After years of breakaway growth, China's solar industry is poised for a big shakeout, with consolidation and failing firms. However, the changes are not going to change the Asian giant's global dominance over the resurgent sector anytime soon, according to Lux Research.
Since 2005, when Suntech became the first Chinese company to complete an IPO on the New York Stock Exchange, the country's solar industry has been on a tear, and now accounts for nearly 60% of global production, including nine of the top 10 global solar module manufacturers. China-based firm's low-cost focus has re-shaped the industry, helping drive solar module prices down 75% since 2007, boosting demand growth - but slashing profit margins, leading to huge losses both in China and abroad.
"Enormous oversupply and heavy debt have set China solar manufacturers up for consolidation," said Zhun Ma, Lux Research analyst. "The road ahead will be strewn with chaos and uncertainties, but the consolidation will draw a new solar landscape in China that still dominates the global solar industry."
Lux Research analysts also studied the China solar industry to understand which firms can survive the ongoing shakeout, and believe that first-tier firms like Yingli, Trina to benefit from consolidation. With the likely disappearance of numerous low-tier companies, Yingli, Trina, Hanwha SolarOne and Canadian Solar can grab domestic market share as China becomes the world's largest solar energy consumer market.
Additionally, the firm said local partnerships are key to global companies. Non-China players can target the large China market by partnering with local companies, as First Solar has done with Zhenfa, or take stakes in domestic leading players as SMA has done. Top materials suppliers will also vie for supply deals with the precious few high-volume manufacturers that survive, as DuPont has with Yingli.
Lux Research added that while China's solar success is often seen as driven by cheap labor, in fact top China solar manufacturers increasingly boast world-class technology. Non-China players like SunPower and SolarWorld now need to innovate in areas including metallization, cell architectures and kerfless wafering to keep up.
