Solar industry's critical juncture

Confronted with massive anti-dumping measures, China's photovoltaic industry will undergo healthier and more sustainable development

"Yingli won't be daunted by the anti-dumping and countervailing duty investigations, or give up the American market. In the future, Yingli will focus on intensifying technological innovation and diversifying its business to improve profitability," said Wang Zhixin, News Director for Yingli Green Energy, in response to the decision made by the United States International Trade Commission (ITC) to impose tariffs on photovoltaic (PV) products imported from China.

Since Yingli Group entered the PV power generation market in 1998, it has expanded its presence across 12 countries, including the United States, Germany, Italy and Spain. With total assets of 36.6 billion yuan ($5.55 billion) and 26,000 staff members, Yingli ranks among the top five globally, producing PV products of nearly 3 gigawatts (GW).

Since the United States and the EU are the major destinations for most of Yingli's output, and the prices there for PV products cannot be reduced any further, the U.S. market is now off limits to Yingli after the ITC announced an anti-dumping duty of 249.96 percent and an anti-subsidy duty of 15.97 percent on Chinese-made PV products on November 7. Controversial debate has ignited at Yingli over whether to abandon the U.S. market.

Yingli is not the only victim, as 500 Chinese PV manufacturers face the same plight. On November 20, Guangdong Macro Co. Ltd. declared a retreat from the new energy industry, fearing that the American market may no longer be accessible.

Following on the heels of the United States, the EU has just launched a similar but more extensive investigation into China's PV products, which could be catastrophic for the Chinese PV industry. As 80 percent of China's PV products go to EU countries, once the EU imposes heavy tariffs like the United States, Chinese PV makers will be driven into a corner.

The major tasks ahead for the Yingli Group are to improve internal management, cut costs and intensify independent innovation, exploring downstream business like PV power stations to improve profitability, said Wang.

"If our products remain competitive with anti-dumping and countervailing duties, we will be free from concerns over these protectionist behaviors."

Heavy losses

As early as in the 1990s, the Chinese Government placed emphasis on energy security and environmental protection, encouraging the exploration of clean energy. As technologies in the PV industry edged toward maturity, private capital began to invest in the industry. So far, roughly 95 percent of Chinese PV producers are privately funded.

In 1991, the German Government launched a project to install 1,000 MW roof-mounted solar panels, opening a new path for invigorating the PV market through government subsidies. A number of other EU countries followed suit.

As investments in the PV industry not only facilitate the development of clean energy, but also contribute to GDP growth and employment, many local governments in China also put forward similar programs. Subsidized by the government in the past decade, the PV industry has experienced a period of explosive expansion. That's the context for the success story of Yingli.

Suntech, the global PV sales champion in 2011, grew even faster than Yingli. In 2000, with a laptop and a business plan, Shi Zhengrong, an overseas returnee, came to the new district of Wuxi in Jiangsu Province and set up the company. The local government offered all-round support, helping Suntech go through various formalities and raise $8 million as start-up capital. Shi once said, "Without the Wuxi local government, Suntech couldn't have been so successful."

Support from local governments impelled China's PV industry to develop by leaps and bounds. By 2007, the production capacity of China's PV industry had taken the lead in the world. By 2011, China had 80 percent of the global PV production capacity, and in the list of the top-10 PV manufacturers Chinese makers hold the top five.

Nevertheless, under government subsidies, the development of the PV industry has not necessarily led to desired results. The production of silicon chips, solar cells and batteries is labor-intensive, which means anyone who has enough funds to purchase manufacturing equipment can establish production lines. For this reason, businessmen engaged in the trade of real estate, garment and feedstuff rushed to invest in the PV industry. In the past five years, the number of PV makers has quintupled to over 500.