SOLAR VALUE CHAIN
How China has become dominant in all production steps for solar panels
Although thin-film solar panels are produced under just one roof, China’s solar industry has focused on the five-step value chain for classic solar cells made of crystalline silicon and then assembled into solar panels. Through rapid, state-sponsored expansion, China’s manufacturers have reached economies of scale across the entire photovoltaic (PV) value chain – and consequently dominate the global solar market today.
Steps of the solar value chain: polysilicon, ingot, wafer, solar cell, panel
Several manufacturing steps are needed to make a standard solar panel from polycrystalline silicon feedstock (briefly called polysilicon).
Polysilicon chunks are melted in a crucible to either pull a monocrystalline silicon cylinder out of the melt (Czochralski process) or to crystallize a rectangular, multicrystalline block through directional solidification of the melt. (Principally, ‘multicrystalline’ and ‘polycrystalline’ are synonymous words; Bernreuter Research uses ‘multicrystalline’ as an attribute of solar products in the value chain after polysilicon has been melted in order to avoid any confusion with the polycrystalline feedstock.)
The silicon cylinder or block is called ingot; it is sawn into square bricks and those are sliced into thin silicon wafers. More than 90% of all solar cells are made of such mono- or multicrystalline silicon wafers; 60 or 72 pieces of them (120 or 144 if half-cut cells are used) are assembled into a standard solar module, also called solar panel.
Integrated production of thin-film solar panels only plays a minor role
The rest of the market consists of thin-film solar panels, which are produced in a fully integrated process by depositing a very thin layer of a compound semiconductor, mainly cadmium telluride (CdTe) or copper indium gallium diselenide (CIGS), on a glass sheet or a flexible foil.
There are several reasons why thin-film technology hovers around a modest market share of only 5%:
- The module efficiency of thin-film panels is lower than that of crystalline standard panels.
- Production equipment for thin-film panels is not standardized and not available off the shelf.
- Initial capital expenditure for thin-film production equipment is relatively high. In contrast, investment in crystalline silicon production capacities can be spread on several shoulders along the PV value chain.
U.S.-based First Solar is the only thin-film panel producer that has successfully overcome these hurdles on a bigger scale. With its large-sized (1.23m x 2.01m) CdTe panels and a production capacity of several gigawatts now, the company is competitive against the huge crystalline silicon manufacturing base in China.
Market shares in the PV value chain: China dominates across the board
Early on, China recognized the strategic importance of the solar industry and focused on the classic value chain for solar panels made of crystalline silicon. Anti-dumping duties of the United States and the European Union on imports of China-made solar cells and panels have not prevented the Chinese central and local governments from promoting their domestic PV sector with subsidies and incentives like cash grants, loan guarantees, free land, preferential tax rates, electricity tariff rebates and discounts on raw materials such as aluminum for module frames.
China’s share in production volumes along the solar value chain in 2019
As a result, China’s PV industry has quickly reached economies of scale and thus gained a dominant position along the entire solar supply chain. Ingot and wafer production is almost completely controlled by China-based manufacturers today. Initially, companies like LDK Solar and GCL-Poly Energy built up large capacities for multicrystalline solar wafers; now, with the meteoric rise of monocrystalline technology, it is Longi and Zhonghuan Semiconductor that dominate the production of monocrystalline wafers.
In the polysilicon sector, the first step of the value chain, China’s market share is still the lowest. Non-Chinese polysilicon manufacturers have long prevailed in this domain with their know-how of the Siemens process. In the meantime, however, China’s top producers have caught up on the learning curve. The country’s share in solar-grade polysilicon production is rising steadily, supported by prohibitive duties on imports from the USA (polysilicon market analysis).
Somewhat less pronounced than in wafers is China’s market share in solar cells and even less in solar panels. The U.S. and EU anti-dumping duties prompted Chinese manufacturers to establish new production capacities outside China, notably in Southeast Asian countries like Malaysia and Vietnam. Moreover, with continuously sinking panel prices, the relative share of transportation costs is increasing due to the heavy weight of panel glass and frame; that makes local panel production close to the demand for PV installations more attractive.
Published on June 29, 2020 © Bernreuter Research
About the author
Johannes Bernreuter is head of the polysilicon market research specialist Bernreuter Research. Before founding the company in 2008, Bernreuter became one of the most reputable photovoltaic journalists in Germany because of his diligent research, clear style and unbiased approach. He has earned several awards, among others the prestigious RWTH Prize for Scientific Journalism from the RWTH Aachen University, one of the eleven elite universities in Germany.
Originally an associate editor at the monthly photovoltaic magazine Photon, Bernreuter authored his first analysis of the upcoming polysilicon bottleneck and alternative production processes as early as 2001 (Publication List). After preparing two global polysilicon market surveys for Sun & Wind Energy magazine in 2005 and 2006, he founded Bernreuter Research to publish in-depth polysilicon industry reports.