China owns most of supply of rare earth elements and has the ability to trigger a trade war if it decides to. Rare earth elements war may affect the whole solar industry mainly because Silicon Carbide, a compound of silicon and carbon that occurs in nature as an extremely rare mineral and is used in wafer dicing process, is under strict control of China.

Once China decides to tighten the supply of Silicon Carbide, companies that have business in wafer dicing would hardly be able to survive outside China. Two leading Taiwanese solar companies, Sino American Silicon Products Inc. and Green Energy Technology are assessing the possibility of implementing diamond cutting technique to minimize the potential risk of unavailability of Silicon Carbide.

Historical speaking, there was a time when thin film technology was believed to have great development potential, what happened then was the necessary element, Salane, used in production of thin film went completely out of stock. Now that the supply of Silicon Carbide is also controlled by China, the history might repeat itself, sending a cautious message to the market players. Sino American Silicon Products Inc., for example, has been conservative about increasing capital expenses to expand capacity over the past year.

In addition, it is impossible for global solar industry supply chain to avoid other political risks like foreign exchange risk and protectionism. In early September of 2010, the U.S government announced imposition of anti-dumping tax on all aluminum imported from China. The tax rate was as high as 137%, increasing costs of exporters of aluminum industry in China.