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Shi Zhengrong was once considered a private-sector legend in China. The scientist-turned-businesan from Jiangsu province built his company, Suntech Power, into the world’s largest solar panel maker in less than a decade, heralding China’s massive commercialization ofsolar photovoltaic (PV) technology.
The glory has faded quickly, however. A confluence of excessive supply, plummeting overseas orders and an immature domestic market is buffeting Chinese solar companies. Rumors he spread that Suntech may soon face bankruptcy or delisting from the Nasdaq. The firm is not alone: More than 2,000 Chinese PV companies are also engaged in a game of survival-of-the-fittest.
The state may be the biggest culprit. A steady flow of government subsidies has caused solar panel
Beijing is now trying to revive the solar industry by stimulating domestic demand. But government intervention landed the industry in this mess and may not be able to get it out. China’s still-all market for solar products can likely absorb only a fraction of the products produced in the country, setting the industry up for a long and painful consolidation process.
“In effect, the actual solar power capacity has snowballed to twice the size of global market demand, which is less than 30 gigawatts this year,” said one industry observer, who asked to be identified only as Liu because of company policy.
The cost of being cheap
China’s leaders handpicked the solarpower sector as a “strategic emerging industry” in 2009, part of a broader effort to cultivate high-tech manufacturing. During the last five years, state banks he shelled out US$18 billion in cheap loans to fund the expansion of solar panel manufacturing. Provincial governments scrambled to provide land and draft preferential policies to build their own solar panel empires, with the ultimate goal of driving up GDP figures and adding thousands of low-wage manufacturing jobs.
Within a few years, Chinese businesses grew to control 60% of the global market for polycrystalline silicon, the raw material used to make solar cells, and 70% of the market for solar panels and modules. This government-spurred glut ultimately triggered a brutal price war. Since 2010, the prices of polycrystalline silicon and solar cells he dropped 73% and 68% respectively, forcing companies around the world out of business.Rising trade barriers he also pummeled Chinese manufacturers, who export roughly 90% of what they make. In early November, the US International Trade C
The tariffs will come as a shock to an industry that was priced to dominate the world market.
“The real problem with China’s photovoltaic industry is not an underdeveloped domestic market, but that China has become the manufacturing hub of global solar products,” said Ray Lian, an analyst with US-based market research firm Solarbuzz. “So naturally, Chinese companies he to sell overseas,” where tariffs are a major handicap.
The US currently purchases about 10% of global PV products, so Chinese solar panel makers could still survive even if they are completely barred from the market, according to Liu, the industry observer. “However, if the EU decides to impose more than 30% tariffs on solar panels and cells made in China, it will be a devastating blow to Chinese enterprises as they will lose half of their market share.”
While China often blames its sagging solar business on overseas protectioni, the industry’s problems are to a large extent generated from within. Chinese solar firms are saddled with debt and losses.
China’s top 10 listed solar firms had US$17.5 billion in debt in the first quarter of 2012, suggesting the industry is nearing the tipping point of bankruptcy, New York-based investment bank Maxim Group noted in a report. According to the China Photovoltaic Industry Alliance, the industry’s gross profit ratio in 2010 was about 30%. In 2011, it slumped to less than 10%, a threshold which suggests companies are operating at a loss.
To stay afloat, companies are being forced to scale back. Suntech has shuttered some solar cell production capacity in Wuxi, Jiangsu province, where the company is headquartered. Trina Solar, China’s third-largest solar module maker, reportedly plans to trim a whopping 22% of its staff, including 200 managers.
As losses pile up, more companies will declare bankruptcy and conduct mergers. This cycle of market consolidation is expected to continue until 2014, said Lian, by which time he predicts that global solar demand will rise to 40 gigawatts from 30 gigawatts currently.Too big to fail
Beijing has introduced a range of measures aimed at propping up the ailing industry. In July, the National Energy Administration raised China’s solar generation capacity target to 21 gigawatts by 2015 and 50 gigawatts by 2020 in an effort to curtail the sector’s reliance on faltering Western markets. Solarbuzz now expects China to grow to be the largest solar market after the EU by next year.
The government is also taking steps to solve one of the Chinese solar industry’s most basic and daunting problems: faulty connections to the electrical grid. Official data indicates that 25% of newly installed solar power capacity in China last year was wasted because plants could not maintain a grid connection.
