The four major death points of China's photovoltaic industry

**Abstract** On November 16, 2012, Suntech Power, a company listed on the New York Stock Exchange, closed at $0.77. If the stock price remains below $1 for 30 consecutive days before March of the following year, Suntech will be delisted from the NYSE. Since August, the company has been engaged in a desperate effort to keep its stock above the critical threshold, but each attempt only lasted a few days. The pressure has grown stronger with every passing week. The situation worsened after the global solar counter-guarantee fraud scandal was exposed. At that point, the U.S.-based New Group valued Suntech at zero. Without a miracle, delisting seemed inevitable. On the same day, Jiangxi Saiwei closed at $0.91, Yingli Green Energy at $1.39, and Trina Solar at $2.32. The combined market capitalization of these three Chinese PV companies was just $521 million, while their total liabilities reached an astonishing $8.884 billion (as of Q1 2012). It's no surprise that analysts from both domestic and international investment banks were predicting the collapse of Chinese PV firms. What made the situation even more alarming was the rapid technological advancement in the industry. A leading international photovoltaic company, GT, was set to launch a new large-scale crystalline silicon manufacturing technology. This innovation was expected to cut production costs by 40% and increase energy output by the same margin. This would effectively double the amount of electricity generated per unit of money spent—making existing technologies look outdated almost overnight. It was a bitter irony: China had invested hundreds of billions of dollars over the past decade into the solar industry, buying technology, equipment, land, and even polluting the environment. Yet, many companies had not yet recouped their investments. By early 2012, the top ten PV companies had accumulated over 100 billion yuan in debt. Financial institutions were also heavily involved, with the China Development Bank alone providing 245 billion yuan in credit lines to key players like Jiangxi Saiwei, Trina Solar, and Yingli Green Energy. In the early days of the solar boom, local governments were eager to attract PV companies by offering tax breaks, electricity security, and even free land. They aimed to build massive industrial clusters worth hundreds of billions. However, this came at a cost. Crystalline silicon manufacturing is highly energy-intensive, and with 78% of China’s electricity coming from coal, the environmental impact was significant. While helping Europe reduce emissions, China was polluting its own air and consuming its own resources. As a result, it faced accusations of "anti-dumping" and "counter-subsidy" from the international community. The challenges facing the Chinese PV sector are fourfold: reliance on foreign markets, lack of self-sufficient raw materials, non-elastic demand, and absence of core technology. These issues are often referred to as the "two heads out"—meaning they're dependent on external factors. Looking at the market side, European governments' subsidies depend on their economic conditions. When budgets tighten, support decreases, which directly impacts Chinese exporters. This dynamic led to rising sales but shrinking profits. For example, in 2007, Suntech shipped 358 megawatts and earned $143 million in net profit. But by 2011, despite producing 2,400 megawatts and shipping 2,015 megawatts, the company lost over $1 billion. On the polysilicon front, international giants had already mastered low-cost, high-efficiency production, with solar-grade polysilicon priced around $30 per kilogram. Chinese companies, however, rushed into massive expansion, pushing prices up to over $400 per kg. In response, many Chinese firms started investing billions in their own polysilicon projects, hoping to profit from the high prices. But as production capacity expanded and the European market slowed, international players began flooding the market with cheap products, driving prices down to under $25 per kg by mid-2012. In 2008, Miao Liansheng launched the ambitious "Jiusix Silicon Industry" project, promising to reduce energy consumption and pollution using a new silane process. The goal was to bring the cost down to $22 per kg. Similarly, Yingli announced plans to reach 18,000 tons of production capacity by 2013. However, when the first phase of the 3,000-ton line went online, the actual cost was as high as $60–$70 per kg, with poor output. By 2011, Yingli had written off 2.275 billion yuan in losses, effectively declaring the project a failure. Beyond the two main issues, Chinese PV companies also struggled with rigid demand and a lack of technological independence. Unlike essential commodities such as oil or grain, solar panels rely entirely on government subsidies. This dependency left them vulnerable to policy changes and market fluctuations. The lack of core technology further weakened their competitive edge. So, what can we learn from the downfall of the Chinese PV industry? Some industries are not meant to be pursued blindly. As Confucius once said, “When the state is not in danger, chaos does not exist, and the gentleman should not act.” Just as a girl looking for a partner doesn’t settle for someone unqualified, businesses must choose wisely and ensure they have a solid foundation and sustainable income.

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