China’s photovoltaic industry has entered the “ice age”, needs state support: GCL founder

Beijing must urgently intervene and save China’s overburdened solar industry, which holds 80 percent of global production capacity after years of state subsidies, a leading industry official said.

The founder of one of China’s largest solar makers has called for government intervention and industry discipline to help address an unprecedented downturn in the country’s solar energy sector as a price war intensifies amid widening oversupply.

“The mismatch between supply and demand is serious,” Zhu Gongshan, founder and president of GCL Technology and chairman of the Asian Photovoltaic Industry Association, said at an industry conference in Shanghai on Tuesday. “The sector has entered an ice age.

“China’s solar industry urgently needs the government’s ‘visible hand’ and the market’s ‘invisible hand’ to cooperate and make structural changes by improving technical standards and market access thresholds.”

China’s solar sector is experiencing major shocks from overcapacity that could push small producers out of business, even in the face of mounting losses on corporate books.

During the latest round of industry upheaval, the solar sector’s total capacity nearly tripled and profit margins fell by about 70 percent, according to Zhu.

“Four segments – silicon materials, silicon wafers, solar cells and photovoltaic modules – have fallen below cash costs and the entire industry chain has come under pressure,” he told the audience.

Trade barriers from Europe and the United States have also exacerbated China’s oversupply problem due to shrinking foreign demand and falling exports, Zhu said.

In 2023, China exported about 220 gigawatts (GW) of solar modules globally, accounting for about 80 percent of the world’s total capacity, up 55 GW year-on-year, thanks to accelerating clean energy transition and decarbonization plans. However, recent investigations by EU authorities into Chinese solar producers over alleged unfair subsidies and increased tariffs set by Washington have created uncertainty about exports from the country.

Longi, one of China’s largest solar companies, and Jiangsu-based Trina Solar have closed some of their production capacity in Southeast Asia in recent weeks, citing changes in trade policy and market conditions.

However, according to a Daiwa report last month, the oversupply problem in China’s solar industry is likely to persist into the late 2020s.

“Unless solar companies adopt OPEC-style supply constraints, solar industry profits will continue to fluctuate around cost levels,” Daiwa analyst Dennis Ip said in a report.

Last month, HSBC analysts said in a report that the “invisible hand” of local Chinese governments is potentially driving the current economic downturn as they move away from focusing on profitability and place greater emphasis on advanced and green industrial modernization and local employment.

“Solar producers may have felt pressure to maintain production even in the face of losses, given the risk of breaches of contracts/relations with local governments, repayment of grants/loans and fines,” the report said. “In our view, this could delay market consolidation and the phasing out of less competitive supplies.”