In October, State Grid Corporation, which dominates the electricity grid for northern China, promised to provide free support services to all and medium solar power producers. And industry insiders say that the National Energy Administration is considering offering subsidies to power producers of RMB0.40 to RMB0.60 for each kilowatt-hour of solar energy that gets distributed.
Yet analysts are cautious about the government’s ability to implement these policies. Modernizing China’s electric grid will take years, Liu said, so the improvements are unlikely to help relieve the pain of solar panel makers in the near term.
Minnan Wang, a solar analyst at research firm Bloomberg New Energy Finance, cautioned that the domestic market can absorb some of the excess capacity that is being generated do
“Developing the market in itself is a good thing, and we do hope that China can adopt clean energy usage more widely. However, we cannot expand the market for the sake of sing the market,”she said.
Hey hands
By building a solar industry empire almost overnight, China has encouraged a dangerous miatch between supply and demand that ultimately hurt not only foreign competitors, but Chinese companies and workers themselves.
China’s solar sector may prove to be a canary in a coal mine. The solar sector is one of the most over-invested industries in China, but it is by no means the only one. In 2010, Chinese polysilicon producers were running at 56% capacity, wind-power equipment makers at 50% and methanol manufacturers at 40%, far below industry erages in the US, according to research by Societe Generale. China’s erage capacity utilization has declined steadily since the financial crisis, dropping from above 70% in 2007 to roughly 60% in 2011.
To encourage solar as well as other industries, the Chinese government must adopt a more holistic approach. Channeling cheap bank loans and land to the sector ultimately undermines both the market’s ability to function efficiently and Chinese companies’ ability to compete fairly against overseas rivals.
There could be an upside to the situation. Perhaps escalating trade disputes and rising unemployment might serve as a wake-up call for the Chinese government to abandon this “great leap forward”mentality of building industries.
Either way, the industry will he to pay for Beijing’s past mistakes with a stretch of painful consolidation.
The glory has faded quickly, however. A confluence of excessive supply, plummeting overseas orders and an immature domestic market is buffeting Chinese solar companies. Rumors he spread that Suntech may soon face bankruptcy or delisting from the Nasdaq. The firm is not alone: More than 2,000 Chinese PV companies are also engaged in a game of survival-of-the-fittest.
The state may be the biggest culprit. A steady flow of government subsidies has caused solar panel
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factories to bloom across the country, sparking a vicious price war and rendering Chinese companies vulnerable in a volatile market.Beijing is now trying to revive the solar industry by stimulating domestic demand. But government intervention landed the industry in this mess and may not be able to get it out. China’s still-all market for solar products can likely absorb only a fraction of the products produced in the country, setting the industry up for a long and painful consolidation process.
“In effect, the actual solar power capacity has snowballed to twice the size of global market demand, which is less than 30 gigawatts this year,” said one industry observer, who asked to be identified only as Liu because of company policy.
The cost of being cheap
China’s leaders handpicked the solarpower sector as a “strategic emerging industry” in 2009, part of a broader effort to cultivate high-tech manufacturing. During the last five years, state banks he shelled out US$18 billion in cheap loans to fund the expansion of solar panel manufacturing. Provincial governments scrambled to provide land and draft preferential policies to build their own solar panel empires, with the ultimate goal of driving up GDP figures and adding thousands of low-wage manufacturing jobs.
Within a few years, Chinese businesses grew to control 60% of the global market for polycrystalline silicon, the raw material used to make solar cells, and 70% of the market for solar panels and modules. This government-spurred glut ultimately triggered a brutal price war. Since 2010, the prices of polycrystalline silicon and solar cells he dropped 73% and 68% respectively, forcing companies around the world out of business.Rising trade barriers he also pummeled Chinese manufacturers, who export roughly 90% of what they make. In early November, the US International Trade C
源于：大学生论文www.udooo.com
ommission voted to institute anti-dumping and anti-subsidies charges ranging from 23.75% to more than 250% on Chinese solar panels. And the EU Trade Commission launched an investigation the same month into unfair Chinese subsidies which could result in the organization introducing its own stiff tariffs.The tariffs will come as a shock to an industry that was priced to dominate the world market.
