China has made the entire world dependent on its solar panels with a simple formula: government support, constantly improving technology and prices so low they end up breaking the market. There’s just one problem: its manufacturers are losing money hand over fist.
Crisis in China’s solar sector. Most Chinese PV module makers are struggling to turn a profit. Half of them are simply struggling to contain their huge losses and are having to dip into their “war chests.”
The root of the problem is market prices: many solar panels are sold at cost or even below production prices, a situation that has been favoured by the huge oversupply in the sector.
The production capacity of the Chinese solar sector has doubled in three years. There are too many manufacturers just when installations are slowing down. Especially those of older, P-type panels.
Half of manufacturers sell at a loss. According to a report by Bloombergnegative margins are mounting throughout the solar industry supply chain, and most companies are already losing money.
Chinese manufacturers have the funds to withstand these losses for a while, but more than half reported negative earnings before interest expenses (EBITDA) during the first quarter of 2024:
- First Solar (USA): $243.1 million
- Trina (China): $132.2 million
- Jinko (China): $73.2 million
- Canadian Solar (China): $49.1 million
- DAQO (China): $30.5 million
- GCL System (China): $14.2 million
- Aiko (China): $1.6 million
- Akcome (China): -$24 million
- Eging (China): -27.2 million dollars
- Risen (China): -$34.8 million
- Tongwei (China): -$38.7 million
- TCL Zhonghuan (China): -$78 million
- JA Solar (China): -$96.3 million
- Longi (China): -$437.1 million
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Advice offered by the brand
GCL asks the Chinese government for help. GCL Technology, China’s second-largest solar company and one of the largest companies in the global energy sector, has asked for state support to deal with the crisis.
GCL, which makes more efficient N-type panels, has been hurt not only by oversupply but also by falling exports. Rising US tariffs and EU investigations into alleged unfair subsidies from Beijing have worsened the global position of the big PV companies.
Weather the storm. The Chinese government appears to have a clear idea of how to deal with the crisis: by financing new domestic solar installations and reducing industry taxes to alleviate oversupply.
Beijing is determined to prevent the industry from shrinking at all costs. The crisis has already forced manufacturers such as Longi to close production lines and reduce staff, but the future is bright for the industry.
China plans to build Over 1000 GW in N-type cell capacity as the world meets its net-zero emissions commitments. China’s manufacturing capacity is 17 times that of the rest of the world and could cause a new market surge by 2025.
The bet is risky because it is not clear how long these companies can hold out in crisis, but if there is a country with the capacity to absorb losses, it is this one. China leads 80% of the photovoltaic sector and although rivals such as India are growing, They still depend on silicon and other Chinese components.
Image | Longi
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