The Dominance of Chinese Solar Supply Chains: A Closer Look
The dominance of Chinese solar supply chains is not a new phenomenon. Back in 2012, the United States imposed anti-dumping and countervailing duties on crystalline silicon cells and modules produced in mainland China and Taiwan and imported into the US. These tariffs shifted the spotlight to Southeast Asia as a hub for solar manufacturing. This becomes particularly significant as the US strives to develop its domestic solar manufacturing industry and reduce reliance on imports from around the world, especially considering the inconsistent long-term geopolitical trade relationships with these regions. This article provides a comprehensive breakdown of the over 50 GW of solar modules consumed in US channels in 2023, including module assembly locations, global module ownership breakdown, and the implications for US module buyers in addressing traceability challenges.
The data for the charts and analysis comes from the "PV Manufacturing & Technology Quarterly" published in March 2024. The analysis is complemented by commentary from the PV Module Tech Bankability Ratings Quarterly. Understanding the origin of products, including polysilicon and other components, has never been more important than now. As I have repeatedly stated publicly, this is critical from a product quality perspective, but the demand now stems from the traceability of the supply chain and procurement practices related to environmental, social, and governance (ESG). Aside from First Solar, there has been a surge in Indian module imports. It is unrealistic to expect solar module procurement teams to become overnight experts in understanding the full value chain supplier preferences of 50-60 companies that may participate in a large-scale RFP bid. However, these buyers should at least know where the modules are assembled (starting with the cells).
Chart 1: Supply by production region
2023 US Solar Market: Key Trends and Implications
Domestically-manufactured modules accounted for approximately 15% of the US market in 2023, with First Solar accounting for about two-thirds of this production. This was no major surprise. What did catch many by surprise was the surge in Indian-made module imports into the US. The success of Indian PV players, however, is no accident. Many have been patiently waiting for the export opportunity to arise for nearly two decades. India's heritage in module manufacturing dates back several decades, and many companies in the sector have experienced multiple industry cycles. During the boom years of the European PV industry in 2010-2013, companies like Vikram and Tata briefly tasted success from export business, only to be squeezed out by the dominance of Chinese imports that followed. Since then, while domestic module supply continued to grow, the desire to establish a significant export business never disappeared.
The surge in Indian module imports to the US over the past few years, and particularly in 2023 as shown in Figure 1, is partly due to an oversupply situation for Indian module suppliers, but also because US module buyers have been looking for alternatives to Chinese and Southeast Asian suppliers. Political relations between India and the US, not to mention the latter's frosty relationship with China, have likely played a role in expediting the customs clearance process for products imported into the US, even though most modules coming from India have to source their solar cells from Chinese companies' production facilities in Asia. It is no surprise then that there is now increased scrutiny of the upstream components used in these modules imported into the US. However, India is finally starting to build out cell capacity at scale for the first time, with Adani making major investments in this area.
Waaree emerged as a top 10 module supplier in the US in 2023, and several other Indian module players, such as Vikram, Adani, Emmvee, Goldi, Rayzon and Jakson, are expected to maintain strong momentum in 2024. Apart from module supply from India and Southeast Asia (which also includes imports from non-Chinese entities manufacturing in the region, such as First Solar, Qcells, REC and VSun), the volume of imports from module suppliers in Europe, the Middle East and other North American regions (primarily Canada and Mexico) mentioned earlier, has been relatively small, for both private label and OEM products. From a supply standpoint, all eyes are now on how much new module manufacturing capacity will be built in the US in 2024. And where the solar cells will come from (currently mostly supplied by Chinese-owned companies in Southeast Asia), where the silicon wafers for these cells are sourced from, whether the ingots are produced in China or in new silicon wafer plants in nearby Southeast Asia, and of course, the origin of the polysilicon. This year could be a transition year for US domestic module capacity growth. In fact, the real growth in domestic module supply may come from First Solar, which is expecting to increase its US module production by about 40% year-over-year in 2024, thanks to the ramping up of new factories. It will become clearer in a few months when Hanwha Solutions' US entity Qcells North America's new factory in Georgia starts production, how much additional US domestic module supply will be available.
Ownership of Module Supply and Challenges with IRA Allocation
Until recently, almost all the focus on restricting US module imports has been on the regional origin of cell and module production, rather than tracing the ownership of the companies. This largely explains the evolution of the Southeast Asia "issue" over the past decade, where Chinese module suppliers have such a high market share of modules purchased by downstream channels in the US. While the primary mission of the Inflation Reduction Act (IRA) is to provide a funding mechanism for virtually all domestic manufacturers (regardless of whether the company is US-owned, headquartered in China, or a subsidiary of a foreign entity anywhere in the world) to apply for incentives, it has also highlighted the issue of where module suppliers are owned.
Figure 2 shows the breakdown of US module supply in 2023 by country of ownership of the module supplier. I have broken down the categories into China, US, Korea & Japan, Other North America (OtherNA), and Rest of World (RoW).
Chart 2：2023 SUPPLY BY COMPANY OWNERSHIP
Mitigating Module Supply Risks Remains a Key Focus in 2024
Aside from First Solar's domestic silicon wafer fab construction, the build-out of new PV manufacturing capacity in the US is still in its early stages in 2024, and this is likely to be the case in 2025 and 2026 as well. The debate over the rational allocation of IRA funding will continue. In addition, the threat of new tariffs and revised tariffs will always be present. With all these disruptions, it's no wonder that US module buyers simply want to have a choice of suppliers with minimal risk and smooth, on-time deliveries in the coming years.
Nothing is more complex in the solar industry than buying PV modules in the US. From a traceability perspective, even when everything seems to be in order, buyers are often faced with the harsh reality of buying products from companies that have been technically bankrupt for years and are unlikely to honor warranty claims in five months, let alone five years.
Today, prudent US module buyers need to have not only a Plan B, but also C, D, and E, and should consider diversifying their supplier portfolio across the various segments shown in the two pie charts above.
