfalls that led to setbacks. After 2008, Chinese photovoltaic companies faced bankruptcy one after another due to plummeting raw material prices and the initiation of anti-dumping investigations by the United States and Europe.
In the year 2000, the International Energy Agency (IEA) made a bold prediction that the global photovoltaic solar power generation capacity would reach 18 GW by 2020. However, the actual progress showed that this forecast was too conservative. By the end of 2020, the cumulative installed capacity of photovoltaic systems worldwide had already reached 760.4 GW. Over the past two decades, the global photovoltaic industry has experienced rapid development beyond expectations. In this process, Chinese photovoltaic companies have played a crucial role.
During the past 20 years, the Chinese photovoltaic industry has made significant breakthroughs, establishing itself as a leader and innovator in the global photovoltaic sector. Comprehensive breakthroughs in photovoltaic technology research and development, capacity expansion, and market applications have made Chia the world's largest photovoltaic market and manufacturing country. This success has not only played a key role in China's sustainable economic development but has also made a positive contribution to global clean energy transition and environmental protection. Focusing on the period from 2000 to 2010, the early stage of China's photovoltaic industry development witnessed a convergence of opportunities and numerous risks within the backdrop of historical trends, shaping the development landscape of the Chinese photovoltaic industry.
From Zero to Global Expansion, Starting from the Northwest China
In the early 1980s, the United States, with its leading research and development capabilities and industrial level, dominated over 85% of the global photovoltaic industry market share. In 1990, Germany introduced the "2000 Roofs Initiative," aiming to install 3-5 kWp photovoltaic panels on the roofs of every household. In 1997, the United States proposed the "Million Solar Roofs" program while Japan launched the "New Sunshine Program" with a target to produce 4.3 billion watts of photovoltaic power by 2010. However, at that time, the scale of the photovoltaic market was still small, and with the decline in oil prices, renewable energy development plans in Europe, the United States, and other countries were put on hold, allowing traditional energy giants to gradually rise.
In the early stages of China's power industry development, the electricity grid had not yet fully covered the northwestern and remote regions, which had abundant solar and wind resources. China recognized the tremendous potential of photovoltaic power generation in addressing electricity shortages in the western and rural areas and began to focus on photovoltaic development. In 1997, in response to the "World Solar Energy Summit" held in Zimbabwe in 1996, the Chinese government formulated the "Brightness Program," a global initiative to promote access to electricity in unelectrified areas. As part of this initiative, the "China Brightness Program" plan was established to develop and utilize renewable energy sources such as wind and solar energy in the northwestern China.
The year 2001 marked the beginning of China's photovoltaic industrialization. Overseas Chinese entrepreneur Shi Zhengrong, as a returnee from Australia, founded China's first photovoltaic company, Suntech（无锡尚德）, in Wuxi. The Wuxi government not only provided land resources but also offered favorable tax incentives. Additionally, eight state-owned enterprises collectively invested USD 6 million in Suntech, providing financial support. During this period, the first generation of photovoltaic companies emerged, focusing on meeting the electricity demand in rural areas of western China and capitalizing on the initial development boom of the global photovoltaic industry.
With Shi Zhengrong holding more than ten solar cell technology invention patents and possessing advanced technology, Suntech experienced rapid growth. In 2002, Suntech was still operating at a loss, but it turned profitable starting from 2003. By 2004, Suntech's performance had multiplied by 20 times. Subsequently, Suntech continued to expand and started venturing into overseas markets.
As global environmental awareness awakened and renewable energy began to rise, developed economies in Europe and America vigorously developed the solar energy industry, leading to a significant increase in market demand. Chinese first-generation photovoltaic companies such as Suntech and LDK Solar（江西赛维） stood out with their low-cost advantages, winning a large number of photovoltaic component orders in the European and American markets and achieving their first overseas expansion.
After 2005, the global photovoltaic market experienced rapid development, with annual installed capacity soaring from less than 1 GW to 30 GW, with a compound annual growth rate exceeding 60%. During this period, Chinese photovoltaic companies took full advantage of the subsidies provided by European and American governments for the photovoltaic industry, seizing the market and achieving rapid capacity expansion. They formed a relatively complete solar photovoltaic industry chain, including high-purity silicon production, solar cell and module manufacturing, photovoltaic system installation, and related supporting industries.
On December 14, 2005, Suntech became the first Chinese private enterprise to be listed on the New York Stock Exchange. On its first day of trading, Suntech's stock price surged by 40%, making its founder Shi Zhengrong the richest person in China that year. He, along with Peng Xiaofeng, the founder of LDK Solar, and Miao Liansheng, the founder of Yingli Solar（英利集团）, were known as the "Three Fathers" of Chinese photovoltaic enterprises.
Chinese photovoltaic companies chose to list overseas one after another and emerged as important participants in the global photovoltaic industry, thanks to their outstanding manufacturing capabilities. Their revenue capacity also reached its peak around 2008. In 2010, Suntech, with a module shipment volume of 1.5 GW, surpassed the US company First Solar for the first time, claiming the top spot as the world's largest photovoltaic company.
The Inherent Deficiencies Behind Wild Expansion: Operational Challenges Due to Lack of Core Technology
Behind the frenzy of expansion among first-generation PV enterprises lies inherent deficiencies. As overseas-listed companies, their operating model involves having "four heads abroad": raw materials, equipment, technology, and even the market are all located overseas, while Chinese companies are only responsible for manufacturing and assembly. This means that the pricing power of polysilicon materials, PV industry technology, and PV demand market are all controlled by Europe and the United States, while Chinese PV enterprises are only involved in the intermediate stages of PV module and product processing, resulting in slim profit margins.
