Chinese solar panel manufacturers struggle with fierce competition, call for government intervention

As production capacity grows, solar panel prices continue to fall, particularly in China, which dominates the global market. This is a positive development for consumers, but the situation may not be sustainable from manufacturers’ perspective. Over the past year, a number of planned new production facilities have already been cancelled, and some Chinese manufacturers are even calling for intervention by the central government.

China has rapidly expanded its industrial capacity for solar panel manufacturing in recent years, helping to drive prices down. However, the steep price decline is making new production capacity less profitable, and some projects have already been cancelled as a result.

According to Reuters, China accounts for around 80% of global solar panel manufacturing capacity. Some analysts expect production capacity in China to grow by as much as another 600 GW this year. However, this is likely to be the upper end of estimates, particularly given the intense competition in the Chinese market.

The steep fall in panel prices in the Chinese market is unsettling local manufacturers, who are beginning to sound the alarm. According to Reuters, the significant increase in production capacity drove panel prices in the Chinese market down by 42% over the course of last year. According to data from the China Photovoltaic Industry Association, projects to build a further 59 GW of production capacity were cancelled or suspended between last June and this February. To put that in perspective, this represents around 7% of China’s production capacity last year.

"If you simply copy what others are doing, it won't be sustainable for you," said Gongshan Zhu, chairman of the Asian Photovoltaic Industry Association. He added that local governments were making the situation worse by supporting investment in order to increase employment.

The association chairman also said that profits in the industry had fallen by 70% because of excess production capacity. Weaker exports have also contributed to declining profitability, constrained by tariffs on imports of panels into the US.

"We must join forces to prevent excessive investment," Gao Jifan, chairman and CEO of Trina Solar and honorary president of the Chinese manufacturers' association, said at a recent conference.

According to Reuters, Gao Jifan called on the Chinese government to regulate further investment in the industry to prevent additional losses. Duan Yuhe, president of SiNeng Electric, also called on government institutions to intervene.