China’s Solar Domination – go

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London – ‘Go’ is the Chinese version of checkers or chess. Players take turns to place pieces on a board to weaken opposing positions and strengthen their own with the winner dominating the majority of the 361 squares. The parallels are uncanny as to how the Chinese have used strategy to dominate the solar industry in less than a decade, outclassing western competition in scale and cost.
 
 The Chinese Government’s 12th five year plan has called for cell producers with a capacity of 5GW and polysilicon producers with 50,000mt of production by 2015. The real battle is now being fought by China’s numerous polysilicon start ups and the industry incumbents of OCI (Korea), Wacker (Germany & America), Tokuyama (Japan) and Hemlock (America).
 
Polysilicon is purified silicon from sand. There are various grades with the highest quality being used in semiconductor manufacturing where charge carriers lack of impedance is of paramount importance. Whilst semiconductors used almost all of the 30,000mt production in 2004, today 85% of 200,000 mt global production is used in solar energy products, a rapid switch. In fact, imports into China from 2010 to 2011 rose from 48,000mt to 68,000mt. These figures seem deceiving, as a combination of increasing Chinese exports of finished panels to America, and declining prices of the raw material imported, have meant that China posted its first trade surplus last year.
 
On the back of this Western competitors have joined together to voice complaints of dumping as module prices have fallen 30%. Solarworld has spearheaded the campaign with its American and German production facilities being left for dust by the rapid Chinese rise. The result has been a tentative plan to levy an import tax of 2-4% on Chinese exporters by the Obama administration.  
 
Outside the industry experts are voicing their concerns, saying the barriers to free trade could backfire with China imposing its own tariffs on polysilicon imports to allow its start up producer’s breathing room to find the scale to compete on a global stage. If this were the case, China would be able to provide a one stop shop for solar energy consolidating its hold on the entire solar value chain and bypass the successful upstream European and American operations.
 
Another point raised is that by initialising trade barriers the Americans could inadvertently cut the level of installations which is where most of their 100,000 jobs are employed.
 
As in the game of ‘Go’ it pays to think ahead when international business strategies are concerned. The short term knee jerk reaction to China’s success could be playing into their hands in the long term.

Charlie Hayter