Wall Street Capital and European polysilicon suppliers identified the weaknesses of Chinese PV enterprises and launched a hunt against them. European and American suppliers first created expectations of rising PV material prices in the futures market, pushing the price of polysilicon from USD 40 per kilogram to USD 500 per kilogram. This prompted many Chinese PV enterprises to sign long-term order contracts with European and American PV material suppliers in advance, in order to secure so-called low-cost polysilicon raw materials.
In 2006, Shi Zhengrong predicted that the PV industry would continue to grow over the next decade, and that polysilicon material prices would rise. Therefore, Suntech signed a ten-year memorandum of understanding with the American company MEMC, allowing Suntech to purchase polysilicon at a price of USD 80 per kilogram. Suntech also signed a polysilicon supply contract worth USD 670 million with the American company HOKU.
However, the price of polysilicon began to fluctuate dramatically during this time. The outbreak of the 2008 subprime mortgage crisis led to a contraction in European and American PV demand, causing polysilicon prices to plummet from over USD 400 per kilogram to below USD 50 per kilogram. The pre-signed low-cost polysilicon contracts turned into expensive contracts. Suntech was hit hard, being forced to pay over USD 200 million in substantial penalties and terminating some of the exorbitant polysilicon contracts to mitigate losses. Meanwhile, Chinese PV enterprises faced the dual pressures of overcapacity and the subprime crisis, further exacerbating their plight and pushing them to the brink of bankruptcy.
In 2007, some PV enterprises, led by Suntech, bet on the next-generation thin-film solar cells and planned to achieve a capacity of 400 megawatts by 2010. However, the mainstream view in the market at that time was that the next-generation core PV component was monocrystalline silicon. Monocrystalline silicon had already reached laboratory efficiency of 24.7%, while thin-film solar cells were only at a level of 13%-16% efficiency.
In 2009, Suntech's cadmium telluride thin-film solar cell project launched in Chengdu ended in failure, and the USD 300 million amorphous silicon thin-film solar cell factory built in Shanghai was forced to close completely in 2010, resulting in the failure of the thin-film solar cell plans.
The rapid growth in demand in the European market in 2010 attracted a large amount of investment, and China's PV capacity expanded at a staggering rate of 300%. However, the sovereign debt crisis in several European countries in 2011 led to a slowdown in PV installation growth in Europe, dealing another heavy blow to the PV industry. Due to a series of major failed decisions, coupled with the continuous decline in the PV market, industry giants like Suntech began to suffer massive losses.
Excessive capacity expansion combined with declining raw material prices led many PV enterprises to have to clear their inventories at prices below cost, triggering panic across the industry. Before the 2008 financial crisis, China had over 400 PV enterprises and was the world's largest PV manufacturing country. After the financial crisis, there were fewer than 50 enterprises nationwide, resulting in heavy losses.
Anti-Dumping and Anti-Subsidy Investigations: The last Straw for China's Photovaltaic Industry
The rise of trade protectionism has intensified the challenges faced by the Chinese PV industry. On October 19, 2011, SolarWorld Industries America Inc. (referred to as "SolarWorld") and six other American PV companies jointly filed a complaint with the U.S. Department of Commerce and the U.S. International Trade Commission against Chinese PV companies, accusing them of illegally dumping crystalline silicon PV cells in the U.S. market. They also alleged that the Chinese government provided illegal subsidies to domestic manufacturing companies, including supply chain subsidies and trade barriers. They demanded the federal government to impose tariffs of over USD 1 billion on PV products from China. On November 9, the U.S. Department of Commerce officially initiated the anti-dumping and countervailing (known as "double remedies" or "double-reverse") investigation against Chinese PV products.
In 2012, the U.S. Department of Commerce made a formal decision to impose anti-dumping duties ranging from 18.32% to 249.96% and countervailing duties ranging from 14.78% to 15.97% on Chinese PV companies' products. That same year, the European Union (EU) also launched an anti-dumping investigation against Chinese PV companies, involving an amount exceeding USD 20 billion, making it the largest-scale trade litigation initiated by the EU against China to date. In 2013, the EU similarly decided to impose high punitive tariffs on Chinese PV products. Europe and the United States were the largest markets for Chinese PV companies at the time, accounting for over 85% of the global market share. The double remedies investigations dealt a devastating blow to the already vulnerable Chinese PV industry.
As market prices continued to decline and with the international economic situation and anti-dumping measures by Europe and the United States, panic gradually spread to the investment and financial sectors, placing the Chinese PV industry in a severe financing situation. The disclosure of financial reports by publicly listed PV companies exacerbated this situation, with many companies facing financial strain in their cash flow.
China's first-generation PV companies, after a brief period of glory, became targets of attacks by Europe and the United States. In the brutal price war, 90% of PV companies were forced to halt production. Simultaneously, Europe and the United States' double remedies sanctions eroded the profit margins in the downstream market, leading to the loss of overseas orders, and the domestic market was unable to bear the burden. LDK Solar and Suntech, both filed for bankruptcy after the double remedies investigations. Suntech entered into liquidation in November 2013 and was delisted from the New York Stock Exchange in 2014. From the high-profile entry into overseas markets to a downturn and retreat to the domestic market, this represents a microcosm of the rise and fall of the first-generation PV industry.