The China Factor

國

立 政 治 大 學

‧

N a

tio na

l C h engchi U ni ve rs it y

51

percent. PV imports from Mexico increased by over 900 percent, and imports from Japan increased 221 percent between 2005 and 2011. The largest percent increase of imports from 2010 to 2011 came from Mexico at 767 percent. Malaysia had the second largest percent increase during that time at over 300 percent growth, and China was third with a 135 percent increase. Imports from Mexico and Japan dropped to an increase of 7 and 30 percent respectively.

Reasons for the increases in imports of PV supplies are attributed to the increase of crystalline PV production capacities in China, Malaysia, and the Philippines, the increase in demand in the U.S. for PV systems, and increased outsourcing for PV cells used for module assembly in facilities in the United States. First Solar and AUO SunPower are American companies that account for much of the imports from Malaysia into the United States, since both companies operate production facilities there.

Japan had been the top exporter of PV cells and modules to the U.S. up until 2008.

In 2011, Japan had dropped to the fourth largest exporter to the U.S. with a total value of under $400 million. Exports from South Korea have been modest, but that could change as South Korea pushes to gain a greater share of the world PV market. The imports from Mexico are valued at over $500 million, but much of the market growth can be attributed to foreign countries setting up operations there, such as Japanese companies Kyocera and Sanyo that export PV modules assembled in Mexico to the U.S.

The incentives put in place in the mid-2000s in several countries led to a surge in companies producing PV products. By the year 2011, there were more than 1,000 companies worldwide producing PV materials, components, and equipment. But lower prices for polysilicon, cells, and modules have made it impossible for many PV manufactures to operate without sizable loses. “Meanwhile, some manufacturers in China and Taiwan continue to expand rapidly to obtain economies of scale and reduce unit costs”

(Platzer, 2012).

5.4 The China Factor

U.S manufacturers have a relatively small share of the global PV market compared with China, which accounts for more than three quarters of all PV cell manufacturing. China’s total domestic PV installed capacity was less than 1 GW in the year 2010, and in 2011 China exported roughly 95 percent of the PV modules it produced.

‧

The enormous production capacity for PV cells and modules that has developed in China has put pressure on U.S. producers. As a result, the Coalition for American Solar Manufacturing (CASM) petitioned the U.S. Department of Commerce (DOC) and the International Trade Commission (ITC) over allegations that Chinese producers were dumping crystalline PV products in the United States at below market value. “In a second preliminary decision in May 2012, the department announced … duties on imports of Chinese crystalline silicon solar cells and panels ranging from 31% to 250%, with the majority subject to the 31% duties. Final determinations are scheduled to come later in 2012” (Platzer, 2012).²²

Meanwhile, the Coalition for Affordable Solar Energy (CASE) opposed such tariffs on Chinese made PV products on grounds that it would impede positive momentum for PV system market growth and reduce the overall number of Americans employed in the PV industry supply chain. As a result of the tariffs, Chinese suppliers may set up productions in other countries or outsource part of their supply chain in order to circumvent the U.S. tariffs. “Some Chinese producers may seek to avoid the duties by opening up production in the United States” (Platzer, 2012). Since the tariffs only target PV cells manufactured within China, this will provide new opportunities for PV cell producers such as Taiwan.²³

Although the International Trade Commission (ITC) issued hefty tariffs on PV cells produced in China, it did not materialize into higher PV module prices in the U.S. It is estimated that if Chinese module producers outsource their PV cells to Taiwan for their modules they will incur an increase in module pricing by less than $0.10 U.S. per watt.

This amount is not thought to be enough to price Chinese modules above average prices for PV modules produced in the United States. Nevertheless, the overall percentage of Chinese made PV modules has declined in the U.S. since the tariffs were enacted (SEIA, 2013d).

Even though Chinese module shipments to the U.S. decreased in 2012 due to new tariffs enacted against Chinese suppliers, PV prices in the U.S. continued to fall. The global overcapacity problems caused by overinvestment in solar PV production at the end

22 On November 7, 2012, the ITC announced duties on PV cells produced in China ranging from 22.5 to 255.4 percent (SEIA, 2013c).

23 Taiwan is the world’s second largest supplier of PV cells.

‧

立 政 治 大 學

‧

N a

tio na

l C h engchi U ni ve rs it y

53

of last decade and the year 2011 continued to suppress margins for PV manufacturers in the United States. Many manufacturers worldwide have faced the need for consolidation for survival or have discontinued production all together.

While labor accounts for about 10 percent of the cost to manufacture PV equipment, most production stages are primarily operated by automatic assembly by machines. PV module assembly requires the most manual labor, but even that is becoming more automated as the industry matures. A report conducted by the U.S.

International Trade Commission (ITC) found that manufacturers in China and the United States are now using similar levels of automation to produce PV modules. The cost for China to ship their PV products internationally ranges between 1 to 3 percent of the total value of goods. Taking this into consideration, it would appear that production and transportation costs are not major factors in determining the best locations for manufacturing PV products. “For example, according to a National Renewable Energy Laboratory presentation, Chinese producers have an inherent cost advantage of no greater than 1% compared with U.S. producers; in the U.S. market, China suffers a 5% cost disadvantage when shipping costs are included” (Platzer, 2012).

Interestingly, despite the complaints by U.S. PV manufacturers that cheap PV modules and cells from China has brought them to a competitive disadvantage, the United States exported a greater value of clean energy supplies to China than vise versa.

The U.S. had a net-export advantage of $1.63 billion over China in green energy technology. Ninety-five percent of the solar products shipped to the U.S. from China were solar PV modules, worth a total of $2.65 billion. China also exported PV cells to the U.S. worth a total of $151 million. “By contrast, US firms exported only US$12 million worth of modules to China.” The U.S. shipments of PV products to China were mostly comprised of polysilicon, wafers, and equipment used for PV productions. U.S.

companies Hemlock Semiconductor Group, MEMC Electronic Materials, and the U.S.

division of REC Group were major global suppliers of polysilicon products, all belonging to the list of the top ten polysilicon companies in the world in the year 2011. “MEMC Electronic Materials exported $289 million worth of polysilicon and wafers to China in 2011” (Carus, 2013a).

‧

立 政 治 大 學

‧

N a

tio na

l C h engchi U ni ve rs it y

54