“The real problem with China’s photovoltaic industry is not an underdeveloped domestic market, but that China has become the manufacturing hub of global solar products,” said Ray Lian, an analyst with US-based market research firm Solarbuzz. “So naturally, Chinese companies he to sell overseas,” where tariffs are a major handicap.
The US currently purchases about 10% of global PV products, so Chinese solar panel makers could still survive even if they are completely barred from the market, according to Liu, the industry observer. “However, if the EU decides to impose more than 30% tariffs on solar panels and cells made in China, it will be a devastating blow to Chinese enterprises as they will lose half of their market share.”
While China often blames its sagging solar business on overseas protectioni, the industry’s problems are to a large extent generated from within. Chinese solar firms are saddled with debt and losses.
China’s top 10 listed solar firms had US$17.5 billion in debt in the first quarter of 2012, suggesting the industry is nearing the tipping point of bankruptcy, New York-based investment bank Maxim Group noted in a report. According to the China Photovoltaic Industry Alliance, the industry’s gross profit ratio in 2010 was about 30%. In 2011, it slumped to less than 10%, a threshold which suggests companies are operating at a loss.
To stay afloat, companies are being forced to scale back. Suntech has shuttered some solar cell production capacity in Wuxi, Jiangsu province, where the company is headquartered. Trina Solar, China’s third-largest solar module maker, reportedly plans to trim a whopping 22% of its staff, including 200 managers.
As losses pile up, more companies will declare bankruptcy and conduct mergers. This cycle of market consolidation is expected to continue until 2014, said Lian, by which time he predicts that global solar demand will rise to 40 gigawatts from 30 gigawatts currently.Too big to fail
Beijing has introduced a range of measures aimed at propping up the ailing industry. In July, the National Energy Administration raised China’s solar generation capacity target to 21 gigawatts by 2015 and 50 gigawatts by 2020 in an effort to curtail the sector’s reliance on faltering Western markets. Solarbuzz now expects China to grow to be the largest solar market after the EU by next year.
The government is also taking steps to solve one of the Chinese solar industry’s most basic and daunting problems: faulty connections to the electrical grid. Official data indicates that 25% of newly installed solar power capacity in China last year was wasted because plants could not maintain a grid connection.
In October, State Grid Corporation, which dominates the electricity grid for northern China, promised to provide free support services to all and medium solar power producers. And industry insiders say that the National Energy Administration is considering offering subsidies to power producers of RMB0.40 to RMB0.60 for each kilowatt-hour of solar energy that gets distributed.
Yet analysts are cautious about the government’s ability to implement these policies. Modernizing China’s electric grid will take years, Liu said, so the improvements are unlikely to help relieve the pain of solar panel makers in the near term.
Minnan Wang, a solar analyst at research firm Bloomberg New Energy Finance, cautioned that the domestic market can absorb some of the excess capacity that is being generated do
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mestically, but certainly not all.“Developing the market in itself is a good thing, and we do hope that China can adopt clean energy usage more widely. However, we cannot expand the market for the sake of sing the market,”she said.
Hey hands
By building a solar industry empire almost overnight, China has encouraged a dangerous miatch between supply and demand that ultimately hurt not only foreign competitors, but Chinese companies and workers themselves.
China’s solar sector may prove to be a canary in a coal mine. The solar sector is one of the most over-invested industries in China, but it is by no means the only one. In 2010, Chinese polysilicon producers were running at 56% capacity, wind-power equipment makers at 50% and methanol manufacturers at 40%, far below industry erages in the US, according to research by Societe Generale. China’s erage capacity utilization has declined steadily since the financial crisis, dropping from above 70% in 2007 to roughly 60% in 2011.
To encourage solar as well as other industries, the Chinese government must adopt a more holistic approach. Channeling cheap bank loans and land to the sector ultimately undermines both the market’s ability to function efficiently and Chinese companies’ ability to compete fairly against overseas rivals.
There could be an upside to the situation. Perhaps escalating trade disputes and rising unemployment might serve as a wake-up call for the Chinese government to abandon this “great leap forward”mentality of building industries.
Either way, the industry will he to pay for Beijing’s past mistakes with a stretch of painful consolidation.