In the pursuit of energy security and a strategic shift away from China's dominance with 85% of the global solar panel market share, both Europe and the United States are actively incentivizing domestic production. Simultaneously, China is intensifying efforts to maintain its global leadership in the face of a changing solar industry.
However, beginning in the fourth quarter of 2023, the solar industry has experienced a pronounced oversupply, marking a stark departure from the prosperous years from 2020 to 2022. Consequently, a significant proportion of global solar power plants may encounter losses, potentially facing pressures of elimination.
Amidst the transition from the prevailing P-type PERC to the emerging N-type TOPCon, China appears to be driven by concerns about potential technological advancements in Europe and the US. Consequently, substantial subsidies have been deployed to facilitate this transition, resulting in planned TOPCon capacity in China reaching an unprecedented 1,500 GW, approximately three times the global demand of 350GW in 2023.
As of early December 2023, Chinese media reports have painted a bleak picture of solar price declines intensifying towards the end of the year. Prices across various components have plummeted significantly, with polycrystalline silicon experiencing a staggering decline of approximately 73%, M10-sized silicon wafers dropping by 66%, and G12 wafers undergoing a halving. Major manufacturers have maintained prices since the end of September 2023. In the cell segment, M10 PERC witnessed a 56% decline, G12 a 39% drop, and M10 TOPCon prices have been slashed since May 2023, with module prices plummeting by over 40%.
Both mainstream P-type PERC and N-type TOPCon modules have now fallen below CNY1, indicative of both types being in a loss-making predicament. This trend of price reductions has triggered intense competition, sparking a wave of exits, predicted to peak around the Lunar New Year in 2024.
The Inflation Reduction Act (IRA) has provided incentives on both the supply and demand sides, along with regulations promoting onshore manufacturing to nurture domestic supply chains. The US has also enforced countervailing and anti-dumping measures against China, with investigations against Southeast Asia to prevent circumvention, as Chinese manufacturers have used Southeast Asia as a conduit to bypass trade barriers after numerous trade confrontations. Additionally, the two-year exemption for bifacial modules from Southeast Asia granted by the US will expire in June 2024, further escalating measures against Chinese products.
The US, once considered a new frontier for solar manufacturing, witnessed Taiwanese manufacturers receiving numerous invitations to establish factories in the country in the two years preceding the enforcement of the IRA. However, none took concrete actions, primarily due to aggressive plans by major Chinese counterparts to establish a presence in the US. The lack of clearer local regulations in the US has deterred Taiwanese manufacturers.
As of the end of 2023, China's top five solar giants have successfully entered the US market. This includes JA Solar, which announced the establishment of a 2GW module factory in the US, Jinko Solar with a total production capacity of 1.4GW after investing 1GW in the fourth quarter of 2023, Longi, collaborating with Invenergy to build a 5GW module factory, CSI Solar, establishing a 5GW module factory, TCL's Maxeon investing US$1 billion to build a battery and module factory, and Trina Solar, investing US$200 million to build a 5GW module factory, expected to commence production in 2024.
The US domestic competition is set to unfold in 2024, with significant participation from major Chinese heavyweights. The outcome of this solar battle in the US remains uncertain, as the industry watches whether they can fulfill the US solar "self-sufficiency" dream or be repelled by the high costs of US manufacturing, potentially opening doors for Korean and other players. The probability of Taiwanese companies entering the US seems to be diminishing.
Since Europe lifted trade barriers against China in 2018, China's module market share in Europe has roughly returned to 90%. However, geopolitical issues and the Russia-Ukraine war triggered an energy crisis in Europe, prompting a rush to install renewable energy generation and initiate domestic production, including solar energy.
Nevertheless, by 2023, China's module capacity for Europe has been saturated, with mid-year reports indicating European ports already stocking double the modules needed for the entire year. Unable to absorb excess inventory, European prices collapsed, putting the survival of European manufacturers - unable to compete with Chinese costs - at risk. For example, Swiss manufacturer Meyer Burger Technology AG - championed European energy autonomy for years and finally gained support in recent years - announced plans in November 2023 to manufacture in the US, citing much weaker support in Europe compared to the US.
Globally, only the US and India impose taxes on imported Chinese solar products, while Taiwan outright bans the import of Chinese cells and modules. However, many Chinese cells enter Taiwan through Southeast Asia, repackaged as modules with Southeast Asian origin certificates, resulting in a rapid increase in the share of imported low-cost modules. Taiwanese manufacturers face an urgent survival crisis, with some exiting in 2023, and the challenge in 2024 is likely to be more severe, as the aforementioned conditions remain unresolved.
